There's Nothing Apple Won't Patent
I keep waiting for the day that a tech blog reveals Apple's (NAS: AAPL) latest patent for "a system of inhalation and exhalation producing the necessary biochemical reactions for life," something also known as "breathing." The list of Apple's patent tussles seems to grow longer every week as iMadeItFirst expands to cover such standard mobile functions as slide-to-unlock and the concept of object-oriented graphics. Even the appearance of tablets, presaged by sci-fi classics such as 2001: A Space Odyssey and Star Trek, is "patently" Apple.
The latest patent uncovered by diligent snoops might be one of the most outlandish, and the most dangerous, should Cupertino use it as an anti-competitive club. Ready for this? It's the ability to buy digital stuff online with credits. Somewhere (possibly on top of a big pile of money), Mark Pincus just got a shiver down his spine.
What's wrong with this patent picture?
The claim extends over any form of buying a "media item" in an online store using credits instead of real currency. That's all it is. The patent is so broad that it doesn't specifically explain how one might get the credits. "Whatever means" are good enough.
Apple was helpful enough to say that the credits might potentially come from codes on bottle caps. The patent was filed in May 2006, around the same time Coca-Cola (NYS: KO) rolled out My Coke Rewards ... a way to get points from bottle caps that you can use to buy stuff online. Unfortunately, Apple thought to patent the idea first. Sorry, Coke.
Patent all the things
The biggest problem I see here is that Apple was clearly not first to come up with this idea. The notion of buying credits to exchange for goods, real or virtual, has a long history online. Games are particularly avid users of the credit payment model. Linden Labs sells "Linden Dollars," which are then converted into virtual items or property in Second Life, a game that has been running since 2003. Game-based virtual currency is certainly a model for using credits to get digital goods.
A number of freemium game publishers use the credit model, notably Zynga (NAS: ZNGA) and Glu Mobile (NAS: GLUU) . Gluu's been making games since 2001, and Zynga's a billion-dollar business built entirely on the premise that people would rather spend money than wait an hour to hatch a virtual chicken. Both use credits for in-game purchases. Zynga's credits, routed through Facebook, are so popular that the game company provides 12% of Facebook's revenue. Would either be infringing on Apple's brilliant idea?
Patently Foolish final thoughts
This just strikes me as a head-smackingly ridiculous patent that no technologically savvy official should have accepted. There are mounds of prior examples of credit payment systems, undermining any claim that this might be original intellectual property. I'm not the only one who thinks Apple's patent warfare is bordering on the absurd. But the problem is that the patent system itself allows such absurdities to continue.
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At the time this article was published Fool contributorAlex Planesholds no financial position in any company mentioned here. Add him onGoogle+or follow him on Twitter@TMFBigglesfor more news and insights. The Motley Fool owns shares of Apple and Coca-Cola.Motley Fool newsletter serviceshave recommended buying shares of Coca-Cola and Apple as well as creating a bull call spread position in Apple. Try any of our Foolish newsletter servicesfree for 30 days. We Fools may not all hold the same opinions, but we all believe thatconsidering a diverse range of insightsmakes us better investors. The Motley Fool has adisclosure policy.
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