December 23, 2014 / 5:17 PM / in 3 years

Breakingviews: Uber takes patent office for ride on surge pricing

NEW YORK (Reuters Breakingviews) - Uber is taking the U.S. patent office for a ride on surge pricing. The taxi app’s claim to own the idea of increasing charges during peak hours is a stretch. Like the company’s other dubious intellectual-property filings, though, this one can temporarily slow rivals. That may buoy investors anticipating an initial public offering, but the tactic risks fueling patent wars.

Twitter, Facebook and other technology companies typically stockpile IP filings before going public. That helps them defend against infringement claims and deter competitors from copying their inventions. Uber is seeking patents covering its cab-booking services in preparation for a possible IPO.

The problem is that most of its applications have been rejected. Of the 16 filed publicly so far, 11 were bounced for being obvious or covering abstract ideas. Five await review - including the filing for surge pricing.

That one seems unlikely to pass muster either. Hotels, airlines and other companies - even the cafeteria at Goldman Sachs’ headquarters - set prices according to fluctuating demand. Of course, the number of, say, hotel rooms is typically fixed while the supply of Uber cars can grow when necessary. That difference might make Uber’s system distinctive enough to be eligible for protection.

The company would still have to contend, though, with a U.S. Supreme Court decision in June that said merely running abstract ideas through a computer doesn’t make them patentable. The ruling seems squarely aimed at concepts like surge pricing.

Even if Uber’s patents are ultimately squelched, they can serve a strategic purpose. Filings take three years on average to crawl through the approval process, according to research firm Envision IP, and applicants can buy additional rounds of review. That gives the likes of Uber plenty of time to discourage would-be competitors like Lyft.

Asserting dubious claims, though, invites abuse of the patent system. Research suggests infringement lawsuits cost companies tens of billions of dollars each year in legal expenses and lost market value. Even successful challenges to Uber’s patents would further inflate that figure.

The company is already reeling from public relations gaffes like inflicting surge pricing on people trying to flee an Australian hostage siege. Its patent strategy looks like yet another PR fender bender waiting to happen.

CONTEXT NEWS

- Taxi app company Uber has filed 16 published applications for U.S. patents, including one that covers surge pricing, the practice of charging customers more during times of high demand, according to Envision IP, an intellectual property advisory and research firm based in New York.

- The U.S. Patent and Trademark Office has rejected 11 of the applications and has yet to finish examining the remaining five, including the surge pricing filing, Envision IP reports.

- Envision IP report: bit.ly/1sGgeur (The author is a Reuters Breakingviews columnist. The opinions expressed are his own.)

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