United States Patent
`[19]
`[11] Patent Number:
`5,835,896
`
`Fisher et al.
`[45] Date of Patent:
`Nov. 10, 1998
`
`U8005835896A
`
`[54] METHOD AND SYSTEM FOR PROCESSING
`AND TRANSMITTING ELECTRONIC
`AUCTION INFORMATION
`
`9 300 266 A 9/1994 Netherlands .
`W0 92 15174
`A 9/1992 W1P0~
`W0 96 34356
`
`[75]
`
`Inventors: Alan S. Fisher, Fremont; Samuel
`Jerrold Kaplan, Hillsborough, both of
`Calif.
`[73] Assignee: Onsale, Inc., Menlo Park, Calif.
`
`[21] Appl‘ No“ 623’654
`[22]
`Filed:
`Mar. 29, 1996
`
`6
`
`................................................... G06F 15/300
`Int. Cl.
`[51]
`................................................. 705/37; 705/27
`[52] US. Cl.
`[58] Field Of Search ..................................... 395/201, 226,
`395/227, 237, 244, 240; 283/56; 340/825.26,
`825.27, 825.28, 825.29; 902/22, 24; 379/91-93;
`705/1, 26, 27, 37, 44
`
`[56]
`
`3 581 072
`4:677:552
`4,799,156
`4,903,201
`5,063,507
`5,101,353
`571367501
`5,168,446
`
`References Cited
`US. PATENT DOCUMENTS
`5 1971 N me er ................................. 395 237
`6i1987 SibleyfIJr.
`..
`395i237
`
`1/1989 Shavit
`.....
`395/226
`2/1990 Wagner ..........
`395/237
`
`.. 395/226
`11/1991 Lindse et a1.
`.....
`.. 395/237
`3/1992 Lupienyet a1.
`
`" 395/237
`8/1992 Silverman et al‘
`
`12/1992 Wiseman ........
`395/237
`395/237
`9/1993 Lee .................
`5,243,515
`.. 395/237
`11/1993 Hartheimer et a1.
`5,258,908
`
`.. 395/237
`4/1994 Hartheimer et a1.
`5,305,200
`..........
`.. 395/792
`6/1994 Bird et a1.
`5,325,297
`
`7/1994 Fraser et a1.
`379/91
`5,329,589
`.
`12/1994 Togher et al.
`.. 395/237
`5,375,055
`2/1995 Clealwatef ~~~~~
`395/208
`5,394,324
`6/1995 Abecassis ................................ 235/379
`5,426,281
`FOREIGN PATENT DOCUMENTS
`
`2 658 635 A 8/1991
`
`France .
`
`A 10/1996 WIPO ‘
`OTHER PUBLICATIONS
`“Onsale: Onsale brings thrill ofAuctions and Bargin hunting
`online; unique internet retail service debuts with week—long
`charity auction for the Computer Museum in Boston”,
`Business Editors/Com uter Wriuters, Ma 24, 1995, Dialo
`g
`file 610, Accession NO). 0489267.
`y
`Dialog(R) File 610:Business Wire (c) 1997 Business Wire,
`“Onsale: Onsale Brings Thrill of Auctions and Bargain
`Hunting Online: Unique Internet retail service debuts with
`week—long charity auction for The Computer Museum in
`Boston”, Mountain View, CA, May 22, 1995,
`Dialog(R) File 16:Promt(R) (c) 1995 Information Access
`Co., “Car auction reaches into space”, Automotive News,
`Nov. 25, 1991, p. 6.
`Dialog(R) File 609zKR/T Bus. News (c) 1995 Knight—Rid-
`der/Tribune Bus News, “California Computer Auctions No
`Boon For Bargain Hunters”, Sep. 13, 1993, by Tom Schmitz,
`San Jose Mercury News, Calif.
`.
`.
`Primary Examiner—Fm?” POIHVII
`Attorney) Agent) or Flrm—Adam H. Tachner; Crosby.
`Heafey, Roach & May
`ABSTRACT
`[57]
`A system and method for conducting a multi-person, inter-
`-
`-
`-
`-
`-
`-
`active auction,
`in a variety of formats, w1thout usmg a
`human auctioneer to conduct the auction The S
`t
`.
`.
`.
`~
`VS em 15
`preferably implemented in software. The system allows a
`group of bidders to interactively place bids over a computer
`or communications network. Those bids are recorded by the
`system and the bidders are updated with the current auction
`status information. When appropriate, the system closes the
`auction from further bidding and notifies the winning bid-
`ders and losers as to the auction outcome.
`
`4 Claims, 12 Drawing Sheets
`
`
`
`MERCHANDISE
`
`CATALOG PAGE
`GENERATOR
`
`
`
`
`
`
`i
`>
`{28
`
`(30
`{3|
`CUSTOMER
`MERCHANDISE
`B[D
`AUCTION
`
`DATABASE
`DATABASE
`DESCRIPTION
`DATABASE
`
`DATABASE
`
`
`eBay Ex. 1004, Page 1 of 20
`
`eBay Ex. 1004, Page 1 of 20
`
`

`

`US. Patent
`
`Nov. 10,1998
`
`Sheet 1 0f 12
`
`5,835,896
`
`
`
`eBay Ex. 1004, Page 2 of 20
`
`eBay Ex. 1004, Page 2 of 20
`
`

`

`US. Patent
`
`Nov. 10,1998
`
`Sheet 2 0f 12
`
`5,835,896
`
`I-—-‘
`
`Cordless lO—Channel Phone Model 5400
`
`
`
`List Price: $129.95
`
`Minimum Bid: $1.00
`Bid Increment: $2.00
`Quantity Available:
`
`16
`
`&K\.
`
`5
`
`I/jfl
`
`Auction closes on Fri Mar 29, 1996 1:00 PST.
`Sales Format: Dutch Auction
`
`The current high bidders are:
`
`1)
`CJNY of Reno, NV, Tue Mar 26, 3:27 pm ($25.00,
`1)
`CJPM of Petersburg, VA, Tue Mar 26, 4:18 pm ($19.00,
`CJNA of Corinth, TX, Tue Mar 26, 3:43 ($17.00, 1):
`"FOR THE WIFE"
`CJMN of Grand Prairie, TX, Tue Mar 26, 4:24 pm ($17.00,
`1)
`CJRD of Cambridge, MA, Tue Mar 26, 2:43 ($15.00,
`1)
`[330 of St Laurent, PQ, Tue Mar 26, 2:52 pm ($15.00,
`CJJF of Scranton, PA, Tue Mar 26, 2:59 pm ($15.00,
`1)
`[300 of Evansville,
`IN, Tue Mar 26, 3:01 pm ($15.00,
`CJDP of Columbia, SC, Tue Mar 26, 3:12 pm ($15.00, 2)
`CJLR of Gainesville, FL, Tue Mar 26, 3:40 pm ($15.00,
`CJRR of Washington, NC, Tue Mar 26, 3:15 pm ($13.00,
`EJFW of University Park, PA, Tue Mar 26, 4:29 ($9.00,
`EJDB of Evansville,
`IN, Tue Mar 26, 2:45 pm ($5.00,
`1)
`EJSK of Goshen, KY, Tue Mar 26, 2:59 pm ($5.00,
`2 out of 16)
`
`1)
`
`1)
`
`1)
`1)
`1)
`
`Item #1918.
`
`This Factory Reconditioned Cordless Phone Model 5400 Features:
`
`CJCIarity Plus, circuitry for virtually static—free reception
`leO-Channel selection
`C39—Number memory
`EJLighted Dial
`EJHandset holds charge for up to 7 days
`Available in Two—tone Gray
`
`FlG. 2
`
`eBay Ex. 1004, Page 3 of 20
`
`eBay Ex. 1004, Page 3 of 20
`
`

`

`US. Patent
`
`Nov. 10,1998
`
`Sheet 3 0f 12
`
`5,835,896
`
`Cordless lO—Channel Phone Model 5400
`m;
`L_____
`NOTICE: It is a violation of law to make bids in a false name or with
`
`an invalid credit card, even if the software initially accepts such a
`bid. Please be aware that even if you do not give us your real name,
`your web browser transmits a unique internet address to us, which can
`be used by law enforcement officials to identify you.
`
`Minimum Bid: $1.00
`Bid increment: $2.00
`
`Bid (price not
`
`to exceed):
`Quantity:
`
`The quantity you request may not always be available. Click here if you
`are not willing to accept a reduced quantity.
`
`if any, will be added to your order.m
`Applicable sales tax,
`
`If you enter your ONSALE account number, you only need to enter your
`first name (for security) in the Shipping Address area below.
`
`(Optional)
`
`Account Number:
`Shipping Address:
`First Name:
`Last Name:
`Streell:
`Street2:
`
`City:
`State/Province:
`Zip Code:
`Country:
`Email Address:
`Daytime Phone:
`Nighttime Phone:
`FAX:
`
`Your credit card number is requ1red to quarantee your bid. Your card Will
`not be charged unless your bid is successful. Only Visa and MasterCard
`cards are accepted.
`Credit Card #:
`
`Expiration Date: Month (e.g. "07")
`
`Year
`
`(Optional) Credit card billing address if different from shipping
`address:
`
`Name as on Card:
`Street]:
`Street2:
`
`City:
`State/Province:
`Zip Code:
`Country:
`
`
`(Optional) You can enter a comment for display on screen with your bid.
`Comment:
`
`Click here if you do not want ONSALE to keep you informed of current high
`
`[:JLACEBID
`bids via electronic mail.
`-11%- ’oi'r'flol
`
`CLEAR FORM
`
`FIG. 3
`
`eBay Ex. 1004, Page 4 of 20
`
`eBay Ex. 1004, Page 4 of 20
`
`

`

`US. Patent
`
`Nov. 10,1998
`
`Sheet 4 0f 12
`
`5,835,896
`
`22
`
`20
`
`23
`
`24
`
`ELECTRONIC
`
`MAIL BID
`
`BID
`
`FORM
`
`
`
`MERCHANDISE
`
`
`
`CATALOG PAGE
`
`
`ELECTRONIC MAIL
`
`NOTIFICATION
`
`25
`
`MERCHANDISE
`
`CATALOG PAGE
`
`
`
`GENERATOR
`
`21
`
`26
`
`27
`
`BID VALIDATOR
`
`AUCTION
`
`MANAGER
`
`ELECTRONIC MAIL
`
`MESSENGER
`
`28
`
`29
`
`3O
`
`3|
`
`CUSTOMER
`
`AUCTION
`
`DATABASE
`
`DATABASE
`
` MERCHANDISE
`
`
`DESCRIPTION
`
`
`DATABASE
`
`BID
`
`DATABASE
`
`FIG. 4
`
`eBay Ex. 1004, Page 5 of 20
`
`eBay Ex. 1004, Page 5 of 20
`
`

`

`US. Patent
`
`Nov. 10,1998
`
`Sheet 5 0f 12
`
`5,835,896
`
`START
`
`40
`
`4|
`
`42
`
`CREATE
`
`NO
`
`CUSTOMER
`
`COSTOMER RECORD
`
`RECORD
`
`YES
`
`
`
`RETURN
`
`ERROR
`
`MESSAGE
`.TO BIDDER
`
`44
`
`43
`
`IS BID VALID P
`
`NO
`
`.
`
`45
`
`YES
`
`46
`
`BID IN BID
`
`DATABASE
`
`47
`
`RETURN
`
`FIG. 5
`
`eBay Ex. 1004, Page 6 of 20
`
`eBay Ex. 1004, Page 6 of 20
`
`

`

`US. Patent
`
`Nov. 10,1998
`
`Sheet 6 0f 12
`
`5,835,896
`
`GET CURRENT
`
`TIME
`
`OPEN NEW
`
`ITEMS FOR
`SALE
`
`CLOSE AUCTION
`
`FOR OLD
`
`ITEMS
`
`ADJUST
`
`MARKDOWN
`
`PRICES
`
`UPDATE BID
`
`LIST FOR
`
`OPEN ITEMS
`
`REGENERATE
`
`MERCHANDISE
`CATALOG PAGES
`
`FIG. 6
`
`ARKED BID IN
`
`DATABASE
`
`LOOK UP
`
`E MAIL ADDRESS
`
`83
`
`LOOK UP INVEN-
`TORY INFORMATION
`
`CONSTRUCT E MAIL
`
`MESSAGE
`
`
`
`
`
`
`
`
`SEND EMAIL MES—
`
`SAGE TO BIDDER
`
`F l G 8
`
`eBay Ex. 1004, Page 7 of 20
`
`eBay Ex. 1004, Page 7 of 20
`
`

`

`US. Patent
`
`Nov. 10,1998
`
`Sheet 7 0f 12
`
`5,835,896
`
`NO
`
`
`
`MERCHANDISE
`
`
`
`ITEM P
`
` MORE
`
`
`
`
`
`
`
`
`
`RETURN
`
`SELECT A
`
`
`MERCHANDISE
`|TEM
`
`QUERY BID DATA—
`
`BASE FOR BIDS
`
`SORT BIDS
`
`MARK BIDS AS.
`SUCCESSFUL OR
`UNSUCCESSFUL
`
`
`ANY ACTIVE PROXY
`BIDS MARKED AS UN-
`
`SUCCESSFUL P
`
`
`
`UPDATE BID
`DATA BASE
`
`
`
`
`INCREMENT PROX
`
`BIDS AS REQUIRED
`
`FIG. 7
`
`eBay Ex. 1004, Page 8 of 20
`
`eBay Ex. 1004, Page 8 of 20
`
`

`

`US. Patent
`
`Nov. 10,1998
`
`Sheet 8 0f 12
`
`5,835,896
`
`90
`
`SORT BIDS
`
`BY AMOUNT
`
`RE MAINING TO
`
`
`BE PROCESSED
`
`
`
`
`
`
`RETURN
`
`
`
`MARK BID AS
`"UNSUCCESSFULL"
`
`SELECT NEXT
`
`HIGHEST BID
`
`
`
`
`IS BID
`BELOW MINIMUM
`
`BID P
`
`
`
`
`CAN
`BID QUANTITY BE
`
`SATISFIED P
`
`
`
`FIG. 9
`
`
`
`MARK BID AS
`
`"SUCCESSFULL"
`
`
`
`
`QUANTITY
`REMAINING
`
`DECREMENT
`
`eBay Ex. 1004, Page 9 of 20
`
`eBay Ex. 1004, Page 9 of 20
`
`

`

`US. Patent
`
`Nov. 10,1998
`
`Sheet 9 0f 12
`
`5,835,896
`
`IIO
`
`SORT BIDS
`BY AMOUNT
`
`
`
`
`
`"UNSUCCESSFUL"
`
`SELECT NEXT
`HIGHEST BID
`
`
`BIDS
`
`
`REMAINING TO BE
`PROCESSED
`
`
`
`
`
` MARK BID AS
`
`
`
`
`
`
`
`IS BID
`
`BELOW MINIMUM
`
`BID .P
`
`
`CAN BID
`QUANTITY BE SAT-
`
`
`
`ISFIEDP
`
`
`
`YES
`
`FIG. IO
`
`MARK BID AS
`
`"SUCCESSFUL"
`
`DECREMENT QUANTITY
`
`
`
`RECORD "MINWIN" PRICE
`
`eBay Ex. 1004, Page 10 of 20
`
`
`
`REMAINING
`
`eBay Ex. 1004, Page 10 of 20
`
`

`

`US. Patent
`
`Nov. 10,1998
`
`Sheet 10 0f 12
`
`5,835,896
`
`START
`
`I3|
`
`
`SORT BIDS BY
`AMOUNT AND
`
`QUANTITY
`
` REMAINING TO
`BE PROCESSED
`
`I30
`
`
`
`
`
`MARK BID As
`
`SELECT NEXT
`
`"UNSUCCESSFUL"
`
`HIGHEST BID
`
`
`
`BELOW MINIMUM
`
`
`CAN BID
`QUANTITY BE
`
`SATIS FIED P
`
`YES
`
`FIG.
`
`MARK BID AS
`
`II
`
`"SUCCESSFUL"
`
`
`DECREMENT
`QUANTITY
`
`REMAINING
`
`
`RECORD "MINWIN"
`BID QUANTITY
`
`eBay Ex. 1004, Page 11 of 20
`
`eBay Ex. 1004, Page 11 of 20
`
`

`

`US. Patent
`
`Nov. 10,1998
`
`Sheet 11 0f 12
`
`5,835,896
`
`START
`
`SORT BIDS
`
`BY AMOUNT
`
`I50 |5I
`
`
`
`
`
` REMAINING TO
`BE PROCESSED
`
`
`MARK BID AS
`"UNSUCCESSFUL"
`
`
`
`
`I2
`
`
`SATISFIED P
`
`QUANTITY BE
`
`YES
`
`FIG.
`
`CONVERT BID
`
`IN TO ORDER
`
`
`DECREMENT
`QUANTITY
`
`REMAINING
`
`
`
`eBay Ex. 1004, Page 12 of 20
`
`eBay Ex. 1004, Page 12 of 20
`
`

`

`US. Patent
`
`Nov. 10, 1998
`
`Sheet 12 0f 12
`
`5,835,896
`
`szme
`
`Imus.<Pounmm
`
`
`
`Emtmm_oz<10
`
`mm—
`
`cm.
`
`m4:
`
`
`
`Ema.226%";
`
`acmommmpooo
`
`mzmt
`
`meZ
`
`
`
`mw_oz<IONES.
`
`a.2m:
`
`CL
`
`mt
`
`mt
`
`
`
`
`
`IZ<DOme<|=<><Z<I._.
`
`
`
`mmmjC.:.Z<DOa_m
`
`mm»
`
`mfr;
`
`«5on
`
`I049.oz_u_|=>>
`
`mrtkz<30
`
`omozommEmu
`
`zmnkmm
`
`=mm4<u=
`
`zmskmm
`
`.95..
`
`Oh
`
`
`
`Z_Emtmkdons
`
`wm<m<k<o
`
`EOE
`
`
`
`onmEm:.5323
`
`M.Di
`
`eBay Ex. 1004, Page 13 of 20
`
`eBay Ex. 1004, Page 13 of 20
`
`
`
`
`
`
`
`
`

`

`5,835,896
`
`1
`METHOD AND SYSTEM FOR PROCESSING
`AND TRANSMITTING ELECTRONIC
`AUCTION INFORMATION
`
`BACKGROUND OF THE INVENTION
`
`1. Field of the Invention
`
`The present invention relates generally to electronic com-
`merce and more particularly to conducting an interactive
`auction over an electronic network.
`
`2. Description of the Related Art
`Auctions usually take the form of a physical gathering of
`bidders assembled together within an auction house. Auc-
`tions presenting more valuable, collectible merchandise,
`such as art, coins and antiques, are often preceded by
`preparation of a catalog of merchandise, circulated to inter-
`ested parties in advance of the gathering at
`the auction
`house, where bidding by those physically present will take
`place. For auctions of more mundane items, such as house-
`hold possessions, estate sales and the like, the interested
`bidders simply appear at the appointed time and place and
`bid on merchandise in which they are interested.
`Traditional auctions requiring a bidder’s physical pres-
`ence disadvantageously require that the merchandise lots up
`for sale be available at the auction venue for inspection by
`the bidders and subsequent pickup by the successful bidders.
`For many types of merchandise it would be far easier for
`both buyer and seller to leave the inventory at its original
`source and ship purchased items to the successful bidders at
`the end of the auction. Moreover, physical auctions have the
`still further disadvantage that only one item may be auc-
`tioned at a time. The auctioneer solicits bids from the floor
`
`for a given lot, but once the highest bid has been accepted,
`the lot is closed and the next lot brought forward. This
`sequential processing combined with the finite amount of
`time available to a gathered group is inherently limiting
`because multiple lots cannot be auctioned simultaneously to
`the same group of people during their limited period of
`availability.
`Some changes in bidding requirements have made tradi-
`tional auctions somewhat more convenient for bidders.
`
`Many auction firms allow bidders to submit their bids in
`advance of the auction. Advance bidding may be done by
`mail as a convenience to the bidders so that they do not have
`to be physically present at the auction. Also, the advent of
`the telephone and facsimile machine allowed bidders to
`submit bids in near real-time during the course of an auction.
`These technologies free the bidder from being physically
`present at
`the auction,
`thereby saving time and travel
`expense. To incorporate these technologies into the tradi-
`tional auction format, representatives of the auction firm
`receive telephone or facsimile bids from their clients and
`alert the auctioneer of these new bids. Similarly, the repre-
`sentatives may relay information about the current bid items,
`such as the current high bid, back to the telephone bidders.
`Bidding by mail or facsimile suffers a significant disad-
`vantage as compared to bidding in person or by telephone
`because the mailing or faxing bidder has no opportunity to
`increase a bid in quick response to competitive bids received
`from the floor or by telephone. Moreover, although tele-
`phone bidding allows the bidder to avoid travel expense and
`inconvenience,
`traditional auctions may be scheduled at
`inconvenient times for many remote bidders. Also, because
`of the large number of items or lots sold in a typical auction,
`which can number in the eight hour period in order to be
`present when the few lots in which the bidder has an interest
`come up for sale. The lots in which the telephone bidder is
`
`2
`interested may be scattered throughout the lengthy tradi-
`tional auction. Time zone differences further diminish the
`
`appeal of telephone bidding for an international potential
`customer base.
`
`All of these limitations and disadvantages of physical
`auctions, even when telephone bidding or bidding by fac-
`simile is permitted, serve to discourage a large number of
`bidders and ultimately leads to lower selling prices to the
`economic detriment of the auctioneer and seller.
`
`Electronic auctions held over the Internet using electronic
`mail (E-mail) have provided a minor innovation as com-
`pared to more traditional physical options.
`In E-mail
`auctions, an auction catalog is electronically mailed to
`people interested in bidding. Subsequently, bidders submit
`their bids on individual lots to an auctioneer via E-mail. The
`auctioneer reads the electronic mail bids and enters them in
`a database of bids. When the auction closes, the auctioneer
`notifies the winning bidders, usually via electronic mail, and
`ships the merchandise to the winning bidders.
`There are several disadvantages to E-mail auctions. First,
`a human auctioneer is required to prepare the auction catalog
`and to read and process the electronic mail bids. This takes
`a considerable amount of effort in a large auction. Secondly,
`it is difficult to keep the bidders updated as to the current
`high bids on the various items. Electronic mail on most large
`public networks, such as the Internet, is lower priority traffic
`than most, meaning it can take several hours for bids to reach
`the auctioneer and for bidding updates to reach the bidders.
`Thirdly, as the auction closing draws near, the volume of
`bids may prohibit the auctioneer from sending out high bid
`information to the bidders because of the time involved in
`
`reading the electronic mail bids and in entering them into the
`bid database.
`
`A recent innovation applied to E-mail auctions is the use
`of the Internet’s World Wide Web (WWW) facility to post
`descriptions of the merchandise and show the current high
`bids. This innovation provides the advantage of eliminating
`the need to electronically mail bidding updates to bidders.
`And since WWW traffic is much higher priority on the
`Internet, bidders suffer less of a time lag in seeing updated
`Web pages. However, a human auctioneer is still involved
`and is required to manually process the electronic mail bids,
`enter them into the bid database, and to update the World
`Wide Web pages with current high bid information.
`Sales firms other than auction houses have also used the
`
`Internet’s World Wide Web facility to post descriptions of
`their merchandise and to offer the merchandise for sale at a
`
`10
`
`15
`
`25
`
`30
`
`35
`
`40
`
`45
`
`50
`
`set price. These systems are automated and are capable of
`accepting an order from a customer by having that customer
`fill out an online order form. This order information is taken
`
`by the system and placed into an order database or account-
`ing system which then processes the order. However, such
`systems sell merchandise only at a fixed price and do not
`allow merchandise to be auctioned off, or to have their prices
`dynamically adjusted in an interactive manner in response to
`bids and other market conditions such as supply and
`demand.
`
`Security brokerage firms for years have used automated
`transaction systems for matching buy and sell orders for
`securities. For example, the New York Stock Exchange’s
`DOTS (Direct Order Transmission System) and the NAS-
`DAQ’s SOES (Small Order Execution System) systems
`offer complete electronic matching of buyers and sellers.
`However, these systems do not operate an auction. They
`merely pair buy orders with sell orders when the pricing
`criteria of both sides of the trade are met.
`
`55
`
`60
`
`65
`
`eBay Ex. 1004, Page 14 of 20
`
`eBay Ex. 1004, Page 14 of 20
`
`

`

`5,835,896
`
`3
`Anumber of issued US. patents relate to various forms of
`electronic commerce. These patents fall into three broad
`categories: 1) patents relating to on-line networks, 2) patents
`relating to electronic commerce over on-line networks, and
`3) patents related to various forms of securities (e.g., stocks
`and futures) trading via electronic means. From the first of
`these groups, on-line networks, US. Pat. No. 5,406,475
`entitled Data Processing Network Having A Plurality Of
`Independent Subscribers, US. Pat. No. 5,235,680 entitled
`Apparatus And Method For Communicating Textual And
`Image Information Between A Host Computer And A
`Remote Display Terminal, and US. Pat. No. 5,310,997
`entitled Automated Order And Delivery System, are repre-
`sentative of the prior art. These patents describe systems of
`terminals connected over wide area networks to centralized
`
`computers. However, they do not disclose the details of
`electronic commerce or auctions in particular.
`In the second group, patents relating to electronic
`commerce, US. Pat. No. 5,285,383 entitled Method For
`Carrying Out Transactions Using Electronic Title, and US.
`Pat. No. 5,297,031 entitled Method And Apparatus For
`Order Management By Market Brokers, describe various
`means for conducting transactions over electronic commu-
`nications networks. They also describe various means for
`displaying merchandise for sale to a plurality of customers
`connected to a central computer of a computer network and
`various means for conducting simple sale transactions where
`a buyer purchases an item at the stated price. As a group,
`these patents do not disclose the means for conducting
`electronic auctions or any sales format other than a simple
`or “straight” sale.
`One particular US. Pat. No. 4,789,928, discloses a means
`for soliciting bids over an electronic network from bidders
`that are remote to the site of a live auction. This system
`records bids from remote bidders and simultaneously trans-
`mits the current high bid from the floor of the physical
`auction to the terminals of the remote bidders. However, this
`patent does not disclose or suggest
`the concept of an
`electronically conducted auction including a means for
`automatically closing the auction under certain conditions
`and without benefit of a live human auctioneer. Furthermore,
`this patent fails to disclose or suggest a means for auctioning
`a plurality of items simultaneously; rather, the disclosed
`system is strictly tied to the sequential proceedings of a
`physical auction. Finally, this system contemplates only a
`simple “highest bidder” auction where a single lot goes to an
`individual high bidder. This system cannot handle a lot
`available for auction which includes a plurality of items and
`where a plurality of winning bidders sufficient to match the
`plurality of auctioned items eXists.
`In the third group of patents related to electronic
`commerce, patents relating to securities trading, US. Pat.
`No. 4,412,287 entitled Automated Stock Exchange, and US.
`Pat. No. 5,077,665 entitled Distributed Matching System,
`disclose means for prospective buyers to post offers to buy
`a given security at a specific price and for prospective sellers
`to post offers to sell a given security at a specific price. These
`automated systems maintain lists of buy and sell orders. If
`an offer to buy a security is placed at a price greater than or
`equal to an eXisting offer to sell that security at a given price,
`these systems will automatically consummate the trade by
`matching the buyer with the seller. While the securities
`industry uses, and these patents disclose, such terms as
`“auction” and “bid”,
`they are actually referring to the
`process of matching a set of buyers’ bids with a set of
`sellers’ prices. There is no auction in the true sense of a
`plurality of bidders simultaneously bidding in a manner
`
`10
`
`15
`
`20
`
`25
`
`30
`
`35
`
`40
`
`45
`
`50
`
`55
`
`60
`
`65
`
`4
`accessible to all bidders and sellers in order to achieve a high
`selling price. In fact, these patented systems do not include
`disclosure of the list of open buy or sell orders,
`thus
`depriving the seller of the ability to openly solicit the highest
`price for securities. Instead, the market price of securities
`sold through these automated systems fluctuates up and
`down based upon the last successful match between an open
`buy order and an open sell order when both the buyer and
`seller have placed orders at compatible prices. There is no
`ability in such systems to conduct truly competitive and
`open bidding.
`The present invention overcomes the above-listed draw-
`backs of the background art by providing a method and
`system for conducting auctions and mark down sales of
`merchandise over a computer network without the aid of a
`human auctioneer. The system is open to bidders anywhere
`in the world, leading to increased bid activity. Complete and
`thorough descriptions of all offered merchandise may be
`placed on-line, since the costs associated with printing
`auction catalogs are minimized in an electronic medium. An
`auction within the inventive system may be conducted over
`a period of time, mitigating the problems of inconvenient
`scheduling and time zone differences. A variety of auction
`formats can be employed within the inventive system
`depending on the type of merchandise being sold. And
`finally, the method and system of the present invention can
`be conducted automatically without the need for a human
`auctioneer, thereby allowing for a large number of items to
`be continuously auctioned.
`SUMMARY OF THE INVENTION
`
`To address the shortcomings of the background art, the
`present invention provides, in a computer network enabling
`communication between a host computer and a plurality of
`remote bidders, a system and method for transmitting and
`processing auction information implemented as a computer
`program within the host and network, comprising posting
`means for posting information across the network,
`the
`information being descriptive of a lot available for purchase,
`bidding means available to the bidders for submitting a
`plurality of bids across the network in response to the
`information, receiving means for receiving a plurality of
`bids sent across the network by the plurality of bidders, and
`categorizing means for automatically categorizing the bids
`as successful or unsuccessful.
`
`in a computer
`The present invention further provides,
`network enabling communication between a host computer
`and a plurality of remote customers, an auction information
`transmission and processing system implemented as a com-
`puter program within the host and network, comprising, a
`merchandise database connected in communication with the
`
`host for storing merchandise information, the merchandise
`information being descriptive of a lot available for purchase
`by a customer, a bid database in communication with the
`host for storing bid information, the bid information being
`descriptive of a bid received from one of the remote
`customers, an auction manager implemented in the server
`and in communication with the databases, an electronic mail
`messenger in communication with the auction manager and
`the bid database, a bid validator, including means for receiv-
`ing bids from the customers, connected to the auction
`manager and in communication with the bid database,
`wherein the auction manager induces a customer to bid
`across the network on a lot of merchandise by posting a
`descriptive merchandise catalog page containing data from
`the merchandise database, the customer views across the
`network the catalog page and sends a bid to the bid validator
`
`eBay Ex. 1004, Page 15 of 20
`
`eBay Ex. 1004, Page 15 of 20
`
`

`

`5,835,896
`
`5
`across the network, the bid validator determines whether the
`bid is valid,
`the bid database stores the bid, the auction
`manager determines whether the bid is successful, and the
`electronic mail messenger notifies the customer whether the
`customer’s bid was determined to be successful by the bid
`manager.
`
`A primary advantage of this system is that it results in
`greater prices for merchants as well as broader distribution
`of their products. By incorporating an auction format which
`is available to a wide audience via electronic means, the
`inventive system and method results in more bidders, greater
`demand, and hence higher prices for the seller. And because
`this electronic system reaches a geographically diverse
`audience, merchants’ product lines becomes visible in areas
`where their products are not normally distributed or
`advertised,
`resulting in increased sales volume without
`increased marketing expense. As the network grows, busi-
`ness grows. Furthermore, the electronic auction system is
`automatic and does not require a human auctioneer, thereby
`allowing many individual items to be auctioned during the
`same time period and providing a decrease in costs associ-
`ated with running an auction. Indeed,
`it would not be
`possible to operate an equivalent twenty-four hour per day,
`seven day per week auction with potentially hundreds or
`even thousands of individual items and millions of potential
`bidders without such an inventive electronic auction method
`
`and system.
`
`BRIEF DESCRIPTION OF THE DRAWINGS
`
`The aforementioned advantages of the invention, as well
`as additional advantages thereof, will be more fully under-
`stood as a result of a detailed description of a preferred
`embodiment when taken in conjunction with the accompa-
`nying drawings in which:
`FIG. 1 illustrates a preferred computer environment for
`implementing the system and method of the present inven-
`tion.
`
`FIG. 2 illustrates a merchandise catalog page offering an
`item for sale via electronic auction on the Internet’s World
`Wide Web;
`FIG. 3 depicts a bid form for bidding on an auction item;
`FIG. 4 is a block diagram of components illustrating a
`preferred embodiment of the present invention;
`FIG. 5 is a flowchart illustrating the bid validator and its
`method of operation;
`FIG. 6 is a flowchart illustrating the auction manager and
`its method of operation;
`FIG. 7 is a flowchart illustrating the bid manager and its
`method of operation;
`illustrating the electronic mail
`FIG. 8 is a flowchart
`messenger and its method of operation;
`FIG. 9 is a flowchart illustrating the standard auction
`format and its method of operation;
`FIG. 10 is a flowchart
`illustrating the Dutch auction
`format and its method of operation;
`FIG. 11 is a flowchart illustrating the progressive auction
`format and its method of operation;
`FIG. 12 is a flowchart illustrating the buy or bid sale
`format and its method of operation;
`FIG. 13 is a flowchart illustrating bid quantity determi-
`nation and its method of operation; and
`FIG. 14 is a flowchart illustrating the markdown price
`adjustment feature of the present invention and its method of
`operation.
`
`10
`
`15
`
`20
`
`25
`
`30
`
`35
`
`40
`
`45
`
`50
`
`55
`
`60
`
`65
`
`6
`DETAILED DESCRIPTION OF A PREFERRED
`EMBODIMENT
`
`An inventive method and system is disclosed for con-
`ducting a multi-bidder, interactive auction without using a
`human auctioneer to conduct the auction. Preferably imple-
`mented in software, the electronic auction system allows a
`group of bidders to interactively place bids over a computer
`or communications network, automatically records the bids,
`updates the bidders with the current auction status
`information, closes the auction from further bidding when
`appropriate, and notifies the winning bidder or bidders and
`loser or losers as to the auction outcome.
`
`The inventive system includes a database for maintaining
`descriptions of the merchandise for auction, the bids, and
`other relevant information in a commercially available data-
`base system. Database searches are preferably performed
`periodically to check for new items to be made visible to
`potential bidders. Such periodic searching allows an indi-
`vidual charged with maintaining this system to load relevant
`information into the database at his or her leisure. Once the
`database is loaded with information about the item and the
`
`item is scheduled for presentation to potential bidders, the
`system takes the merchandise information and creates a
`human readable catalog page for a viewing over a public
`network such as the Internet’s World Wide Web. Bidders are
`
`then able to view the new item for auction and to place their
`bids. These catalog pages preferably contain the current high
`bid, bid increment, quantity available, merchandise
`description, and picture of the item.
`Upon accessing a public network and seeing an item’s
`catalog page, the bidder may press a button on the catalog
`page or take some similar action which causes a bid form to
`be displayed on the screen. The bidder then enters the
`information necessary to place a bid, such as their name and
`address, bid amount, payment information, etc., and then
`presses a bid submission button, or takes a similar action
`which sends the bid to the system.
`The system receives the electronic bid information and
`places it in the bid database. Because this new bid will, in
`general, be a bid for a higher amount than was last bid by
`another party, the system will regenerate the item’s catalog
`page. This updated catalog page will then show the new high
`bid to any prospective bidders who later access that catalog
`page.
`Because most bidders will not, in general, be accessing
`the network and viewing the merchandise catalog pages as
`they are updated with new high bids, the system may send
`electronic mail notifications to bidders who have been
`
`outbid by the just-placed bid. These electronic mail notifi-
`cation messages preferably contain the relevant merchandise
`information, the current high bid, the bid increment, etc., and
`encourage the bidder to submit a new and higher bid to
`outbid the current high bidder. These electronic mail noti-
`fication messages allow the bidder to enter a new bid by
`replying to the electronic mail message and sending it back
`to the system.
`Upon receiving a new or revised bid via electronic mail,
`the system follows the same set of actions as when the
`bidder places a bid using the electronic bid form when
`viewing a merchandise catalog page, namely, the system
`extracts the relevant bid information from the electronic
`
`mail message, deposits this information in the bid database,
`and then updates the merchandise catalog page as appropri-
`ate. Such an electronic mail message bid may further cause
`a new round of electronic mail notifications to go out to the
`recently outbid bidders.
`
`eBay Ex. 1004, Page 16 of 20
`
`eBay Ex. 1004, Page 16 of 20
`
`

`

`5,835,896
`
`7
`This process preferably continues until the system detects
`that the item is scheduled to be closed for further bidding or
`another closing trigger is detected. At this point, the system
`closes the auction by updating the merchandise catalog page
`with the final winning bid information and by sending
`electronic mail notifications to both the winning bidder or
`