Greg Swistak

If you manufacture a kiosk that sells Internet access, you might hear from a company in Utica, N.Y. Their beef? You are infringing on patent number 5822215. A couple of association members contacted me last week because Upstate Networks had sent them just such a message.

Does Upstate have a legal leg to stand on? If so, just how hard can that leg kick companies in the paid Internet access segment?

The object of Upstate Networks' patent is a black box that allows a bill acceptor to interface with a PC. The device controls the amount of time a user is allowed to surf the Internet after currency is inserted.

I have been involved in the integration of many kiosks that used bill acceptors, but until this point I hadn't heard of Upstate Networks' device. As a result, I spoke to MEI (the largest manufacturer of bill acceptors) and was told the black box from Upstate wasn't really needed; MEI uses APIs to allow acceptors to interface with a serial port.

Essentially, then, it appears that Upstate Networks has a patent that allows them to exclude others from manufacturing devices that accept cash and control the amount of time someone has access to the Internet.

The patent

Here, in excerpts from the actual language, are the patent grants of interest to us:

A fee activated public on-line computer terminal comprising in combination:

• a digital computer having at least memory, CPU, display and input components;
• a pliant currency acceptor having output pulses indicative of the amount of currency inserted therein;
• a serial interface circuit connected between said digital computer and said pliant currency acceptor;
• a public telecommunications interface connected to said digital computer and adapted to be connected to a public telecommunications channel;
• a custom software package connected to said digital computer and said serial interface for controlling operation of said terminal.
  

Said software package including:

• means for connecting said digital computer to a global telecommunications network via said telecommunications interface and a public telecommunications channel;
• means for activating said pliant currency acceptor for reception and validation of currency inserted therein; 
• means for determining the amount of pliant currency inserted in said pliant currency acceptor;
• means including an internal clock for setting a period of time proportional to the pliant currency inserted in said acceptor
• means for activating and maintaining access thereby to said global telecommunications network for said (a) period of time proportional to the amount of pliant (fee paid by the) currency inserted in said pliant currency acceptor.
• means for activating and maintaining access (thereto) to said global telecommunications network for said (a) period of time proportional to the amount of pliant (fee paid by the) currency inserted in said pliant currency acceptor.

The application for this patent was filed August 26, 1996, and the patent was issued October 13, 1998.

This is interesting because of the sheer number of people who used the same technology much earlier, either to do the same things identified in the patent or for similar functions.

Although more years have passed than I care to admit since I took Introduction to Patent Law, I do remember the instructor explaining that a would-be patent needed to be novel and could not be a restructuring or reconfiguring of existing technology. The invention also needed to be a first; in other words, if an invention was in public use or was published in a public document prior to the application, a patent couldn't be granted.

I contacted a patent lawyer to get a better understanding of how Patent 5822215 was issued in light of the fact that I was pretty sure there was a lot of prior use that would make it invalid. The lawyer explained that unless there was a patent issued to someone else prior to someone submitting a patent application, the Patent Office leaves it to the courts to decide if a patent is valid or not.

So what does that mean to us? Well, there's good news and bad news. The good news is that Upstate has already settled with a few manufacturers -- AT&T and Moonrise Systems among them -- for 1 1/8 cents per dollar of the sale price of each kiosk. That sum won't throw the futures of most players into doubt. Unfortunately, however, it means that until someone challenges the patent in court, and that means legal bills, time and uncertainty. And even if the patent is invalidated, those who pursued the court case will not be reimbursed for their costs.

Only those folks who have been served notice that they are infringing on the patent can determine the economics of defending their rights to manufacture pay-for-use Internet kiosks or to arrive at some sort of settlement with the holders of Patent 5822215. I know there are a few out there who are looking at their options.