Patent, Holder in Due Course

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7.1 Patent Amazon.com has become one of the biggest online retailers.Amazon.com, Inc., enables customers to find and purchase books, music, videos, consumer electronics, games, toys, gifts, and other items over the Internet by using its website www.amazon.com. As an early entrant into this market, Amazon.com became a leader in e-commerce. Other e-commerce retailers began offering goods and services for sale over the web.

One problem that Amazon.com and other e-commerce retailers faced was that more than 50 percent of potential customers who went shopping online and selected items for purchase abandoned their transactions before checkout. To address this problem, Amazon.com devised and implemented a method that enabled online customers to purchase selected items with a single click of a computer mouse button. A customer who had previously registered his or her name, address, and credit card number with Amazon.com could complete purchases by clicking an instant “buy” button. Amazon.com applied for a software patent for its one-click ordering system, and the U.S. Patent and Trademark Office (PTO) granted patent no. 5,960,411 (‘411 patent) to Amazon.com. Amazon.com designated this as the “1-click®” ordering system.

While Amazon.com’s patent application was pending, other online retailers began offering similar one-click ordering systems. One was Barnesandnoble.com, which operates a website through which it sells books, software, music, movies, and other items. Amazon.com sued Barnesandnoble.com, alleging patent infringement, and sought an injunction against Barnesandnoble.com from using its one-click ordering system. Barnesandnoble.com defended, asserting that a one-click ordering system is clearly obvious and, therefore, did not meet the required “nonobvious” test of federal patent law for an invention to qualify for a patent. Was Amazon’s 1-click ordering system nonobvious and therefore qualified for a patent? Amazon.com, Inc. v. Barnesandnoble.com, Inc., 239 F.3d 1343, Web 2001 U.S. App. Lexis 2163 (United States Circuit Court of Appeals for the Federal Circuit)

23.7 Holder in Due Course Royal Insurance Company Ltd. (Royal) issued a draft in the amount of $12,000 payable through the Morgan Guaranty Trust Company (Morgan Guaranty). The draft was made payable to Gary E. Terrell in settlement of a claim in an insurance policy for fire damage to premises located in Kansas City, Missouri. Subsequently, the attorney for Mr. and Mrs. Louis Wexler notified Royal that Terrell’s clients had an insurable interest in the damaged property. As a result, Royal immediately stopped payment on the draft. On the same day, the draft was indorsed by Gary E. Terrell and deposited in his account at the UAW-CIO Local #31 Federal Credit Union (Credit Union). Over the next two days, Terrell withdrew $9,000 from this account. Immediately upon receiving the draft, Credit Union indorsed it and forwarded it to Morgan Guaranty for payment. The draft was returned to Credit Union with the notation “Payment Stopped.” When Royal refused to pay Credit Union the amount of the draft, Credit Union sued. The basis of the lawsuit was whether Credit Union was a holder in due course. Who wins? UAW-CIO Local #31 Federal Credit Union v. Royal Insurance Company, Ltd., 594 S.W.2d 276, Web 1980 Mo. Lexis 446 (Supreme Court of Missouri)