Ada Genavia
Apr 14, 2012

Web-based restaurant system makes a patent troll hungry for Groupon

Online dining management systems and coupons are on the riseGroupon has grown successfully due to its ability to help city-dwellers explore local dining hotspots, discover various entertainment activities and purchase products they may not have previously considered. Its basis is pretty simple: customers come to the website to find daily deals on restaurants or local activities. This in turn builds revenue and excellent customer relationships for both Groupon and the businesses benefiting from their enticing discount system.

Sounds like a good deal for everyone involved; unless, of course, you are a patent troll with the rights to a web-based restaurant system. Mount Hamilton Partners (MHP) has filed a patent infringement lawsuit against Groupon. The patent in question is US patent 7,904,334 entitled ‘System and method for reducing excess capacity for restaurants and other industries during off-peak or other times,’ which was filed in May 2004 and published March 2011. In the filings, MHP argues that Groupon,by helping restaurants fill unused seats and build direct relationships -- thus increasing loyalty -- with individual customers, is infringing its patent, causing ‘irreparable harm.' 

‘Patent trolling’ is nothing new for MHP, despite its website's claim that their mission is to ‘invest in technology companies by providing strategic and financial support at strategic stages of research and development.’ They have already filed suits against Google (for Google Offers) and OpenTable Inc. Both services are leaders in online deal savers and customer service management. OpenTable was actually in the midst of its IPO in May 2009, the same week it was hit with a patent infringement lawsuit by MHP.

The only ‘irreparable damage’ that Groupon and similar companies would inflict on MHP is loss of potential revenue -- revenue which MHP did hardly anything to gain. This is not just a problem for this particular infringement case -- it could have ramifications for many other companies that have produced and are currently producing this type of service. 

Let’s take a closer look at this patent and see what benefits and disadvantages it provides for the parties involved.

The patent states that it is a ‘computer-implemented system for reducing excess capacity for one or more restaurants that experience periods of peak demands and periods of non-peak demands and for collecting information about at least one user.’ This detail sounds advantageous for restaurants considering the unpredictability of peak hours in the city. By allowing them to maximized the low periods and not overbook the high periods, as well as obtain crucial customer data, their profits will be far greater than if they were merely subject to the whims of chance.

The patent further explains that it is a ‘computer-based implemented system including a website configured to facilitate reduction of excess capacity at two or more restaurants by offering incentives ... to enable users to search for restaurants at which to dine.’ The inclusion of online functionality that offers customers incentives offers a symbiotic reward for both buyer and seller.

The computer program also includes a restaurant search module to find different categories for restaurants based on location, name and cuisine type. It displays the incentives available to the user on a per restaurant basis as well as receiving user input corresponding to a user selected restaurant. In general, this patent describes the basic foundation of Groupon as well as Google Offers and Open Table. The dynamically adaptive and 'smart' selection of consumer preferences allows restaurants to pivot as needed for targeted appeal as well as save customers time by simplifying their hunt.

Smaller restaurants can benefit from increased exposureThis patent serves as an efficient tool for widespread city business success. There is no doubt that individuals will get the most out of their dining experiences with this type of search engine tool. Most people tend to stick to the same type of dining they know. This causes restaurants to overflow, or suffer from long waiting times and ‘challenging’ customers that restaurant employees are left to deal with. Although this type of experience is hard to avoid on a Saturday night, this patent gives people the opportunity to explore different cuisines as well as find deals suited to their own preferences.

Restaurant capacities would be more well balanced and their business would receive all sorts of hungry customers. Restaurant managers are not the only group that benefits; the marketing and advertising segment of the dining industry can get a kick with this system. Consumers would also feel more economically-savvy with the savings incentives they would receive. This would alternatively create better business growth for restaurants and marketing businesses.

The main downsides would be if restaurants are overlooked due to not being advertised as part of the service or bad restaurants conning people into eating at their establishment through major discounts. There's also not much oversight for who can create coupons, and companies like Groupon have often been plagued by hustlers who mislead customers into buying coupons for false businesses.