Having long ago established itself as the first port of call for anyone wanting to check online for lower prices while out shopping on the high street, Amazon sent shockwaves through the retail industry recently when it emerged that it had secured a US patent on technology that appears designed to prevent the very behaviour that the company has benefited from for so long.
US patent no. US9665881B1, titled ‘Physical Store Online Shopping Control’, details a mechanism by which a retailer can prevent a person within one of their brick-and-mortar stores from ‘showrooming’, the practice of looking at items in the store but buying them online at a lower price. The technology analyses mobile web browsing activity of consumers within the store and takes action upon detection of the potential consumer attempting to access competitor websites.
The action can include directing the consumer to a different web page that provides information related to a product that is complementary to the product that the customer was initially searching for, as well as redirecting the consumer to a different web page entirely. The technology does however have its limitations as it can only affect devices connected to the store’s Wi-Fi network, relying on the various permissions the consumer implicitly consents to, and can’t affect the experience of consumers browsing on their carrier’s 3G or 4G network – but any reduction in showrooming behaviour is likely to help retailers protect sales.
But questions remain as to why Amazon has pursued the patent. It makes some sense at first glance, within the context of the Internet giant’s substantial investment in plans to expand its physical retail operations. The patent could have been filed as a move to protect Amazon’s high street revenues from other e-commerce sites – a case of poacher turning gamekeeper. Some critics, taking this view, suggested when the patent came to light that it could constitute a first step towards online censorship, a blow to net neutrality, and an infringement of consumer rights.
However, rather than being about Amazon trying to stop people using their phones to carry out online price comparisons in its own stores, perhaps this is instead an example of Amazon obtaining a ‘defensive’ patent in a move to stop other retailers developing and implementing the same technology in their own stores to prevent customers checking prices on Amazon.
While it’s impossible to be absolutely certain of Amazon’s motivations, it certainly seems more likely that it would be trying to protect its web traffic and online sales from high street retailers who know that technological innovation could be their only chance of competing with it as the industry landscape continues to shift. Amazon’s high street operation will always be dwarfed by its online interests. In any case, there are valuable lessons for entrepreneurs and start-ups to learn from this tactic.
Protecting your business models through defensive patents
An offensive IP strategy enables an entrepreneur to protect their business’s core technology innovations, while also driving profits. The strategy of developing a strong IP portfolio doesn’t just enable a company to protect and improve its market position; it can also open up new long-term revenue streams, and can be a strong indicator of value and invest-ability for VCs and other sources of funding.
A defensive IP strategy, meanwhile, represents the other side of the coin. It can enable a company to capture unclaimed territory by patenting a space to prevent competitors moving in. For example, part of a defensive IP strategy might be to – as Amazon appears to have done – patent a technology that you don’t in fact intend to capitalise on yourself, but to simply to remove your competitors’ freedom to develop and implement that same thing – most likely because their doing so would be detrimental to your own business model. By obtaining this US patent on technology to prevent showrooming, Amazon is perhaps aiming to protect itself from disruption by taking the technology off the table for other retailers.
In order to remain competitive and stay ahead of the market, entrepreneurs must think outside of the box and stop thinking about IP just in terms of protecting their current technology, processes, brands, and trademarks. They should also think about how competitors might be able to put them at a disadvantage, and explore options for mitigating that risk. This could mean patenting technology and processes that are potentially damaging to your own business model if they were to be used against you, as Amazon has, or it may involve buying up domain names similar to your brand, even if you don’t intend to use them, to keep them out of the hands of potential copycats.
Failing to think outside of the box could put your company at risk of being disrupted. For instance, when the first digital video recorders (the predecessors of the Sky+ or TiVo box) came onto the market, one of the big technology issues was working out how to have the recorders identify advert breaks and remove that content from the recording to provide a seamless viewer experience. Had the ad content companies been wise to this and secured a patent on the technology to cut out ads before the DVR manufacturers did, they could have prevented them using it (or at least licensed it out to them) – and consequently protected their advertising revenue stream.
While having an offensive IP strategy in place can drive additional revenue sources, a defensive IP strategy can protect your company’s future development path for continued growth and expansion. Often a business will explore ideas and solutions that – for one reason or another – are not incorporated into its products. Securing protection for these alternative solutions can be worthwhile, albeit at some cost, leaving competitors with fewer and less desirable options.
One hallmark of a successful company is the amount of infringement and counterfeiting it sees across its IP portfolio. A strong patent strategy can put you at a competitive advantage, whether it’s to get funding, enhance your reputation, facilitate joint ventures and partnerships, or enjoy a clean exit, and most of all it can lead to licensing and monetisation opportunities. Investors will often look at a startup’s patent portfolio in deciding whether to invest and, if so, how much to invest. Patents – both offensive and defensive – provide investor security and position a startup for long-term growth. They also add gravitas to reaching the initial public offering stage and are a factor in the longevity of a business after IPO. So, don’t just think about applying for patents for technology you’re going to use; think also about applying for patents for the technology that you don’t want your competitors to use against you.
Peter Finnie is patent attorney and managing partner at Gill Jennings & Every.