Shopify joins patent non-aggression network as competition with Amazon heats up

Shopify

Shopify has joined the Open Invention Network (OIN), a patent non-aggression community that aims to defend the intellectual property (IP) rights of developers that use Linux, an open source operating system.

The OIN acquires patents based on the Linux system and licences them royalty-free to its members, who agree not to assert their own patents against Linux and Linux-related systems and applications.

“By no means [does] getting yourself involved in this patent pool prevent you from patenting other technology.”

Over the last few years, Shopify has been trying to play a game of catch-up with Amazon, one of its top competitors, which has thousands of patents to its name. IP experts such as lawyer Natalie Raffoul have publicly stressed that to stay competitive, Shopify needs to increase its patenting activity, noting that IP should be a priority if Shopify truly wants to play in the global marketplace.

“Hopefully, [Shopify] can catch up, but they will probably need to increase their patenting rate 10-fold,” she told BetaKit in January.

Speaking with BetaKit recently, Raffoul said joining a network like OIN could add value to Shopify’s ongoing IP strategy.

Shopify is one of a number of large companies that have joined the OIN in recent months. Current members include Google, IBM, and Sony, among others. Robert Guay, senior counsel of IP at Shopify said by joining the OIN, the company is committing “to patent non-aggression in core Linux and adjacent open-source software.”

“We believe that this commitment will promote innovation and help enable entrepreneurs and developers to build on open source foundations without focusing on the threat of litigation,” added Guay.

At the beginning of this year, BetaKit reported the Ottawa-founded company had received approvals for two merchant patents and that Shopify’s number of publicly available approved or pending patents, at the time, totalled approximately 45. The number is a far cry from the zero patents Shopify held just three years prior, but still sits well below the thousands of patents owned by Amazon. Reports from The Globe and Mail and The Logic have also noted Shopify’s anemic number of patents.

Raffoul told BetaKit Shopify’s decision to join a patent non-aggression network could help its overall IP strategy. “By no means [does] getting yourself involved in this patent pool prevent you from patenting other technology. It’s not going to hamper you in doing that,” Raffoul said. “So that doesn’t mean because they joined this pool, they now have a fully non-aggressive patent strategy.”

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What joining this network will allow Shopify to do, said Raffoul, is access OIN’s portfolio of Linux software patents that can still generate value without the threat of litigation.

“This is a good move for Shopify, because they’re exploring options,” she added. “When you’re thinking about IP strategy, you want to be thinking defensively… but also you want to be thinking about how [to] add value.”

Shopify has prioritized warehouse fulfillment, social media partnerships, and business banking as new areas of expansion in recent years. It’s not currently clear whether Shopify’s latest patent filings align with these priorities, as it takes 18 months after a patent is filed for it to appear publicly. What is clear, is that the company’s latest business pursuits have intensified Shopify’s competition with Amazon.

Some experts argue what has also increased Shopify’s competitive advantage over Amazon is its differing value proposition to merchants. Earlier this year, Amazon brought its IP protection program to its sellers in Canada. That followed reports the company had used data from its own merchants to launch competing products.

In 2019, New York University professor Scott Galloway juxtaposed Shopify with Amazon, stating Shopify has the ability to be a “true partner to e-commerce firms” as opposed to a “virus” that uses data to promote its own private label brands and effectively own the consumer relationship as Amazon does. Galloway said this has made Shopify a threat to Amazon that the $1.65 trillion firm can no longer ignore.

In the patent department, however, Shopify still has a long game of catch-up to play. Amazon was granted over 4,000 patents in 2019 and 2020 alone, for everything from drones to artificial intelligence.

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The public discourse on Canadian IP strategy has grown louder over the last few years. Experts have routinely pointed to Canada’s continued lag in IP generation, as well as Canadian innovation’s challenges in IP development.

One early 2020 report, focused on Ontario, found that 59 percent of small to medium-sized enterprises (SMEs) in the province were at least slightly aware of patents, yet only two percent of SMEs held at least one. Last year, Ontario created an action plan and team focused on generating IP in the province and the Alberta government committed to modernizing its own IP laws.

Over the last year, governments at various levels have mobilized to strengthen Canada’s IP activity. In its 2021 budget, the federal government earmarked $90 million to provide startups with access to IP services.

Isabelle Kirkwood

Isabelle Kirkwood

Writer, globetrotter, drone pilot & David Attenborough enthusiast