The Emptoris Sourcing Patch -- What it Means for Users

Earlier this week, I had the chance to take a quick look at the patches Emptoris will be deploying to satisfy Ariba's claims and the court's findings that it infringed on patents "6,499,018 and 6,216,114, patents covering, respectively, the use of individual bid ceilings and certain auction overtime rules in electronic auctions." The bottom line is that from the screen shots I've seen, Emptoris has eliminated the infringing features.

I am familiar with both patents going back to my time at FreeMarkets, and while I am most certainly not an IP attorney, the patches appear, in what I saw, to ameliorate the violation. For the approximately 80% of Emptoris customers that are running the Emptoris sourcing product in a SaaS model, Emptoris will manage the deployment of the patch process for them. For the other 20%, Emptoris will send out the patch and these customers will have a set time period to install it before it becomes Ariba's option to get involved.

For patent 6,499,018, which dealt with preliminary bid features that essentially took a supplier's ceiling price from the RFQ and transferred it to the auction, a supplier in the Emptoris system had only one choice historically -- to accept the bid or not participate. With the patch, Emptoris suppliers will have the ability to accept or reject the price on a line-item basis with the request to each supplier that "before making a decision, please review and accept/decline an initial bid that will appear. To decline a bid, uncheck the box next to that item". This appears to be a suitable fix, and in fact provides greater flexibility to suppliers in accepting or declining a price ceiling prior to a market (which, for example, might be important if underlying commodity prices have increased from the time of the RFQ on a line-by-line basis).

For patent 6,215,114, which covered automatic extension rules in the overtime phase of an event, Emptoris used to offer multiple options to users that could trigger overtime or an additional overtime. To be specific, a supplier's bid that was either the leading bid, one of the top 2 bids, one of the top 3 bids, one of the top 4 bids, one of the top 5 bids, or any bid could trigger overtime or an additional overtime. To eliminate the patent infringement, Emptoris now only supports two auto-extension rules that can trigger overtime or an additional overtime: for any bid submitted or the leading bid. This fix will limit, to some degree, the amount of flexibility in extending overtime situations to balance increased competition with unduly long overtime periods, but I estimate that it will have a potential material impact to <1% of the auctions that customers currently run.

Now that Emptoris has eliminated the infringing areas with these patches, what will it mean for the market? The two customers that I've had a chance to connect with so far were not overly concerned -- for different reasons -- though one did caution that the fix is not a hot patch and requires a new release of the code, IT involvement, etc. In other words, the end business result is minimal, but it will come with at least some hassle. Emptoris SaaS customers, however, should avoid any code release headache.

- Jason Busch