While some analysts remain concerned that name-your-price online retailer Priceline.com’s (Nasdaq: PCLN) business model could be easily replicated, the company is busy patenting its methods.
Priceline.com, which has seen its stock price rocket since its recent initial public offering partially because investors are intrigued by the company’s unique business model, announced Friday that it been awarded a U.S. patent covering the type of airline ticket the company sells. Priceline.com says its airline product is unique because it allows airlines, rather than customers, to select the flights and routing after customers agree to make a purchase.
The new patent is the second patent of Priceline.com’s business methods. The company has also patented the methods underlying its demand collection system, which currently offers “name-your-price” products and services in the travel, automotive and personal finance categories.
“Patents are a critical element of priceline.com’s business strategy as they strengthen and expand our competitive position,” said Rick Braddock, chairman and CEO of Priceline.com. “Protected intellectual property enables us to establish and maintain our distinctive position in the e-commerce marketplace and gives the company the ability to focus on building its business and brand, and not be as concerned with the competitive copying going on in the e-commerce space. These patents also present Priceline.com with the potential opportunity to open up new revenue streams through licensing.”
More Patents Have Been Applied For
Both of these patented business methods were invented by intellectual property laboratory Walker Digital. The patents have been assigned to Priceline.com as part of a joint licensing agreement. Walker Digital has applied for 20 U.S. and international patents related to Priceline.com’s business.
“With recent U.S. Patent and Trademark Office and court affirmations regarding the patentability of business methods, a company now has the ability to protect not only its business products but the actual methods employed in bringing them to market and satisfying customers,” ” said Jay Walker, chairman of Walker Digital and founder and vice chairman of Priceline.com
Can Business Model Truly Be Protected?
Despite the patents, other companies are finding ways to take advantage of the growing interest in Priceline.com’s formula for doing business. For example, Budget Rent A Car became the first rental-car company to offer online bidding last month. With the new service, customers will be able to decide where and when they want to pick up and return a rental car, what kind of car they want, and the price they’re willing to pay. Budget will inform the customer within one day as to whether their bid has been accepted.
This service is a bit different from Priceline.com’s airline product, because customers get to decide the time and location. Of course, the service is still very similar to what Priceline.com does, and it seems like only a matter of time before other companies start their own variation of a name-your-price service.