Online reverse auctions provider FreeMarkets has filed patent infringement suits against three of its competitors, alleging the other firms are using a specific capability FreeMarkets patented in its software.

FreeMarkets has named Procuri, B2E Markets and PurchasePro in separate suits as violating an existing FreeMarkets patent. According to legal documents, the first patent in question is entitled the "Method and system from controlling the initiation and duration of overtime intervals in electronic auctions," which provides the capability to extend auctions by specified periods if the host decides to do so for competitive reasons. A second patent named in the suits covers the "Method and system for handling disruptions in the management of electronic auctions."

Perhaps the most surprising fact about the suit was the method by which the companies named in it found out.

"The first time we heard about the suit was through a press release," says Steve Stern, vice president of corporate communications and investor relations at PurchasePro. "I have been involved with a lot of patent litigation work in my career and this is the first time I have heard of any corporate litigation being filed before the two companies even talked. Usually there is some intercourse between the general counsels about the issue. But they just put out a news release naming three companies."

Ron Holtz, CFO of B2E Markets, says his firm received the same treatment and says he thinks FreeMarkets issued the press release prior to the actual filing. Since seeing the press release March 4, PurchasePro has spoken with the other companies named in the suit and feels the suit is simply a competitive move by FreeMarkets against three of its closest contenders.

"I think it's interesting FreeMarkets only filed suit against these three companies and not against the other companies developing and offering reverse auction technology," says Stern. "We just signed a deal with a major semiconductor company in Pennsylvania, not far from where FreeMarkets is located. It was my understanding that FreeMarkets owns the semiconductor market so that is an inroad for us. We are an easy target. We are in a turnaround stage. We were struggling last year and now we have some cash infusions, but we're a company that's easy to attack."

Orville Bailey, president and CEO of B2E Markets, issued a statement on the suits saying, "It is a shame to see a competitor trying to freeze the market rather than focusing on delivering innovation and true value." Procuri issued a statement two days after the suits were announced stating it intends to defend against the suit vigorously.

FreeMarkets declined comment beyond its original press release.

The lawsuit may be an indiction of increasing price competition in reverse auctions. Some companies, for example, say they are putting more focus on long-term relationships in preparation for potential supply squeezes. In another development, some companies are turning the tables by conducting reverse auctions on reverse auction providers.