News Column

Researchers Submit Patent Application, "Electronic Bond and Guaranty Process and Business Method", for Approval

September 11, 2014



By a News Reporter-Staff News Editor at Politics & Government Week -- From Washington, D.C., VerticalNews journalists report that a patent application by the inventors HARRISON, Jr., Shelton E. (Newport Coast, CA), filed on November 25, 2013, was made available online on August 28, 2014.

The patent's assignee is Shelton E. Harrison, Jr.

News editors obtained the following quote from the background information supplied by the inventors: "(1) Field of Invention

"The present invention relates to the field of electronic commerce conducted in a client-server network environment, typically, the World Wide Web. Specifically, the invention relates to issuing performance bonds and guaranties over the Internet, as in cases where the party to be bonded is an Internet seller or bidder in an on-line auction environment.

"(2) Background Art

"The growth of electronic commerce has been accompanied by new risks to consumers. Enabling long-distance, anonymous transactions between individuals, user-to-user auction sites on the World Wide Web have given rise to severe problems of fraud and intellectual property piracy. These activities are also common on sites operated by fraudulent sellers themselves.

"Various solutions have been attempted. Electronic escrow services, where a third party is injected between buyer and seller to verify that a quid pro quo exchange occurs, represent one proposed solution. But such services, such as escrow.com, have proven to be of limited value and have gained only limited market acceptance, mainly because escrow services (a) create unavoidable delays in effecting the exchange and (b) add significant costs to every transaction, even when the exchange goes well. Moreover, since escrow transactions must be arranged on an individual basis, the use of an on-line escrow approach is simply not feasible for high-volume sellers.

"Another problem plaguing online auctions today is that of 'deadbeat bidders,' bidders who win an auction but never pay for the item purchased. Deadbeat bidders not only cost the seller a sale to other bidders who would have honored their contractual obligation to pay, but deadbeat bidders also cause sellers out-of-pocket expenses, since the auction company's commission typically must be paid by the seller whether or not she receives payment from the winning bidder. Escrow does not address the problem of deadbeat bidders, nor do electronic payment services, such as PayPal.

"What is needed is a solution that effectively eliminates the risk of buying and selling over the Internet while adding little or no transactional cost in terms of time and money.

"Performance bonding is a known means of legally shifting the risk of a given loss, a performance bond being a contractual agreement between the surety, the principal and the obligee whereby the surety agrees to protect the obligee if the principal defaults in performing the principal's contractual obligations. Black's Law Dictionary, 6.sup.th Ed.

"A guaranty is similar in purpose to a bond. A guaranty is a collateral agreement for performance of another's undertaking in which the guarantor agrees to satisfy the debt of another (the debtor), only if and when the debtor fails to repay (secondarily liable).

"Collateral is property which is pledged as security for the satisfaction of a debt or performance of a principal obligation.

"Letters of credit are a known means of facilitating transactions, whereby a bank or other institution agrees to honor demands for payment made in compliance with specified conditions.

"A penal sum is a monetary sum agreed upon in a bond to be forfeited if the condition of the bond is not fulfilled. In this document, the term 'coverage limit' may be used interchangeably with penal sum.

"Automatic means of adding an electronic image and accompanying text to an Internet auction listing or other World Wide Web page is also known. For example, the company known as Honesty.com enables Internet auction sellers to visit the Honesty.com Web site, enter an auction site name, auction number, email address and password, and then have the Honesty.com logo and a unique 'hit counter' added to the given auction listing automatically.

"Means of searching the Internet and World Wide Web for infringing uses of digital images and text is also known, such as the automated search technology designed by iParadigms for plagiarism.org or the techniques known as 'digital watermarking' or 'fingerprinting.'

"Merchant card services enabling Visa or MasterCard transactions in real-time over the Internet are known."

As a supplement to the background information on this patent application, VerticalNews correspondents also obtained the inventors' summary information for this patent application: "The disclosed invention provides an automated, computer-implemented, network-based method by which Internet sellers can obtain either a performance bond or a guaranty in real time and immediately deploy a unique seal evidencing this contractual protection for buyers. The bond and the guaranty are contractual vehicles which serve to indemnify buyers against the risk of non-performance or non-conforming deliveries by sellers. Bonds for bidders, which assure sellers of payment when a bonded bidder wins an auction, are also disclosed.

"In the preferred embodiment, the potential bond applicant first visits the Web site of the bond/guaranty company ('Company') and registers. The registered user then applies for either (1) a general suretyship performance bond which will offer security to purchasers in all of a seller's eligible Internet transactions up to the penal sum for all claims in aggregate or (2) a guaranty for a specific single Internet auction.

"Upon submission, the seller's application is processed automatically through evaluation software with reference to various databases, performing automated analysis of the risk-worthiness of the user, the authenticity of the information submitted, and other checks. The seller then receives immediate approval or rejection of the application. If the application is accepted, the terms and price of the bond or guaranty are quoted to the applicant. The seller then pays by credit card, and a unique seal which identifies the newly formed bond or guaranty is displayed to the applicant. This seal can be automatically added to certain auction listings by CGI script, or the seller can manually add the HTML code referencing this logo to her HTML documents, whether these are hosted on her own site or a third party auction site.

"In the preferred embodiment, potential buyers activate their coverage under the seller's bond or guaranty by 'clicking through' a link in the seal to a page on the bonding/guaranty company site and submitting the information requested therein. Confirmation of coverage is then sent to the potential buyer by email. Alternately, coverage can be automatic for anyone who buys from a bonded seller, requiring no activation by the buyer.

"If a seller defaults, the buyer submits a claim, including confirmation of coverage activation, if required. The Company evaluates the claim and reimburses the buyer if warranted. Thereafter, the Company takes appropriate action for reimbursement from the seller, such as charging the seller's credit card.

"In this way, the present invention offers a more effective, less expensive, infinitely scalable and virtually 'invisible' solution to the problem of making the Internet a secure marketplace.

"Various security measures for reducing piracy of the seal or otherwise misrepresenting a seller's status are disclosed. Various revenue models are also disclosed which allow shifting of cost to the most efficient payer. A seal which includes a 'bond margin' counter is also disclosed.

"In one alternative embodiment, the Company's risk is significantly reduced through a process by which the bond applicant's credit card used for sequential preauthorizations that serve to reserve a portion of the funds available in the given account as collateral. Other forms of collateral, such as an irrevocable letter of credit, can be substituted by special arrangement with the Company.

"In another alternative embodiment, the Company and a third party auction site operator work collaboratively through real-time data sharing so as to enable the third party auction site operator to serve the Company's seal in portions of the auction site under the exclusive control of the auction site operator.

"Another significant alternative embodiment provides for the bonding of bidders as well as sellers. In this embodiment, bidders can open a deposit account with the Company that allows instantaneous payment of a bonded seller at the close of an auction.

BRIEF DESCRIPTION OF THE DRAWINGS

"FIG. 1 depicts the basic steps by which an exchange between an Internet seller and buyer is transacted.

"FIG. 2A depicts an exchange between an Internet seller and buyer wherein the present invention is used to provide a bond or guaranty.

"FIG. 2B presents a flow chart depicting a high level, general overview of the steps involved in guaranty contract formation and claims resolution under the present invention.

"FIG. 3, included for comparison, depicts the basic steps by which an exchange between an Internet seller and buyer is transacted through an escrow service.

"FIG. 4A depicts a flow chart of a typical site registration process.

"FIG. 4B depicts a uniquely numbered identifying Seal which signifies that the given Internet seller is bonded; this Seal is to be displayed in HTML documents wherein sale is offered.

"FIG. 4C depicts a Seal signifying that the given Internet auction is guaranteed.

"FIG. 5 presents a high level flow chart documenting the process by which an application is submitted, evaluated, and processed and the resulting bond or guaranty contract, if any, formed.

"FIG. 6 depicts a flow chart documenting the bond application evaluation subprocess.

"FIG. 7 depicts a flow chart documenting the guaranty application evaluation subprocess.

"FIG. 8 depicts a flow chart documenting the process of 'flagging' an individual.

"FIG. 9 depicts a flow chart documenting the process by which a registered user's Experience Rating is assigned.

"FIG. 10 depicts an example Verification/Activation Page, to which potential purchasers or bidders 'click-through' in order to verify that the given seller is bonded or the given auction guaranteed and to activate their right to protection under the given bond or guaranty.

"FIG. 11 depicts a flow chart documenting the process by which a potential bidder activates her coverage under a bond or guaranty.

"FIG. 12A depicts a flow chart detailing the process by which a claim is made and resolved.

"FIG. 12B depicts a flow chart detailing the claims payment and collection process.

"FIG. 12C depicts a flow chart detailing the claim dispute resolution process.

"FIG. 13 depicts a high-level map of the databases used in the present invention, identifying the key relationships between them.

"FIGS. 14A through 14D depict different revenue models to which the current invention can be applied.

"FIG. 15 depicts a flow chart detailing the process by which a bond that makes use of preauthorized charges to a credit card as collateral is put into effect and maintained.

"FIG. 16A presents a timeline illustrating the relationship of a bond to the Company's risk exposure as a result of that bond.

"FIG. 16B presents another timeline illustrating an example of the relationship between the time period during which a bond is effective and the time period during which a claim against that bond can be made.

"FIG. 17A depicts a map of the database relationship that enables co-operation of and data sharing by an auction site and a bonding company.

"FIG. 17B depicts an excerpt from an HTML page that is an auction listing, wherein a special seal evidencing a bond is displayed.

"FIG. 18 depicts a sequence of five moments in time demonstrating the effects of different events on the margin of bond coverage over and above potential claims thereon.

"FIG. 19 depicts a flowchart documenting the process by which a bidder is bonded and a bidder deposit account is created.

"FIG. 20 depicts a flowchart that ties together previous discussion by illustrating the many different results that can occur after the closing of an auction in the context of potential bonding of both sellers and bidders."

For additional information on this patent application, see: HARRISON, Jr., Shelton E. Electronic Bond and Guaranty Process and Business Method. Filed November 25, 2013 and posted August 28, 2014. Patent URL: http://appft.uspto.gov/netacgi/nph-Parser?Sect1=PTO2&Sect2=HITOFF&u=%2Fnetahtml%2FPTO%2Fsearch-adv.html&r=943&p=19&f=G&l=50&d=PG01&S1=20140821.PD.&OS=PD/20140821&RS=PD/20140821

Keywords for this news article include: Jr., Legal Issues, Shelton E. Harrison, Shelton E. Harrison Jr.

Our reports deliver fact-based news of research and discoveries from around the world. Copyright 2014, NewsRx LLC


For more stories on investments and markets, please see HispanicBusiness' Finance Channel



Source: Politics & Government Week


Story Tools






HispanicBusiness.com Facebook Linkedin Twitter RSS Feed Email Alerts & Newsletters