111111 1111111111111111111111111111111111111111111111111111111111111
`
`US005794207A
`5,794,207
`[l lJ Patent Number:
`[451 Date of Patent:
`Aug. 11, 1998
`
`
`
`
`
`
`
`
`
`
`
`
`
`& Lee A. Schott.
`Richard E. Speidel
`"Impact of Electronic
`
`
`Contracting on Contract Formation Under Revised UCC
`
`
`Article 2. Sales." C878 ALI-ABA 335. Dec. 9. 1993.
`
`
`Jeffrey B. Ritter. "Scope of the Uniform Commercial Code:
`
`Computer Contracting Cases and Electronic Commercial
`45 Bus. Law. 2533 (Aug. 1990).
`Practices."
`Says it Plans to Launch Air Fare
`Laura Del Rosso. "Marketel
`
`'Auction' in June." Travel Weekly, Apr. 29. 1991.
`
`
`
`
`
`Jeff Pelline. "Travelers Bidding on Airline Tickets; SF Firm
`
`Offers Chance for Cut-rate Fares." San Francisco
`A4. Aug. 19. 1991.
`Section
`Walker Asset Management Limited
`Chronicle,
`[73] Assignee:
`Partnership. Stamford. Conn.
`
`
`Michael Schrage. "An Experiment in Economic Theory;
`
`
`
`Labs Testing Real Markets." The Record Section BL Nov.
`26. 1989.
`Laura Del Rosso. 'Ticket-Bidding Firm Closes it Doors."
`
`Travel Weekl)i Mar. 12. 1992.
`G06F 15/20 [51] fut. Cl.6 ......................................................
`
`
`
`
`[52] U.S. Cl .......
`380/49; ........................... 705/23; 705126;
`
`
`
`380123; 380/25
`Primary EXami ner- Thomas H. Tarcza
`[58] Field of Search .....................................
`
`395/226. 227.
`Examiner- Pinchus M. Laufer
`Assistant
`
`
`395/237. 238. 239. 244; 380123. 24. 25.
`Attorney, Agent, or Firm- Morgan & Finnegan
`LLP; Jeffrey
`27, 37. 38. 39. 44. L 5. 6
`49; 705126.
`L. Brandt
`References Cited
`
`[21] Appl. No.: 707,660
`
`Sep. 4, 1996
`[22] Filed:
`
`
`
`(List continued on next page.)
`
`United States Patent [19]
`Walker et al.
`
`[54] METHOD AND APPARATUS FOR A
`CRYPTOGRAPHICALLY ASSISTED
`COMMERCIAL NETWORK SYSTEM
`DESIGNED TO FACILITATE BUYER­
`DRIVEN CONDITIONAL PURCHASE
`OFFERS
`
`Jay S. Walker. Ridgefield. Conn.;
`
`[75] Inventors:
`Bruce Schneier. Oak Park. Ill.; James
`A. Jorasch. Stamford. Conn.
`
`[56]
`
`[57]
`
`ABSTRACT
`
`U.S. PATENT DOCUMENTS
`The present invention is a method and apparatus for effec­
`
`
`
`1/1981 Yuris et al .............
`................. 235/381
`
`
`
`
`
`tuating bilateral buyer-driven commerce. The present inven­
`4,247,759
`5/1984 Kelly et al. ............................. 3951205
`4,449,186
`
`tion allows prospective buyers of goods and services to
`11/1985 Kurland et al . ......................... 3951215
`4.553,222
`
`
`
`communicate a binding purchase offer globally to potential
`12/1988 Fujisaki .............
`
`...................... 364/401
`4,789,928
`
`
`
`sellers. for sellers conveniently to search for relevant buyer
`l/1989 Sbavit et al. ............................ 3951226
`4,799,156
`
`
`
`purchase offers, and for sellers potentially to bind a buyer to
`2/1990 Wagner ..................
`................. 364/408
`4,903,201
`offer. In a preferred
`a contract based on the buyer's purchase
`6/1991 Webber et al . ......................... 364/407
`5,021,953
`
`
`
`
`embodiment. the apparatus of the present invention includes
`12/1992 Wiseman ................................. 3951237
`5,168,446
`
`
`
`a controller which receives binding purchase offers from
`3/1993 Graziano et al. . ........................
`5,191,613
`380/25
`9/1996 Rosen ...................................... 364/408
`
`
`
`prospective buyers. The controller makes purchase offers
`5,557,518
`
`
`
`
`available globally to potential sellers. Potential sellers then
`OTHER PUBLICATIONS
`
`have the option to accept a purchase offer and thus bind the
`
`
`corresponding buyer to a contract. The method and appara­
`
`Raymond T. Nimmer. "Electronic Contracting: Legal
`
`
`
`tus of the present invention have applications on the Internet
`J. Marshall J. Computer&: Info. L. 211 (1996).
`Issues," 14
`
`
`as well as conventional communications systems such as
`
`
`American Law Institute. Draft-Uniform Commercial Code
`voice telephony.
`Parts 2. 3. and 7. pp. 1-15. Jan. 4.
`Revised Article 2 (Sales).
`
`
`1996, printed from http:/ /www.kentlaw.edu/ulc/uniform/uc­
`cart2/chapt2/ucc2c237.html.
`
`44 Claims, 20 Drawing Sheets
`
`CONDITIONAl
`PURCHASE
`
`OrFER 100
`
`CENTRAl
`
`
`
`COIITROI L �R
`
`I
`CONOnlmJAL
`PURCHASE
`O'FER 100
`
`PURCHAS[
`OfFER 100
`
`CONDITIONAc- ,
`BUYER INTER' ACE I-4CD
`
`PURCHASE
`COIJFIRMATION
`120
`
`Petitioner Askeladden - Exhibit 1007 - Page 1
`
`

`
`5,794,207
`Page 2
`
`OTHER PUBLICATIONS
`
`
`Fran Golden. "AAL's Riga Doubts Marketel's Appeal to
`Travel Weeki);
`Nov. 13. 1989.
`Retailers."
`
`Robert Kuttner. "Computers May Turn the World into One
`
`
`Pit." Business Week, Sep. 11. 1989.
`Big Conunodities
`"Web Ventures Presents Booklt!" press release printed from
`
`
`http://www.webventures.com/bookit/ (Web Ventures World
`Wide Web site) on Dec. 2. 1996.
`
`Petitioner Askeladden - Exhibit 1007 - Page 2
`
`

`
`� • 00
`•
`�
`= f""t'.
`� a
`
`> �
`--...
`-�
`QO
`
`�
`� � -
`
`-�
`
`
`N 0
`
`SELLER
`INTERFACE f.+
`300
`
`SELLER
`MODEM
`
`350
`
`SELLER
`INTERFACE f+.
`300
`
`SELLER
`MODEM
`350
`
`SELLER
`
`INTERFACE �
`N-5 ESPONSE 110
`300
`SELLER
`
`SELLER
`MODEM
`350
`
`:J l �ONFI�:TION RESPONS�110
`
`PURCHASE SELLER
`
`CONDITIONAL
`PURCHASE
`OFFER1�
`CONDITIONAL
`PURCHASE
`OFFER 100
`�
`
`?
`CONDITIONAL
`PURCHASE
`OFFER 100
`
`CENTRAL
`CONTROLLER
`
`200
`
`CONDITIONA�
`PURCHASE
`OFFER 100
`
`�
`
`PURCHASE
`CONFIRMATION
`120
`
`BUYER INTERFACE 400 1-- BUYER
`
`
`MODEM
`450
`
`FIG. 1
`
`til "'
`"'' ":. "'
`
`N
`=
`"''
`
`Petitioner Askeladden - Exhibit 1007 - Page 3
`
`

`
`U.S. Patent Aug. 11, 1998
`
`Sheet 2 of 20
`
`5,794,207
`
`CENTRAL
`
`CONTROLLER 200 5
`
`RAM
`
`215
`
`I
`
`CRYPTOGRAPHIC ROM
`PROCESSOR
`210
`
`220 I
`
`l
`
`I
`
`CLOCK -
`235
`
`CPU
`
`PAYMENT
`
`PROCESSOR
`
`230
`
`OPERA TING I
`
`SYSTEM
`
`240
`
`205
`
`DATA STORAGE
`
`DEVICE 250
`
`K
`
`�
`
`NETWORK
`INTERFACE
`
`245
`
`TO BUYERS
`
`AND SELLERS
`
`( BUYER
`( SELLER
`265�
`( CPO
`AUDIT DATABASE D 295
`COUNTEROFFER 1(
`SELLERACCOUNT � 298
`SELLER RESPONSE (
`DATABASE 270
`ESCROW ACCOUNT � 299
`( PURCHASE CONFIRMATION
`DATABASE 275 (
`
`PAYMENT
`
`DATABASE 285
`
`
`
`CRYPTOGRAPHIC KEY
`
`DATABASE 290
`
`DATABASE 260
`
`DATABASE
`
`DATABASE 267
`
`-
`
`FIG. 2
`
`CONTRACT DETAIL )
`255 �
`
`DATABASE
`
`DATABASE 280
`
`Petitioner Askeladden - Exhibit 1007 - Page 4
`
`

`
`U.S. Patent Aug. 11, 1998
`
`Sheet 3 of 20
`
`5,794,207
`
`VIDEO MONITOR 330
`
`SELLER INTERFACE [300
`
`VIDEO
`DRIVER
`
`RAM
`
`ROM
`
`TO CENTRAL
`CONTROLLER
`
`325 315 320 200
`l
`
`l
`
`COMM.
`PORT
`
`MODEM
`
`CLOCK 335 CPU
`350
`305 340
`CRYPTOGRAPHIC I
`355
`310
`
`DEVICE 360
`·�
`DATABASE 370
`( MESSAGE D
`DATABASE 380
`( AUDIT D
`
`PROCESSOR
`
`DATA STORAGE
`
`..._
`
`__.
`
`BIOMETRIC
`DEVICE
`
`INPUT
`DEVICE
`345
`
`FIG. 3
`
`Petitioner Askeladden - Exhibit 1007 - Page 5
`
`

`
`U.S. Patent Aug. 1 1, 1998
`
`Sheet 4 of 20
`
`5,794,207
`
`VIDEO MONITOR
`
`430
`
`BUYER INTERFACE
`
`[400
`
`VIDEO
`DRIVER
`
`RAM
`
`ROM
`
`TO CENTRAL
`CONTROLLER
`
`j
`
`425 415 420 200
`l
`
`I
`
`COMM.
`PORT
`
`450
`440
`
`MODEM
`
`CLOCK
`435
`
`CPU
`
`CRYPTOGRAPHIC I
`
`405
`
`PROCESSOR
`410
`
`BIOMETRIC
`DEVICE
`455
`
`INPUT
`
`DEVICE 445
`
`DEVIC�
`DATABASE 470
`( MESSAGE 0
`� AUDIT 0
`
`DATA STORAGE
`
`1'---
`
`=:::
`
`DATABASE 480
`
`FIG. 4
`
`Petitioner Askeladden - Exhibit 1007 - Page 6
`
`

`
`U.S. Patent Aug. 11, 1998
`
`Sheet 5 of 20
`
`5,794,207
`
`AIRLINE TICKET, HOTEL ROOM,
`RENTAL CAR, INSURANCE,
`MORTGAGE
`
`515
`
`FLIGHT MUST ARRIVE BEFORE
`
`MIDNIGHT, HOTEL ROOM MUST BE
`
`NON-SMOKING, CAR MUST NOT BE A
`COMPACT
`
`535
`
`BUYER LOGS ON TO CENTRAL
`CONTROLLER
`
`500
`
`+
`
`SELECTS SUBJECT OF GOODS
`510
`
`�
`
`DESCRIBES GOODS
`
`520
`
`+
`PROVIDES OTHER CONDITIONS
`530
`+
`
`ADDS EXPIRATION DATE
`
`540
`
`550
`
`+
`
`ADDS PRICE
`
`+
`
`ADDS BUYER ID NUMBER
`
`560
`
`+
`CENTRAL CONTROLLER RECEIVES
`DATA FROM BUYER
`570
`+
`
`ADDS LEGAL LANGUAGE TO FORM
`CONDITIONAL PURCHASE OFFER
`
`580
`
`FIG. 5
`
`Petitioner Askeladden - Exhibit 1007 - Page 7
`
`

`
`U.S. Patent Aug. 11, 1998
`
`Sheet 6 of 20
`
`5,794,207
`
`CENTRAL CONTROLLER EXTRACTS
`
`
`
`PRICE AND EXPIRATION DATE
`
`FROM CPO
`
`600
`
`REQUESTS MERCHANT APPROVAL
`
`CODE FOR TRANSACTION FROM
`CREDIT CARD CLEARING HOUSE
`610
`
`SUFFICIENT
`
`CREDIT AVAILABLE?
`
`NO
`
`REQUEST ANOTHER CREDIT CARD
`FROM BUYER
`
`620
`
`YES
`
`DENY CPO
`
`ACCEPT CPO
`
`FIG. 6
`
`Petitioner Askeladden - Exhibit 1007 - Page 8
`
`

`
`U.S. Patent Aug. 1 1, 1998
`
`Sheet 7 of 20
`
`5,794,207
`
`ADD TRACKING NUMBER TO CPO
`
`700
`
`�
`
`ADD TIMESTAMP
`710
`
`+
`
`CPO STORED IN CPO DATABASE
`720
`
`J
`
`SET STATUS OF CPO RECORD TO
`"ACTIVE"
`
`730
`
`�
`
`SUBJECT EXTRACTED FROM CPO
`740
`
`�
`
`CPO POSTED INAPPROPRIATE
`SUBJECT AREA
`750
`
`FIG. 7
`
`Petitioner Askeladden - Exhibit 1007 - Page 9
`
`

`
`U.S. Patent Aug. 11, 1998
`
`Sheet 8 of 20
`
`5,794,207
`
`CENTRAL CONTROLLER MAKES
`PERIODIC SEARCH THROUGH
`CURRENT CPO DATABASE
`BOO
`
`NO CHANGE STATUS OF CPO RECORD TO
`"EXPIRED"
`
`YES
`
`
`CPO MAINTENANCE COMPLETE
`850
`
`FIG. 8
`
`Petitioner Askeladden - Exhibit 1007 - Page 10
`
`

`
`U.S. Patent Aug. 1 1, 1998
`
`Sheet 9 of 20
`
`5,794,207
`
`POTENTIAL SELLER LOGS ON TO
`CENTRAL CONTROLLER
`900
`
`�
`
`SELECTS APPROPRIATE SUBJECT
`AREA
`
`910
`
`�
`
`BROWSES LIST OF AVAILABLE CPO'S
`920
`
`�
`
`SELECTS A CPO
`
`930
`
`I
`
`FULL DETAILS OF CPO TRANSMITIED
`TO SELLER
`
`940
`
`FIG. 9
`
`Petitioner Askeladden - Exhibit 1007 - Page 11
`
`

`
`U.S. Patent Aug. 11, 1998
`
`Sheet 10 of 20
`
`5,794,207
`
`POTENTIAL SELLER SELECTS A CPO
`
`FOR EXECUTION 1000
`�
`
`· ·-·""
`
`'----
`
`CENTRAL CONTROLLER RECEIVES
`SELLER RESPONSE
`1010
`
`�
`
`IDENTITY OF SELLER AUTHENTICATED
`AS WELL AS CAPACITY TO DELIVER
`GOODS
`
`1020
`
`�
`
`CENTRAL CONTROLLER VERIFIES
`STATUS OF CPO
`
`1030
`
`CPO STATUS
`"ACTIVE"?
`
`1040
`
`YES
`
`NO
`
`SELLER RESPONSE REFUSED AND
`
`TRANSMITTED BACK TO POTENTIAL
`SELLER
`
`1050
`
`UNIQUE TRACKING NUMBER ADDED
`TO SELLER RESPONSE
`1060
`
`�
`
`SELLER RESPONSE STORED IN
`SELLER RESPONSE DATABASE
`1070
`
`FIG. 10
`
`Petitioner Askeladden - Exhibit 1007 - Page 12
`
`

`
`U.S. Patent Aug. 1 1, 1998
`
`Sheet 11 of 20
`
`5,794,207
`
`CREDIT CARD INFORMATION OF BUYER
`
`
`TRANSMITTED TO SELLER FOR
`PROCESSING 1100
`�
`CPO IS BOUND (STATUS CHANGED TO
`
`"COMPLETED" AND SELLER ID ADDED)
`1110
`
`�
`
`PURCHASE CONFIRMATION
`TRANSMITTED TO SELLER 1120
`�
`
`PURCHASE CONFIRMATION
`
`TRANSMITTED TO BUYER
`1130
`
`FIG.1 1
`
`Petitioner Askeladden - Exhibit 1007 - Page 13
`
`

`
`U.S. Patent Aug. 1 1, 1 998
`
`Sheet 12 of 20
`
`5,794,207
`
`SELLER TRANSFERS GOODS
`TO BUYER
`
`BUYER EXAMINES GOODS TO SEE IF
`THEY MEET ALL CONDITIONS OF CPO
`1210
`
`NO
`
`BUYER CONTACTS ARBITER FOR
`DISPUTE RESOLUTION
`
`
`
`TRANSACTION COMPLETE
`
`FIG. 12
`
`Petitioner Askeladden - Exhibit 1007 - Page 14
`
`

`
`U.S. Patent Aug. 11, 1998 Sheet 13 of 20
`
`5,794,207
`
`BUYER SELECTS PREFFERED METHOD
`
`OF PAYMENT
`
`1300
`
`�
`
`BUYER TRANSMITS PAYMENT DATA TO
`CENTRAL CONTROLLER
`1310
`
`+
`
`CREDIT CARD NUMBER, BANK
`ACCOUNT NUMBER
`
`1315
`
`PAYMENT DATA STORED IN PAYMENT
`DATABASE
`
`1320
`
`CENTRAL CONTROLLER ESTABLISHES
`BUYER ACCOUNT
`
`1330
`
`i
`
`�
`
`CENTRAL CONTROLLER CONTACTS
`BANK OR CARD ISSUER TO CONFIRM
`THAT FUNDS ARE AVAILABLE
`1340
`
`FIG. 13
`
`Petitioner Askeladden - Exhibit 1007 - Page 15
`
`

`
`U.S. Patent Aug. 1 1, 1998 Sheet 14 of 20
`
`5,794,207
`
`SELLER ENCRYPTS SELLER RESPONSE
`WITH SYMMETRIC KEY
`1400
`
`�
`
`TRANSMITS SELLER RESPONSE TO
`CENTRAL CONTROLLER
`1410
`
`�
`
`CRYPTOGRAPHIC PROCESSOR
`EXTRACTS SELLER ID FROM SELLER
`RESPONSE 1420
`
`�
`
`LOOKS UP SYMMETRIC KEY OF SELLER
`
`1430
`
`*
`
`WITH
`DECRYPTS SELLER RESPONSE
`SYMMETRIC KEY
`1440
`
`�
`
`SELLER RESPONSE AUTHENTICATED IF
`MESSAGE IS INTELLIGIBLE
`1450
`
`FIG.14
`
`Petitioner Askeladden - Exhibit 1007 - Page 16
`
`

`
`U.S. Patent Aug. 1 1, 1998
`
`Sheet 1 5 of 20
`
`5,794,207
`
`SELLER ENCRYPTS SELLER RESPONSE
`WITH PRIVATE KEY
`
`1500
`
`�
`
`TRANSMITS SELLER RESPONSE TO
`CENTRAL CONTROLLER
`1510
`
`�
`CRYPTOGRAPHIC PROCESSOR
`EXTRACTS SELLER 10 FROM SELLER
`RESPONSE 1520
`�
`
`LOOKS UP PUBLIC KEY OF SELLER
`1530
`
`�
`DECRYPTS SELLER RESPONSE WITH
`PUBLIC KEY
`1540
`1
`
`SELLER RESPONSE AUTHENTICATED
`IF MESSAGE IS INTELLIGIBLE
`1550
`
`FIG. 15
`
`Petitioner Askeladden - Exhibit 1007 - Page 17
`
`

`
`U.S. Patent Aug. 11,
`1998
`
`Sheet 16 of 20
`
`5,794,207
`
`SELLER SIGNS SELLER RESPONSE
`
`WITH PRIVATE KEY
`
`1600
`
`�
`
`TRANSMITS SELLER RESPONSE TO
`CENTRAL CONTROLLER
`1610
`
`�
`
`CRYPTOGRAPHIC PROCESSOR
`EXTRACTS SELLER ID FROM SELLER
`RESPONSE
`
`1620
`
`t
`
`LOOKS UP PUBLIC KEY OF SELLER
`1630
`
`�
`
`VERIFIES THE SIGNATURE USlNG
`SELLER RESPONSE AND
`PUBLIC KEY
`
`1640
`
`�
`
`SELLER RESPONSE AUTHENTICATED
`IF MESSAGE IS INTELLIGIBLE
`1650
`
`FIG. 16
`
`Petitioner Askeladden - Exhibit 1007 - Page 18
`
`

`
`U.S. Patent Aug. 11, 1998
`
`Sheet 17 of 20
`
`5,794,207
`
`SELLER HASHES SELLER RESPONSE
`WITH SYMMETRIC KEY, APPENDING
`
`HASH VALUE 1700
`�
`
`TRANSMITS SELLER RESPONSE TO
`CENTRAL CONTROLLER
`1710
`
`+
`
`CRYPTOGRAPHIC PROCESSOR
`
`EXTRACTS SELLER ID FROM SELLER
`
`RESPONSE 1720
`+
`
`LOOKS UP SYMMETRIC KEY OF SELLER
`1730
`
`+
`
`HASHES SELLER RESPONSE USING
`SELLER'S SYMMETRIC KEY
`1740
`
`�
`
`IF
`SELLER RESPONSE AUTHENTICATED
`GENERATED HASH VALUE MATCHES
`HASH VALUE APPENDED TO SELLER
`
`RESPONSE 1750
`
`FIG. 17
`
`Petitioner Askeladden - Exhibit 1007 - Page 19
`
`

`
`U.S. Patent Aug. 11, 1998
`
`Sheet 18 of 20
`
`5,794,207
`
`POTENTIAL SELLER SELECTS A CPO
`FOR COUNTEROFFER
`1800
`
`�
`
`PREPARES COUNTEROFFER WITH
`
`MODIFIED TERMS
`
`1810
`
`�
`
`ATIACHES TRACKING NUMBER
`
`OF CPO
`
`1820
`
`�
`CENTRAL CONTROLLER RECEIVES
`SELLER COUNTEROFFER AND SETS
`STATUS TO "ACTIVE" 1830
`+
`UNIQUE TRACKING NUMBER ADDED TO
`SELLER COUNTEROFFER
`1840
`+
`COUNTEROFFER STORED IN
`COUNTER OFFER DATABASE
`1850
`�
`TRANSMIT COUNTEROFFER
`TO BUYER
`
`1860
`
`FIG. 18
`
`Petitioner Askeladden - Exhibit 1007 - Page 20
`
`

`
`U.S. Patent Aug. 11, 1998
`
`Sheet 19 of 20
`
`5,794,207
`
`NO
`r----�·
`BUYER BINDS?
`1900
`
`YES
`
`COUNTEROFFER
`TRANSMITTED BACK TO
`
`SELLER 1910
`
`1
`CENTRAL CONTROLLER RECEIVES
`BUYER RESPONSE FROM
`BUYER
`1920
`
`FUNDS REMOVED FROM BUYER
`ACCOUNT AND PLACED lN SELLER
`ACCOUNT
`
`STATUS OF COUNTEROFFER
`CHANGED TO "COMPLETED"
`1940
`
`PURCHASE CONFIRMATION
`
`TRANSMITIED TO SELLER
`1950
`
`1
`
`PURCHASE CONFIRMATION
`
`TO BUYER 1960 TRANSMITTED
`
`FIG. 19
`
`Petitioner Askeladden - Exhibit 1007 - Page 21
`
`

`
`U.S. Patent Aug. 11,
`1998 Sheet 20 of 20
`
`5,794,207
`
`SELLER INTERFACE �
`
`300
`
`TRUSTED SERVER
`
`165
`
`�
`
`�
`
`,
`
`OPERATIONS
`SERVER
`
`160
`
`�
`
`BONDING AGENCY
`
`..
`
`170
`�
`
`..
`
`BUYER INTERFACE
`
`400
`
`FIG. 20
`
`Petitioner Askeladden - Exhibit 1007 - Page 22
`
`

`
`5 .794.207
`
`BACKGROUND OF THE INVENfiON
`
`1
`METHOD AND APPARATUS FOR A
`CRYPTOGRAPHICALLY ASSISTED
`COMMERCIAL NETWORK SYSTEM
`DESIGNED TO FACILITATE BUYER­
`DRIVEN CONDITIONAL PURCHASE
`OFFERS
`
`2
`a system can exercise more control over the terms and
`
`
`
`conditions of their purchases. Additionally. when a large
`
`
`number of potential sellers exist. but those sellers do not
`
`
`have the resources to advertise globally. it makes sense for
`5 buyers. if they can, to take the initiative
`in communicating
`its needs to the sellers.
`Currently, there exist certain unilateral buyer-driven sys­
`
`
`
`
`tems of commerce. A good example of such a system is the
`typical reward system wherein a "buyer" broadcasts/
`1. Field of the Invention
`10 publishes
`an offer for a reward to anyone who completes a
`relate The method and apparatus of the present invention
`
`
`
`particular task. That type of system is unilateral because the
`
`
`
`
`to electronic contract applications using electronic networks.
`
`offer can only be accepted by performance of the designated
`2. Background
`
`
`task. Thus, unilateral systems can be utilized only for limited
`There are dozens of different buyer-seller protocols in use
`
`
`
`
`
`types of transactions which allow for acceptance by perfor­
`15
`today. However. almost all of those systems are seller-driven
`mance.
`in the sense that they focus on the methods and processes
`Bilateral buyer-driven systems seek to consummate con­
`
`
`
`available to the seller, allowing him to price, package or
`
`
`tracts between buyers and sellers based on mutual promises
`
`configure goods and services more effectively. Stores,
`
`
`to perform. Bilateral buyer-driven systems. however. cur­
`
`
`
`catalogs. classified advertisements. telemarketing. auction
`
`
`rently represent an extremely small portion of overall com­
`systems such 20
`
`houses. even on-line computerized reservation
`
`merce due to a variety of factors. First, and perhaps
`as SABRE. are all seller-driven.
`
`Traditionally. it is the
`foremost. buyers generally either cannot or do not want to
`
`seller's job to attract buyers and then to complete the sale.
`
`
`invest the time, money or other resources required to locate
`Thus. in a seller-driven system.
`the advertising cost of the
`
`an indefinite number of potential sellers and communicate
`
`
`transaction and the attendant risks that such advertising will
`
`
`the buyer's purchasing needs to each of the potential sellers.
`25 This is especially true of the individual consumer who often
`be unsuccessful falls upon the seller.
`
`Most goods and services sold at retail are done so using
`
`
`cannot afford to pay substantial transaction costs.
`
`
`a general seller-driven protocol whereby the seller sets a
`
`
`For example. an individual seeking car repair services
`price and the buyer decides whether or not to accept that
`
`
`generally would not want to contact every single repair shop
`such as airline
`price. Prices for some services.
`
`tickets, might
`and communicate details of his repair needs to each. The
`but the buyer must still wait for the seller 30
`change frequently,
`
`benefits to the consumer from doing so (e.g .• achieving a
`
`
`to offer a price he finds acceptable. Obviously, some forms
`lower price) would be vastly outweighed by the amount of
`
`of commerce offer far more give and take with offers and
`
`time and money expended in the effort.
`
`
`
`counteroffers being exchanged, however the vast majority of
`Also, buyer-driven systems are not prevalent because
`
`
`
`retail purchases utilize seller-driven. fixed-price. non-
`buyers do not want to be inundated with numerous
`35
`offers
`
`negotiable pricing protocols.
`
`from potential sellers, many of whom may be marginal or
`
`Auctions are probably the most frequently used system
`(e.g. a thousand real estate brokers or car dealers
`unqualified
`
`whereby prices are not fixed by the seller. Here too, the
`
`all calling one buyer). Buyer-driven systems impose inher­
`
`system is seller-driven. The buyer does not find the seller.
`as well. If each buyer has a different set
`ent costs on sellers
`
`rather the seller attracts numerous buyers who. as a group,
`of purchasing specifications and communicates his needs
`the seller may 40
`determine the final selling price-which
`
`using non-uniform language. sellers must pay a substantial
`
`
`subsequently reject unless the item auctioned is being sold
`
`cost even to review and understand each individual request.
`
`without a reserve.
`Moreover. sellers are often not amenable to customizing
`
`
`
`Even on-line reservation systems are seller-driven. Airline
`their products for individual buyers.
`
`systems such as SABRE are in the business of 45 reservation
`As a rule, the greater the number and complexity of the
`
`
`
`constantly posting airfares. Travel agents and consumers are
`buyer's purchase conditions. the more difficult it is to have
`
`on the bid side of the process. However, since they cannot
`
`
`a buyer-driven market. since advertising costs generally rise
`
`communicate their bids to the airlines. they must wait until
`with the number of conditions that must be communicated.
`
`an "asked" fare is quoted which meets their needs.
`
`and the potential number of sellers who can understand and
`
`These 50 Other commerce systems are exchange-driven.
`
`
`fulfill increasingly complex conditions usually declines.
`systems. such as NASDAQ or the New York Stock
`Buyer-driven markets function best when there is a well-
`Exchange (NYSE) match buyers and sellers by offering an
`defined purchase need, when a "brand" provides quality
`
`efficient. fair and orderly marketplace. They favor neither
`assurance to the buyer such as the name of a major airline
`
`
`buyers nor sellers, but simply effectuate communications
`carrier or when the item is a commodity such as oil or coal.
`that allow for the matching process to take place. An 55
`An example of a regularly used bilateral
`buyer-driven
`
`example of an automated exchange-driven commerce sys­
`
`process is the system utilized by large organizations such as
`
`tem for trading futures is disclosed in U.S. Pat. No. 4.903.
`
`companies or governments which want to purchase signifi­
`201.
`cant amounts of goods or services at the lowest possible
`A buyer-driven system is one in which buyers find sellers.
`
`
`price. To begin. they formulate a detailed written specifica-
`60 tion setting forth the quantities
`
`such as a "wanted to buy" classified ad. A help wanted ad is
`
`and requirements of what
`a buyer-driven inquiry since the employer is looking to
`
`they are looking to buy. This document is typically called a
`locate and buy the services of a qualified employee. The
`
`"Request for Proposal" (RFP). Once finalized. RFPs are then
`inquiry is advertised to a large number of potential "sellers."
`If the value
`
`
`distributed to a list of known potential suppliers.
`a number of which may respond by submitting their resumes
`of the RFP is high enough, as it is might be with a large
`65 government contract.
`
`to the prospective employer.
`the buyer may bear the added expense
`Buyer-driven systems yield certain benefits and efficien­
`of trying to attract the widest number of sellers by paying to
`cies that other commerce systems do not. Buyers using such
`publish the RFP in newspapers and trade magazines.
`
`Petitioner Askeladden - Exhibit 1007 - Page 23
`
`

`
`5.794.207
`
`4
`3
`an RFP that they might
`
`Potential suppliers which identify
`
`Accordingly. there is a need for a centralized buyer-driven
`
`
`
`
`be able to fulfiU. will first evaluate it to decide whether or not
`
`
`system of bilateral electronic commerce capable of being
`
`to invest the necessary time and effort to submit a formal
`
`
`
`utilized by even small consumers to communicate their
`
`
`
`proposaL Typically. some number of suppliers submit bind­
`
`
`
`purchasing needs globally to potential sellers which
`in the 5
`
`
`
`ing proposals to the buyer by a deadline established
`
`
`
`addresses the deficiencies of the prior art. The advantages of
`
`
`
`RFP. Once submitted. proposals are then evaluated by the
`It is the only way for a buyer
`such a system are manifold.
`
`
`
`buyer. One proposal is usually selected and the correspond­
`
`
`
`
`efficiently to reach a large market of potential sellers. It also
`
`
`ing supplier notified that it has "won" the business at the
`
`allows the buyer to set the terms he is willing to accept. As
`price quoted.
`
`
`
`
`an additional advantage. it gives the sellers an indication of
`
`
`of the benefits 10 Large organizations can take advantage
`
`
`the state of the market for their product. Finally. since this
`afforded by the RFP process
`because their volume buying
`based. costs are kept to a
`technology is electronically
`a worthwhile
`
`opportunity for suppliers to com­
`represents
`minimum.
`
`
`pete for their business. They also have the resources to
`A key element necessary to achieve a critical mass of
`
`
`
`
`communicate their buying needs to a sufficient number of
`
`
`
`seller participation in such a bilateral electronic buyer­
`
`
`
`
`unit 15 suppliers. As a result. they can often achieve substantial
`
`
`
`driven system is the seller's ability to bind a buyer to a legal
`
`
`cost savings. especially on commodities or commodity
`contract under the terms of the buyer's posted offer. In
`
`services (such as paper clips or long distance service) and on
`
`
`
`
`
`contrast to a non-binding request for proposal. a binding
`
`
`
`perishable items (such as airline tickets and hotel rooms).
`
`
`
`
`
`offer from a buyer is attractive to potential sellers because it
`
`
`
`Individual consumers cannot effectively participate in
`
`
`sets out each and every term and condition under which the
`20
`
`
`such bilateral buyer-driven systems because they generally
`do not
`
`
`buyer will allow himself to be bound. Potential sellers
`do not have the buying power and resources of large
`
`need to worry about the costs of negotiating terms of sale
`
`
`organizations. Some consumers have found ways to group
`
`with the individual buyer because the buyer has laid out all
`
`together in order to achieve some measure of the volume
`
`
`such terms in his offer. Additionally. allowing a seller to bind
`
`buying power enjoyed by large organizations. Many
`
`
`the buyer on the front end of the transaction will alleviate
`are deterred from joining buying 25
`
`consumers. however.
`
`some seller concerns regarding enforcement because the
`
`groups because of the groups' various requirements and
`
`seller has the opportunity to bind the buyer to a legally
`limitations.
`
`enforceable contract.
`As commerce seeks to utilize the inherent advantages of
`
`
`
`In order to understand the requirements necessary to form
`
`
`
`
`the Internet. many types of commerce systems, such as
`
`
`
`binding contracts through electronic commerce. a review of
`
`
`malls. catalogs and auction house. are being implemented on
`30 the current state of contract law is necessary.
`
`
`the Internet These approaches generally seek to create better
`Basic Contract Law
`
`
`seller or exchange-driven systems whereby the sale of goods
`The formation of a legally binding contract requires three
`
`
`and services is made more efficient
`
`
`
`elements: offer. acceptance, and consideration. Put another
`
`While there have been some attempts to use the Internet
`to the formation
`
`of a contract
`35 way. an essential prerequisite
`
`
`to effectuate bilateral buyer-driven transactions. those
`
`
`is an agreement: a mutual manifestation of assent to the
`
`attempts have been largely unsuccessful. Currently. there are
`
`same terms. This mutual assent is established by a process
`
`"bulletin board" type sites on the Internet where buyers can
`
`
`
`of offer and acceptance. Further legal requirements are
`or no cost Thus. any
`
`
`post "wanted" advertising at little
`
`
`imposed by the Statute of Frauds. where applicable.
`consumer could post his own RFP looking for companies
`An offer has been defined as a manifestation of intent to
`
`willing to sell him the exact airline tickets they are looking 40
`to buy or a particular
`act or refrain from acting in a specified way. so made as to
`car with specified options included.
`
`justify a promise in understanding that a commitment has
`
`Because Internet postings are global. the buyer theoretically
`
`been made. A number of kinds of expressions border on. but
`
`
`has the ability to communicate his RFP to a large number of
`
`are not. promises. The most important of these in the context
`
`potential sellers. In practice. however, this process is inef­
`45 of electronic
`
`commerce is a solicitation of an offer. For
`
`
`fective as a buyer-driven system of commerce because
`of Brand X suit for
`
`
`example. a clothing store advertisement
`
`
`potential sellers generally do not frequent the various "bul­
`
`$150 "today only" does not constitute an offer. The adver­
`
`letin board" sites or respond to the individual RFP s .
`
`
`
`tisement is merely an invitation to make an offer. Since the
`
`Sellers are deterred from using such a process because
`store has not specified a quantity nor included any language
`there is no guarantee of the authenticity of the RFP. the cost
`
`
`so of commitment. an advertisement
`of this kind is only a
`of negotiating with individual consumers is often too high.
`
`
`
`and it is difficult to enforce any agreement (including
`
`
`statement of intention to sell or a preliminary proposal
`
`inviting offers. Similarly. the RFPs discussed above are
`
`payment guarantees) which may be reached between the
`
`merely solicitations of offers rather than bindable offers.
`
`
`consumer and the seller. Additionally. "bulletin boards"
`An offer may be accepted by any person in whom the
`
`
`containing RFPs are scattered across the Internet making it
`55 power of acceptance is created. Because the offeror is the
`difficult, if not impossible.
`
`
`for sellers to find relevant RFPs.
`master of his offer. he controls the person or persons in
`
`Finally. when analyzing the RFPs that are posted on the
`
`whom a power of acceptance may be created. The identity
`
`Internet. sellers are confronted by an almost overwhelming
`
`number of different formats. conditions. terms, and language
`
`
`of the offerees is determined by the reasonable person test.
`
`
`Thus. for example. it has been determined that a reward offer
`
`
`in the RFPs. Sellers must spend a large amount of time
`styles
`60 may ordinarily
`
`be accepted by anyone who knows of the
`
`
`buy­and money even simply to understand the prospective
`
`offer. but once the offer has been accepted. no one else may
`er's needs and the legal ramifications of the particular
`used in each RFP. In sum. buyer RFPs posted on
`accept. On the other hand. an offer to pay a sum of money
`language
`to anyone who is willing to sell an 1869 Morgan Silver
`
`
`
`the Internet represent too much uncertainty for sellers.
`
`Sellers are not willing to spend the time and money finding
`
`
`Dollar in M69 condition may be accepted by anyone who
`65 knows of the offer and by any number of persons.
`RFPs. In turn. the absence
`and pursuing Internet
`of a critical
`
`
`
`Essentially. the language of the offer determines to whom it
`
`
`mass of sellers reduces the incentive for buyers to post their
`is offered and who may accept it. Thus. by wording an offer
`RFPs.
`
`Petitioner Askeladden - Exhibit 1007 - Page 24
`
`

`
`5.794.207
`
`6
`5
`methods of attribution or authentication. Once questions of
`
`
`
`
`
`appropriately. it can be directed to a number of persons but
`
`
`
`
`attribution are resolved. and subject to considerations about
`
`capable of acceptance by only one.
`
`the Statute of Frauds and the like. no requirement exists in
`
`
`Under the doctrine of consideration. the third of the three
`law that a contract offer be in writing or that there be a
`
`
`basic elements of contract formation. gratuitous promises
`5
`
`conscious. immediate intent to make a binding commitment.
`are not enforced. This doctrine does not pose any difficulties
`
`Contract rules provide that acceptance must be made in
`
`in the context of electronic commerce.
`by the offeror. However, if
`In order judicially
`the manner specifically required
`
`to enforce a contract. the Statute of
`
`
`no specification of the method for acceptance is made in the
`Frauds requires that a party produce a written copy of it.
`
`However. the rule is only invoked if the contract is of a
`
`
`originating offer, acceptance may be in any manner and by
`certain type. such as a contract for the sale of real property. 10
`
`
`any medium reasonable under the circumstances. Thus.
`
`acceptance by electronic message should be valid.
`
`The primary purpose of this rule is to obviate perjury. The
`
`result is that oral contracts are often unenforceable.
`
`
`A further consideration in electronic commerce is the
`
`However. because this often leads to unjust results. courts
`
`
`Statute of Frauds. In transactions involving a sale of goods
`are construing it narrowly and policy makers are lobbying
`for the price of $500 or more, U.C.C. Section 2-201 requires:
`15
`for its repeal.
`
`
`(1) a writing; (2) containing a quantity term; (3) sufficient to
`indicate that a contract has been made: (4) signed by the
`Electronic Contracting Law and the Current State of the
`
`is sought. In the EDI
`Art
`party against whom enforcement
`
`
`context, this presents problems in reference to the existence
`With the advent of new technology. methods of doing
`
`
`
`of a "writing" and in the requirement of a "signature" by the
`
`business are rapidly expanding. These new methods chal­
`20 party against whom enforcement
`is sought U.C.C. Section
`
`
`lenge traditional contract principles. which are premised on
`
`1-201 ( 46) defines "writing" to include "printing, typewriting
`
`personal contact and paper contracts. Thus. some legal
`
`
`
`or any other intentional reduction to tangible form." The
`
`issues in the field of electronic commerce remain unre­
`
`
`
`critical aspect of this definition deals with the reduction of
`solved.
`
`
`
`the agreement to tangible form. The purpose of requiring a
`One such technology is known as EDL or electronic data
`
`
`25 writing to enforce a contract
`is to ensure some minimum
`It is known that, using EDI. one party
`can
`interchange.
`level of proof of intent and avoid the risk of an entirely
`
`
`transfer information and legally relevant "documents" elec­
`
`
`
`conjectural debate regarding the existence or scope of the
`tronically to another for direct processing in the other party's
`agreement. The sufficiency of an electronic message as