Patent Battler Ends Up in Bankruptcy Court

If you’re an online shopper who has recently shipped a purchase from a major retailer like Macy’s, Target or Amazon.com overseas, Ed Pool says you should have paid some money to his company.

Problem is, Pool is having a hard time convincing a judge of that.

A tiny company in rural Virginia has ended up in bankruptcy court amid a bid to prove to the world that it should be paid for patenting the way that transportation middlemen ship products to customers overseas. After waging expensive, multi-year patent battles, DE Technologies Inc. filed for Chapter 11 protection Monday so a bankruptcy judge could sort out a dispute with a creditor, said Pool, the company’s founder.

Pool’s two-person firm in quiet Blacksburg, Va., has unsuccessfully fought expensive legal battles to recover money from global shipping companies since the company’s controversial patent cleared in 2002—a patent DE Technologies says entitles it to a small percentage of the value of transport companies’ international shipments.

Pool’s patent grip was made possible by a 1998 appeals-court ruling that determined that patents for business methods and processes are valid.

Patent attorneys have cried foul, arguing that DE Technologies shouldn’t be allowed to profit from the mere existence of global commerce. Patents, they argue, are meant to protect ideas that aren’t completely obvious.

But to Pool, his company is just a small firm trying to defend its ground against companies that have the backing of global retail giants. Specifically, Pool’s patent covers software that computerizes the entire trade process, including the creation of customs declarations and shipping documents, along with services such as insurance and letters of credit.

“This opened the world up,” Pool told Bankruptcy Beat.

In 2004, DE Technologies filed its first major patent infringement lawsuit against Dell, which later settled the dispute by agreeing to pay a royalty-free license for an amount that Pool wouldn’t disclose. Pool said his company settled another lawsuit against what’s now called FiftyOne Inc.

DE Technologies is now fighting two other major global shipping companies, International Checkout and IShopUSA Inc., for using the patented process.

Pool, who ranks as a major shareholder in DE Technologies, said the company’s bankruptcy case will allow it to sort through tricky creditor issues so it can continue operating.

DE Technologies’ assets are worth between $10 million and $50 million, while its liabilities amount to less than $10 million, according to papers filed with the U.S. Bankruptcy Court in Roanoke, Va.

-William M. Bulkeley contributed to this article.