Trade NZ wary of US firm's ambitions

By CHRIS BARTON IT editor

Trade New Zealand is giving the cold shoulder to a United States company that wants to move its operations here, creating 200 jobs and, potentially, a multibillion-dollar business.

The rejection is because the company, Delaware-based DE Technologies, has applied for an international patent for a "Universal Shopping Center for International Operation."

If granted, it could entitle the firm to licence fees from just about anyone using the internet for the import or export of goods, and earn the company billions of dollars a year.

"Our understanding is that DE Technologies are claiming that all e-commerce solutions are using their intellectual property and will be seeking payment from other developers," said Ian Shields, investment manager of Investment New Zealand, Trade NZ's investment division.

"This puts Trade New Zealand and Investment New Zealand into a potential conflict-of-interest situation as we are working with many of the New Zealand e-commerce providers."

Investment New Zealand has refused DE Technologies any assistance during its visit here next month. The attitude has incensed DE Technologies' chief executive, Ed Pool: "I simply cannot believe that the Government would shun away a company wanting to establish 200 jobs and bring into the tax base multibillion-dollar revenue streams.

"This sounds more like personal feelings being expressed at the expense of a nation."

He said that if the Investment New Zealand response was a policy directive, it would violate the World Trade Organisation and World Intellectual Property Organisation treaties on patent protection - to both of which New Zealand is a signatory.

On June 6, Mr Pool wrote to Trade New Zealand outlining a desire to locate in Auckland, Wellington or Christchurch.

"We would like to know if our type of operations will be accepted in the developmental plans of New Zealand and if we will have the support of Governmental operations and authorities as well as the trade boards, exporters and banking operators."

Mr Pool said the company was also considering other locations including Singapore, Montreal and Brussels but was attracted to New Zealand by lifestyle issues such as standard of living, recreation, agricultural infrastructure, green standards, non-nuclear policies and educational infrastructure.

The letter also told how Mr Pool and Douglas Mauer were "the first inventors to computerise the ability to do international business transactions," how the company had filed for patent protection rights in 29 countries, and how the patent claim structure "indeed allows for ownership of cross-border transactions done by computers."

The letter even stated that "irrespective of United Nations desires, these patents will prevent the present UN Edifact system from becoming the trade standard unless accommodation is provided to our firm in the form of a licensing agreement."

Edifact is the United Nations standard for electronic document interchange for administration commerce and trade.

DE Technologies gained wide press coverage last year when the US Patent Office notified Mr Pool in May that it would soon issue him a broad patent covering "a process for carrying out international transactions using computer-to-computer communication."

The international application (number PCT/US98/26220, published under the Patent Cooperation Treaty) was lodged in New Zealand and Australia in December 1998.

If Mr Pool's patent becomes final, lawyers hired by his company say that anyone conducting international trades over the internet without the permission of DE Technologies will infringe the company's intellectual property.

Mr Pool got his idea in 1992 when he began importing Russian-made infrared night-vision equipment and selling it to US police departments for half the price of US-made products.

Currency fluctuations, duties and changing freight rates made it difficult to quote a firm price and this led to the development of a computer system to make all the calculations and translations and provide an audit trail.

A Wall St Journal article in August last year quoted Mr Pool: "If you can do [computer-to-computer] currency conversions, file customs electronically, or calculate air, sea or truck freight, then you must obtain a licence from us.

"We were the first people to reduce it all to computer to computer. We're a small company, and we're a classic example of why the patent system is important."

Instead of the normal 3 to 4 per cent letter-of-credit fee, Mr Pool intends to collect a fee equal to 0.3 per cent of each computerised trade deal across borders.

Forrester Research predicts about $US6.8 trillion in e-commerce in 2004. If 10 per cent of that is cross-border, DE Technologies' licence fees could net $US2.4 billion in that year alone.

The case is a dramatic example of a controversial type of patent involving "business methods."

Today many such business-method patents are being tested in court. The most notable involves the patent covering Amazon's 1-Click method, which allows easy identification of a repeat shopper.

But critics say many of these patents should never have been granted because they either cover obvious processes or are simply electronic forms of traditional activities.

Links

DE Technologies

Trade NZ

Intellectual Property Office of NZ