Consortium to Facilitate Internet Payments

By Mel Duvall  |  Posted 2001-09-24

A group representing some of the brightest minds in the computer industry is looking to establish an international consortium to oversee a new payment mechanism for goods and services purchased over the Internet.

The consortium would act somewhat like a Visa International, and would make it possible for consumers to purchase a variety of goods and services over the Web and have the charges added to their monthly cable or ISP bill.

"It solves the problem of the consumer not being comfortable with providing their credit card number or billing information to third parties over the Internet," said Andrew Egendorf, head of Tradecraft, a Boston-area think tank that holds patents covering the technology. "You already have a trusted relationship with your cable company, and your cable company trusts you."

Tradecraft is looking to license its technology to an international consortium being founded by Jim Rose, an international relations expert at MIT. Rose has formed a venture group, called the International Third Party Payment Consortium, with representatives from the banking and computer security sectors.

The consortium would in turn act as clearinghouse for any cable company or ISP worldwide that wants to act as a billing authority for its customers purchasing goods or services over the Web. Rose said talks are already taking place with a large Japanese service provider, and he believes the first deployment of the system could be in place by years end.

At the heart of the venture is a series of patents obtained by Tradecraft during the past two years from the U.S. Patent Office. Tradecraft was established in the summer of 1999 by a group that includes Marvin Minsky, an MIT professor and a legendary figure in the development of artificial intelligence; Egendorf, a high-profile lawyer best known as a member of Naders Raiders; Jean deValpine, a senior venture capitalist in the cable industry; and Henry Morgan, former dean of the School of Management at Boston University.

Tradecraft has received final approval for three patents and is expecting approval on two more, basically giving it a lock on the third-party billing mechanism. Egendorf said the system differs from those offered on AOL or Yahoo!, because third-party retailers still handle the billing for them.

"What we have now is basically a dumb pipe going to a walled garden [as in the case of AOL]," Egendorf said. "What we are proposing is more of a smart pipe or a tended garden."

His group has not yet discussed plans with AOL.

The validity of some Internet patents has come under question during the past year, as the U.S. Patent Office struggled to cope under a flood of claims. However, Egendorf said Tradecrafts cable patent, #5,446,489, has been challenged through a formal re-examination procedure, and passed.

"That has been our goal from the start," he added, "to secure patents that could withstand a court challenge."

Patenting Internet Commerce

Tradecrafts patents cover a system of payment where a cable company or ISP acts as a trusted billing authority between a subscriber and a third party:

Patent # 5,446,489 Covers system of payment where cable provider acts as intermediary

Patent # 5,794,221 System of payment where ISP acts as intermediary

Patent # 6,188,994 An aggregator of ISPs and/or vendors as the intermediary

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