Company's Patent Claims Could Affect Millions of Sites

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If a California company has its way in court, every company selling on the Web could owe it a substantial chunk of change, according to defendants in the case.


Pangea Intellectual Properties LLC, or PanIP, has filed suit in federal court in San Diego against 11 small businesses claiming that their e-commerce sites infringe on two patents the company owns:


* No. 5,576,951, "a system for composing individualized sales presentations from various textual and graphical information sources."


* No. 6,289,319, a system for automatically processing applications based on credit ratings acquired from a credit reporting service.


According to one of the defendants, Allan Dickson, president of Dickson Supply, Brielle, NJ, PanIP's lawyer has said the patents cover any Web site that displays products using text and graphics and is capable of obtaining credit card or other financial information from the user.


This would mean big companies like Amazon.com and eBay also are infringing on PanIP's patents. But Dickson contends that PanIP is going after companies that are small enough and far enough away that they are unlikely to fight back. Other defendants are in New York, Colorado, Oregon, Washington, Minnesota and Tennessee.


"Have you ever heard the term 'low-hanging fruit?' That's what we are," Dickson said.


Dickson's plumbing, heating, irrigation and gas-grill supply company saw just over $5 million in revenue in 2001 and is on track for the same this year, he said. The company has 26 full-time employees and seven or eight part-timers.


PanIP's attorney, Kathleen Walker, verified that the company is suing 11 companies and that none are in California. She requested that further questions be submitted by e-mail and that she would forward them to PanIP's principals. DM News sent 11 questions.


The following reply came from "Ray M." using a Yahoo e-mail address: "Regrettably, the principals from whom you ask for comments are unavailable, given the short period for reply that you require," the e-mail said. "Much of the information that has been previously reported is both inaccurate and misleading. However, much we would like, it is PanIP's policy for a variety of legal reasons not to comment on the specifics of pending litigation."


PanIP has offered to sell a license for its patents for a one-time fee of about $30,000 per defendant, according to Dickson.


Dickson's lawyer estimates it will take $1 million to fight back.


"We aren't big enough to pull out the big guns of 18 lawyers to throw at this guy, but we are the size that could settle," Dickson said. "If we don't show up in court, the next thing you know, the sheriff will be at the door wanting to auction off a truck or something."


According to Dickson's lawyer, Walker has said defendants were chosen by a review of their Web sites, along with information from business information supplier D&B.


"She didn't say exactly how Dun & Bradstreet information was relevant, but it certainly has no relevance to figuring out whether they infringed the patents. It has to do with whether these are good defendants from a lawsuit perspective," said Jon Hangartner, a partner with Liu & Liu LLP, San Diego, which is defending Dickson and four other companies in the suit. "The plaintiff has said flat out that their goal is to get licenses, build a war chest and go after other people. If you look at it from their perspective ... I don't think they're going to be in a big hurry to go after the Amazon.coms. I think they'll just keep going after the little guys. If you can get a couple hundred people to pay $20,000 or $30,000 in licensing fees, I think you're better off."


The four other companies represented by Hangartner are: Snow Country Ski Shop Inc., Rochester, NY; Peekay Inc., Auburn, WA; Backcountry Experience, Durango, CO; and Video Age Inc., Minneapolis, MN. One unnamed company has reportedly settled. Calls to other defendants were not returned, except one Brooklyn, NY, business owner who declined to comment.


Dickson claims he will not back down.


"It would be irresponsible of us not to fight this," said Dickson, who has put information about the suit online at http://panipcase.homeip.net.


"On the whole, we see this as nothing more than a modern extortion racket -- using federal patent law as a blunt instrument to extract a check that the plaintiff is not entitled to receive," copy on the site reads.


A legal defense fund is also in the works. "We're looking for help in this," Dickson said.


Hangartner said he must respond to the suit by June 10 and that he probably will seek to have the action dismissed.


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