USPTO 5960411 might seem like an innocuous set of letters, but for twenty long years, they held the key to one of the most powerful technologies in e-commerce.
In 1997, Amazon.com was still a small online retailer. These were the early days of the internet, and Amazon had been one of the pioneers, calling itself the earth’s largest bookstore. It had then filed for an unusual patent. Amazon said it had developed a means of enabling users to buy items online with one click. Amazon already had users’ addresses and credit card information stored from their previous purchases — it said it would use this information to let users buy items through a single click on its website.
It might not seem like much of an innovation now, but USPTO 5960411 was granted to Amazon and Jeffrey P Bezos in September 1999. Through one stroke of the US Patent office, Amazon alone could use the technology to let users buy items with a single click.
Amazon didn’t wait long to use the patent to its advantage. Just a month after the patent was issued, Amazon sued one of its biggest competitors, Barnes and Noble, for infringing on what was now its IP. Barnes and Noble was one of America’s largest physical bookstores, and spurred in part by Amazon’s advances, had ventured into selling books online. Back then, it had a technology called Express Lane, which let users order items with one click. A judge ordered Barnes and Noble to stop using Express Lane until the case was settled. The lawsuit was settled in 2002, and the terms of the settlement were never disclosed.
The technology was clearly valuable to Amazon, and it was guarding it jealously. One click ordering took away much of the friction from e-commerce. Entering user details again was cumbersome, especially on the dial-up connections of the 2000s, and Amazon’s users had a cleaner, faster checkout experience. It also led to impulse purchases.
But even then, there had been misgivings about the patent. “When 21st-century historians look back at the breakdown of the United States patent system,” wrote The New York Times in 2000, “they will see a turning point in the case of Jeff Bezos and Amazon.com.” The internet back then was a fairly new technology, and patent offices didn’t completely understand its nuances. One Click ordering was such an obvious technology that economist Ken Wilbur said is “something that (Amazon) probably never should have been able to patent.”
Bezos, too, seemed to agree. After the lawsuit, he said the patents system was broken, and suggested that patents be granted for five years, not seventeen. However, he refused to hand over the patent to the public domain. “Despite the call from many thoughtful folks for us to give up our patents unilaterally, I don’t believe it would be right for us to do so,” Bezos wrote.
Some companies, though, were both quick to see the value of the patent, and had the heft to make a deal with Amazon. In 2000, Apple licensed the technology from Amazon, and used it on its iTunes Store and iPhoto. Amazon got a generous fee from these uses — estimates say that the patent was worth billions.
And Amazon’s iron grip on the patent meant that companies in the US weren’t able to implement one click ordering as easily as they could have. That’s set to change — the patent expires on 12th September 2017, and tech companies are already making plans on how to cash in. Facebook Google, Microsoft and other major players are considering developing an internet-wide 1-click checkout, where your credit card information moves with you from site to site. This could be transformational — having credit card and billing information stored at a central place could help users skip from site to site, and enjoy a seamless, Amazon-like checkout process each time.
But while Amazon’s competitive advantage ends today, the patent only underscores how crucial the first-mover advantage can be for tech companies. Amazon had the foresight and good fortune to patent a technology when it was in its infancy — and managed to reap the rewards for twenty long years.