Big Tech Firms in Uproar Over Patent Sale

Gretchen Gallen
SANTA CLARA, Calif. – On the heels of Commerce One's announcement last week that it plans to auction off approximately 39 patents as part of a bankruptcy settlement, some of Silicon Valley's biggest players like IBM, Google and Oracle are up in arms over the potentially detrimental effect the sale could have on the future of web services.

On Nov. 17, the software maker and business solutions provider, which has struggled financially for years, revealed plans to sell off its business operations, including a patent portfolio consisting of seven issued U.S. patents and 30 U.S. patent applications.

Those patents cover the underlying process of web services, including standardized electronic documents to automate the sale of goods and services over the Internet and business interfaces that can seamlessly travel among diverse networks and diverse applications and languages.

Commerce One and its wholly owned subsidiary Commerce One Operations filed voluntary petitions in October for relief under Chapter 11. The company was delisted from the Nasdaq in September.

Commerce One launched nine years ago, but started losing money when it went public in 1999, regardless of its rapid acquisition of valuable patents that currently play a crucial role in many software and business products owned by some the world's largest tech companies.

The concern over the patent auction is that if they fall into the hands of an outside company, they could be used to exploit those companies that are using Commerce One's web services technology.

At greatest risk are web services like Microsoft's .Net business system and IBM's Websphere.

Current estimates predict the web services market will grow at a pace of 52 percent each year until 2008, and in keeping with those predictions, Silicon Valley's most influential companies have made substantial investments in gaining web services market share by building Commerce One's technology into their software and business products.

At present, Google, Microsoft, IBM, Oracle and Sun Microsystems are among a group of concerned companies that have banded together to pool resources and funds to make the winning bid when the Commerce One auction date rolls around on Dec. 6.

The group of web services heavyweights have chosen a company called CommerceNet to manage their cumulative fundraising and patent bids.

According to reports, if CommerceNet wins the patents, they will never be enforced against the technology giants. However, if the bid is lost, there is grave concern that an outside company could effectively hold the entire web services industry in limbo over licensing fees.

CommerceNet, which is based in Mountain View, Calif., is seeking initial contributions of up to $2 million from each from five to 10 companies.

ICMB Ocean Tomo has been retained by Commerce One as its strategic advisor in connection with the auctions. According to John Amster from Ocean Tomo, bids on Commerce One's patents and applications must be submitted in writing by Dec. 2 and must provide for an all-cash purchase price of at least $1,000,000.

Additionally, bids on the Commerce One's business operations, including its SRM Division, also must be submitted by Dec. 2 and provide for an all-cash purchase price of at least $4.3 million.