You may be next: it's a threat to smaller online merchants. Fort Wayne chocolatier fights back.

• Author: Frazier, Lynne McKenna
• Position: Patent infringement

DeBrand Fine Chocolates received a not-so-sweet piece of news this fall.

The Fort Wayne gourmet chocolate company got notice it was being sued by a California company. It was claimed that DeBrand's Web site--which generates about half of the chocolatier's mail-order business--was infringing patents of a company called PanIP.

DeBrand co-owner Tim Beere discovered that his company was one of several online merchants sued in federal district court in San Diego. They had a couple things in common--all were small and all were located far from southern California. PanIP seeks $5,000 in licensing fees from each of the defendants, which include at least two other Hoosier companies in addition to DeBrand: Encore Music Co. in Woodburn and Herds Seed in Logansport.

As Beere researched the matter, he became convinced that PanIP-formed in March, just a month before filing its first lawsuit--was practicing legal extortion, apparently picking targets more likely to pay the licensing fee than wage a legal battle. But Beere decided to fight.

The patent-infringement claims stem from the use of common retail e-commerce technologies. Several controversial patents have been filed staking claims on some of the most basic Web technologies, including the familiar shopping cart. Once obtaining patents, the patent-holders then claim that anyone using those technologies in online operations must pay royalties.

The PanIP patents were filed by Lawrence Lockwood, the only known owner of the Lajolla, Calif., company. The two patents that the suits allege DeBrand and other small companies have infringed upon cover an "automated sales and service system" and an "automatic business and financial transaction-processing system."

Beere and his San Diego attorney contend that those definitions are broad enough to cover any Web site taking online orders.

It's not the first time Lockwood has claimed an electronic...