eBay wins online auction patent, and a major new revenue stream

Eleven years after filing the patent application in October 1998, eBay has won a patent that grants it exclusive ownership over its online auction process model.

This is major for eBay and its competitors. eBay’s competitors will now have to change their process or risk being sued. eBay is already the top site in its field having 14.5 million auctions annually. Its nearest competitors only have 1.5 and 1.2 million annually.

However, lawsuits aren’t the real risk. At least, they’re not the immediate risk.  Lawsuits take a long time and a lot of money to follow through.

The next logical step for eBay is not to sue but to license the model to sites that are already using it. Therefore, unlike a series of lawsuits, eBay has yet another revenue stream.

My prediction? The next step is that eBay will have the USPTO publish in its official gazette a notice this patent is available for licensing.

eBay’s competitors can file objections to this patent to modify or cancel it.  However, only a small number of patents are ever canceled.

The patent is called “Computer-implement method and system for conducting auctions on the Internet“.

Here is an abstract of the process:

Methods and apparatus for a system for facilitating electronic commerce transactions with a first data storage location for holding information about an item for auction from a first participant in a data packet network, a verification process that verifies the user identification of the first participant in said data packet network, the verification process confirming a user identification before allowing the participant in said data packet network access to place information about an item for auction in the system, a display process for displaying information of the item for auction to a plurality of data packet network users, the display process displaying an advertisement with the item for auction to the plurality of data packet users, an auction process for receiving bids on the item for auction from at least one of said plurality of data packet network users, the auction process also verifying a user identification from said at least one of a plurality of data packet network users before allowing receipt of the bid and a notification process for notifying the plurality of data packet network participants that said bid was accepted by said system.

Here is a diagram of the process:

[via GoRumors]