Method and system for processing and transmitting electronic auction information

A system and method for conducting a multi-person, interactive auction, in a variety of formats, without using a human auctioneer to conduct the auction. The system is preferably implemented in software. The system allows a group of bidders to interactively place bids over a computer or communications network. Those bids are recorded by the system and the bidders are updated with the current auction status information. When appropriate, the system closes the auction from further bidding and notifies the winning bidders and losers as to the auction outcome.

BACKGROUND OF THE INVENTION
 1. Field of the Invention
 The present invention relates generally to electronic commerce and more
 particularly to conducting an interactive auction over an electronic
 network.
 2. Description of the Related Art
 Auctions usually take the form of a physical gathering of bidders assembled
 together within an auction house. Auctions presenting more valuable,
 collectible merchandise, such as art, coins and antiques, are often
 preceded by preparation of a catalog of merchandise, circulated to
 interested parties in advance of the gathering at the auction house, where
 bidding by those physically present will take place. For auctions of more
 mundane items, such as household possessions, estate sales and the like,
 the interested bidders simply appear at the appointed time and place and
 bid on merchandise in which they are interested.
 Traditional auctions requiring a bidder's physical presence
 disadvantageously require that the merchandise lots up for sale be
 available at the auction venue for inspection by the bidders and
 subsequent pickup by the successful bidders. For many types of merchandise
 it would be far easier for both buyer and seller to leave the inventory at
 its original source and ship purchased items to the successful bidders at
 the end of the auction. Moreover, physical auctions have the still further
 disadvantage that only one item may be auctioned at a time. The auctioneer
 solicits bids from the floor for a given lot, but once the highest bid has
 been accepted, the lot is closed and the next lot brought forward. This
 sequential processing combined with the finite amount of time available to
 a gathered group is inherently limiting because multiple lots cannot be
 auctioned simultaneously to the same group of people during their limited
 period of availability.
 Some changes in bidding requirements have made traditional auctions
 somewhat more convenient for bidders. Many auction firms allow bidders to
 submit their bids in advance of the auction. Advance bidding may be done
 by mail as a convenience to the bidders so that they do not have to be
 physically present at the auction. Also, the advent of the telephone and
 facsimile machine allowed bidders to submit bids in near real-time during
 the course of an auction. These technologies free the bidder from being
 physically present at the auction, thereby saving time and travel expense.
 To incorporate these technologies into the traditional auction format,
 representatives of the auction firm receive telephone or facsimile bids
 from their clients and alert the auctioneer of these new bids. Similarly,
 the representatives may relay information about the current bid items,
 such as the current high bid, back to the telephone bidders.
 Bidding by mail or facsimile suffers a significant disadvantage as compared
 to bidding in person or by telephone because the mailing or faxing bidder
 has no opportunity to increase a bid in quick response to competitive bids
 received from the floor or by telephone. Moreover, although telephone
 bidding allows the bidder to avoid travel expense and inconvenience,
 traditional auctions may be scheduled at inconvenient times for many
 remote bidders. Also, because of the large number of items or lots sold in
 a typical auction, which can number in the eight hour period in order to
 be present when the few lots in which the bidder has an interest come up
 for sale. The lots in which the telephone bidder is interested may be
 scattered throughout the lengthy traditional auction. Time zone
 differences further diminish the appeal of telephone bidding for an
 international potential customer base.
 All of these limitations and disadvantages of physical auctions, even when
 telephone bidding or bidding by facsimile is permitted, serve to
 discourage a large number of bidders and ultimately leads to lower selling
 prices to the economic detriment of the auctioneer and seller.
 Electronic auctions held over the Internet using electronic mail (E-mail)
 have provided a minor innovation as compared to more traditional physical
 options. In E-mail auctions, an auction catalog is electronically mailed
 to people interested in bidding. Subsequently, bidders submit their bids
 on individual lots to an auctioneer via E-mail. The auctioneer reads the
 electronic mail bids and enters them in a database of bids. When the
 auction closes, the auctioneer notifies the winning bidders, usually via
 electronic mail, and ships the merchandise to the winning bidders.
 There are several disadvantages to E-mail auctions. First, a human
 auctioneer is required to prepare the auction catalog and to read and
 process the electronic mail bids. This takes a considerable amount of
 effort in a large auction. Secondly, it is difficult to keep the bidders
 updated as to the current high bids on the various items. Electronic mail
 on most large public networks, such as the Internet, is lower priority
 traffic than most, meaning it can take several hours for bids to reach the
 auctioneer and for bidding updates to reach the bidders. Thirdly, as the
 auction closing draws near, the volume of bids may prohibit the auctioneer
 from sending out high bid information to the bidders because of the time
 involved in reading the electronic mail bids and in entering them into the
 bid database.
 A recent innovation applied to E-mail auctions is the use of the Internet's
 World Wide Web (WWW) facility to post descriptions of the merchandise and
 show the current high bids. This innovation provides the advantage of
 eliminating the need to electronically mail bidding updates to bidders.
 And since WWW traffic is much higher priority on the Internet, bidders
 suffer less of a time lag in seeing updated Web pages. However, a human
 auctioneer is still involved and is required to manually process the
 electronic mail bids, enter them into the bid database, and to update the
 World Wide Web pages with current high bid information.
 Sales firms other than auction houses have also used the Internet's World
 Wide Web facility to post descriptions of their merchandise and to offer
 the merchandise for sale at a set price. These systems are automated and
 are capable of accepting an order from a customer by having that customer
 fill out an online order form. This order information is taken by the
 system and placed into an order database or accounting system which then
 processes the order. However, such systems sell merchandise only at a
 fixed price and do not allow merchandise to be auctioned off, or to have
 their prices dynamically adjusted in an interactive manner in response to
 bids and other market conditions such as supply and demand.
 Security brokerage firms for years have used automated transaction systems
 for matching buy and sell orders for securities. For example, the New York
 Stock Exchange's DOTS (Direct Order Transmission System) and the NASDAQ's
 SOES (Small Order Execution System) systems offer complete electronic
 matching of buyers and sellers. However, these systems do not operate an
 auction. They merely pair buy orders with sell orders when the pricing
 criteria of both sides of the trade are met.
 A number of issued U.S. patents relate to various forms of electronic
 commerce. These patents fall into three broad categories: 1) patents
 relating to on-line networks, 2) patents relating to electronic commerce
 over on-line networks, and 3) patents related to various forms of
 securities (e.g., stocks and futures) trading via electronic means. From
 the first of these groups, on-line networks, U.S. Pat. No. 5,406,475
 entitled Data Processing Network Having A Plurality Of Independent
 Subscribers, U.S. Pat. No. 5,235,680 entitled Apparatus And Method For
 Communicating Textual And Image Information Between A Host Computer And A
 Remote Display Terminal, and U.S. Pat. No. 5,310,997 entitled Automated
 Order And Delivery System, are representative of the prior art. These
 patents describe systems of terminals connected over wide area networks to
 centralized computers. However, they do not disclose the details of
 electronic commerce or auctions in particular.
 In the second group, patents relating to electronic commerce, U.S. Pat. No.
 5,285,383 entitled Method For Carrying Out Transactions Using Electronic
 Title, and U.S. Pat. No. 5,297,031 entitled Method And Apparatus For Order
 Management By Market Brokers, describe various means for conducting
 transactions over electronic communications networks. They also describe
 various means for displaying merchandise for sale to a plurality of
 customers connected to a central computer of a computer network and
 various means for conducting simple sale transactions where a buyer
 purchases an item at the stated price. As a group, these patents do not
 disclose the means for conducting electronic auctions or any sales format
 other than a simple or "straight" sale.
 One particular U.S. Pat. No. 4,789,928, discloses a means for soliciting
 bids over an electronic network from bidders that are remote to the site
 of a live auction. This system records bids from remote bidders and
 simultaneously transmits the current high bid from the floor of the
 physical auction to the terminals of the remote bidders. However, this
 patent does not disclose or suggest the concept of an electronically
 conducted auction including a means for automatically closing the auction
 under certain conditions and without benefit of a live human auctioneer.
 Furthermore, this patent fails to disclose or suggest a means for
 auctioning a plurality of items simultaneously; rather, the disclosed
 system is strictly tied to the sequential proceedings of a physical
 auction. Finally, this system contemplates only a simple "highest bidder"
 auction where a single lot goes to an individual high bidder. This system
 cannot handle a lot available for auction which includes a plurality of
 items and where a plurality of winning bidders sufficient to match the
 plurality of auctioned items exists.
 In the third group of patents related to electronic commerce, patents
 relating to securities trading, U.S. Pat. No. 4,412,287 entitled Automated
 Stock Exchange, and U.S. Pat. No. 5,077,665 entitled Distributed Matching
 System, disclose means for prospective buyers to post offers to buy a
 given security at a specific price and for prospective sellers to post
 offers to sell a given security at a specific price. These automated
 systems maintain lists of buy and sell orders. If an offer to buy a
 security is placed at a price greater than or equal to an existing offer
 to sell that security at a given price, these systems will automatically
 consummate the trade by matching the buyer with the seller. While the
 securities industry uses, and these patents disclose, such terms as
 "auction" and "bid", they are actually referring to the process of
 matching a set of buyers' bids with a set of sellers' prices. There is no
 auction in the true sense of a plurality of bidders simultaneously bidding
 in a manner accessible to all bidders and sellers in order to achieve a
 high selling price. In fact, these patented systems do not include
 disclosure of the list of open buy or sell orders, thus depriving the
 seller of the ability to openly solicit the highest price for securities.
 Instead, the market price of securities sold through these automated
 systems fluctuates up and down based upon the last successful match
 between an open buy order and an open sell order when both the buyer and
 seller have placed orders at compatible prices. There is no ability in
 such systems to conduct truly competitive and open bidding.
 The present invention overcomes the above-listed drawbacks of the
 background art by providing a method and system for conducting auctions
 and mark down sales of merchandise over a computer network without the aid
 of a human auctioneer. The system is open to bidders anywhere in the
 world, leading to increased bid activity. Complete and thorough
 descriptions of all offered merchandise may be placed on-line, since the
 costs associated with printing auction catalogs are minimized in an
 electronic medium. An auction within the inventive system may be conducted
 over a period of time, mitigating the problems of inconvenient scheduling
 and time zone differences. A variety of auction formats can be employed
 within the inventive system depending on the type of merchandise being
 sold. And finally, the method and system of the present invention can be
 conducted automatically without the need for a human auctioneer, thereby
 allowing for a large number of items to be continuously auctioned.
 SUMMARY OF THE INVENTION
 To address the shortcomings of the background art, the present invention
 provides, in a computer network enabling communication between a host
 computer and a plurality of remote bidders, a system and method for
 transmitting and processing auction information implemented as a computer
 program within the host and network, comprising posting means for posting
 information across the network, the information being descriptive of a lot
 available for purchase, bidding means available to the bidders for
 submitting a plurality of bids across the network in response to the
 information, receiving means for receiving a plurality of bids sent across
 the network by the plurality of bidders, and categorizing means for
 automatically categorizing the bids as successful or unsuccessful.
 A primary advantage of this system is that it results in greater prices for
 merchants as well as broader distribution of their products. By
 incorporating an auction format which is available to a wide audience via
 electronic means, the inventive system and method results in more bidders,
 greater demand, and hence higher prices for the seller. And because this
 electronic system reaches a geographically diverse audience, merchants'
 product lines become visible in areas where their products are not
 normally distributed or advertised, resulting in increased sales volume
 without increased marketing expense. As the network grows, business grows.
 Furthermore, the electronic auction system is automatic and does not
 require a human auctioneer, thereby allowing many individual items to be
 auctioned during the same time period and providing a decrease in costs
 associated with running an auction. Indeed, it would not be possible to
 operate an equivalent twenty-four hour per day, seven day per week auction
 with potentially hundreds or even thousands of individual items and
 millions of potential bidders without such an inventive electronic auction
 method and system.

DETAILED DESCRIPTION OF A PREFERRED EMBODIMENT
 An inventive method and system is disclosed for conducting a multi-bidder,
 interactive auction without using a human auctioneer to conduct the
 auction. Preferably implemented in software, the electronic auction system
 allows a group of bidders to interactively place bids over a computer or
 communications network, automatically records the bids, updates the
 bidders with the current auction status information, closes the auction
 from further bidding when appropriate, and notifies the winning bidder or
 bidders and loser or losers as to the auction outcome.
 The inventive system includes a database for maintaining descriptions of
 the merchandise for auction, the bids, and other relevant information in a
 commercially available database system. Database searches are preferably
 performed periodically to check for new items to be made visible to
 potential bidders. Such periodic searching allows an individual charged
 with maintaining this system to load relevant information into the
 database at his or her leisure. Once the database is loaded with
 information about the item and the item is scheduled for presentation to
 potential bidders, the system takes the merchandise information and
 creates a human readable catalog page for a viewing over a public network
 such as the Internet's World Wide Web. Bidders are then able to view the
 new item for auction and to place their bids. These catalog pages
 preferably contain the current high bid, bid increment, quantity
 available, merchandise description, and picture of the item.
 Upon accessing a public network and seeing an item's catalog page, the
 bidder may press a button on the catalog page or take some similar action
 which causes a bid form to be displayed on the screen. The bidder then
 enters the information necessary to place a bid, such as their name and
 address, bid amount, payment information, etc., and then presses a bid
 submission button, or takes a similar action which sends the bid to the
 system.
 The system receives the electronic bid information and places it in the bid
 database. Because this new bid will, in general, be a bid for a higher
 amount than was last bid by another party, the system will regenerate the
 item's catalog page. This updated catalog page will then show the new high
 bid to any prospective bidders who later access that catalog page.
 Because most bidders will not, in general, be accessing the network and
 viewing the merchandise catalog pages as they are updated with new high
 bids, the system may send electronic mail notifications to bidders who
 have been outbid by the just-placed bid. These electronic mail
 notification messages preferably contain the relevant merchandise
 information, the current high bid, the bid increment, etc., and encourage
 the bidder to submit a new and higher bid to outbid the current high
 bidder. These electronic mail notification messages allow the bidder to
 enter a new bid by replying to the electronic mail message and sending it
 back to the system.
 Upon receiving a new or revised bid via electronic mail, the system follows
 the same set of actions as when the bidder places a bid using the
 electronic bid form when viewing a merchandise catalog page, namely, the
 system extracts the relevant bid information from the electronic mail
 message, deposits this information in the bid database, and then updates
 the merchandise catalog page as appropriate. Such an electronic mail
 message bid may further cause a new round of electronic mail notifications
 to go out to the recently outbid bidders.
 This process preferably continues until the system detects that the item is
 scheduled to be closed for further bidding or another closing trigger is
 detected. At this point, the system closes the auction by updating the
 merchandise catalog page with the final winning bid information and by
 sending electronic mail notifications to both the winning bidder or
 bidders and the losing bidder or bidders.
 The present invention provides an electronic auction method and system for
 presenting merchandise for sale at auction to customers over an electronic
 network, such as the Internet's World Wide Web. Potential customers are
 presented with a series of descriptive merchandise catalog pages through
 which they may navigate to find items (lots) of interest. Upon finding a
 lot of interest, customers may click a button on screen to display a form
 for placing a bid on the lot. After submitting this bid, the electronic
 auction system records the bid and updates the lot's merchandise catalog
 page to show the current high bid or bids and to whom such bids are
 attributable. When the auction is closed, after a period of no bidding
 activity, at a predetermined time, or when a desired sales volume is
 reached, the electronic auction system notifies the winning and losing
 bidders by electronic mail and posts a list of the winning bidders on the
 closed lot's merchandise catalog page.
 The present invention is preferably implemented as a computer program 248
 running on a central server host computer 250, shown in FIG. 1, attached
 to a wide area network 275 accessible by many potential customers through
 remote terminals 210. A preferred network for implementing the present
 invention is the Internet which is accessible by a significant percentage
 of the world population, although the network may also be a local area or
 limited area accessible network. Potential customers are presented at
 screen 280 with merchandise catalog pages, such as the one shown in FIG.
 2, generated by merchandise catalog page generator 25 shown in FIG. 4.
 Each merchandise catalog page includes several action buttons 5 that allow
 the customer to move from catalog page to catalog page and to place bids
 using keyboard 240 and pointing device 260. The user may call up an index
 of available merchandise by pressing button 7 or may return to a central
 home page by pressing button 9.
 By pressing bid button 1 in FIG. 2, the customer is presented with a bid
 form such as the one shown in FIG. 3. The customer fills out the required
 information in the bid form and presses "Place Bid" button 2 to send the
 bid to the electronic auction system for processing. Other equivalent
 means for submitting a bid could be used, as understood by those skilled
 in the art to which the present invention pertains.
 FIG. 4 illustrates a high level block diagram of the electronic auction
 system of the present invention. As shown, information from bid form 20 is
 received by the electronic auction system where it is processed by bid
 validator 21. Bid validator 21 examines the bid information entered by the
 customer on bid form 20 to ensure that the bid is properly formatted, all
 necessary data is present, and the data values entered look credible.
 Exemplary functions of bid validator 21 include verifying credit card
 information entered by the customer, checking that a complete name and
 shipping address has been entered, that the proper state abbreviation and
 zip code have been entered, that an appropriate bid amount has been
 entered, and that a telephone or facsimile number has been entered. Once
 the bid information has been validated, the bid validator 21 places the
 bid in bid database 31.
 Auction manager 26 preferably frequently queries the bid database 31 to see
 if any new bids have been placed. If new bids are found during the query,
 then auction manager 26 calculates the current high bidder or bidders and
 instructs merchandise catalog page generator 25 to regenerate a catalog
 page with the updated bid information.
 Auction manager 26 is also responsible for opening and closing auctions.
 This entails making merchandise lots available for bidding by customers
 and disabling their associated buy or bid features on the merchandise
 pages that have been posted to potential bidders but have closed. When
 auction manager 26 determines that a new lot should be opened for bidding
 or an available lot should be closed, it instructs merchandise catalog
 page generator 25 to create or update the merchandise catalog pages for
 the appropriate lots.
 Electronic mail messenger 27 frequently queries bid database 31 for bids
 recently marked by auction manager 26 as having been outbid or as having
 won an item in a recently closed auction. If such bids are found, the
 electronic mail messenger 27 formats an appropriate electronic mail
 notification message 24 and sends this message to the customer. Many
 customers read their electronic mail throughout the day, making this a
 convenient mechanism for keeping them informed about the status of
 merchandise on which they are actively bidding. Bidders may reply to an
 electronic mail notification message 24 informing them that they have been
 outbid by including an increased bid amount in the reply message. An
 electronic mail bid 22 sent in reply to the notification is received by
 the electronic auction system and processed by bid validator 21 as
 described above.
 FIG. 5 illustrates in detail the procedure of bid validation as
 accomplished by bid validator 21 shown in FIG. 4. A bid is received by bid
 validator 21 and the customer is looked up at step 41 in customer database
 28. If no customer record exists for the customer then a new customer
 record is created 42 and placed in customer database 28. From there, the
 bid information is validated 43 as previously described. If the bid data
 includes one or more errors, then an error message is returned 44 to the
 bidder, preferably in the form of a well-formatted page posted across the
 network, itemizing the errors found in the bid. If the bid is valid, as
 found in step 43, then the bid is placed 46 in bid database 31.
 FIG. 6 provides a detailed illustration of the procedures carried out by
 auction manager 26. Auction manager 26 is preferably a continuously
 running system that begins by getting the current time as at step 51. It
 then checks to see if any new items for sale are to be opened by examining
 the merchandise database to see if any new merchandise items are scheduled
 to be made available for bidding by customers at or before the current
 time. Operator 300, or some automated substitute, may upload merchandise
 and scheduling information to the database, as shown in FIG. 1. If new
 merchandise items are scheduled for posting, these items are opened for
 bidding 52. The auction manager then examines the merchandise database to
 see if any merchandise items are scheduled to be closed from customer
 bidding. If so, these items are closed from bidding 53. Auction manager 26
 then examines the merchandise database to see if any merchandise items
 posted with a price markdown feature are scheduled to have their prices
 adjusted. If so, the prices of these items are adjusted 54 in accordance
 with the particular item's price adjustment parameters. Such parameters
 may include bidding activity over time, amount of bids received, and
 number of items bid for. Auction manager 26 then updates 55 the bid list
 for open items by recalculating the current high bidder list and
 regenerating the merchandise catalog pages 56 to reflect these new bids.
 This step is more fully described below with reference to FIG. 7.
 FIG. 7 illustrates the procedures carried out by the bid manager in
 updating the bid list for open items 55 as shown in FIG. 6. The bid
 manager begins by checking 61 if there are more merchandise items to be
 processed. If such items are found, the bid manager selects 62 a
 merchandise item to process and queries 64 the bid database for bids for
 this item. These bids are sorted 65 using a variety of different priority
 ranking schemes depending upon the auction method and system used for the
 particular merchandise item, as described in more detail below. Then, the
 bids are marked 66 as either successful or unsuccessful depending upon the
 bid price of the respective bids and the quantity of the item being bid on
 relative to the quantity of the item being auctioned. In a preferred
 embodiment, a quantity of an item may be put up for auction, and
 individual bidders may bid on any quantity of the item desired, up to the
 quantity of the item being auctioned.
 The bid manager then checks 67 to see if there are any active proxy bids
 marked as unsuccessful. A proxy bid is a special bid type that allows
 auction manager 26 to automatically bid on the bidder's behalf up to a
 limited amount established by the bidder when his or her initial bid is
 placed. The auction manager will increase the bid as necessary up to the
 limit amount. This feature allows the customer to get the lowest possible
 price without exceeding a limit preferably established when the bid is
 entered. If there are active proxy bids marked as unsuccessful, then the
 bid manager increments 69 the proxy bids by a preset bid increment. This
 procedure of sorting 65 marking 66 bids and incrementing 69 the proxy bids
 as required continues until either there are no additional proxy bids
 marked as unsuccessful or the proxy limits have been reached on the proxy
 bids. At this point, bid database 31 is updated 68 with the marked bids.
 This process is then repeated for each merchandise lot open at the current
 time for bidding by customers.
 FIG. 8 illustrates the procedures carried out by electronic mail messenger
 27 which notifies bidders when they have been outbid. When marked bids are
 updated in bid database 31 as shown in FIG. 7, electronic mail messenger
 27 detects 81 the presence of these marked bids and then looks up 82 the
 customer's electronic mail address and looks up 83 inventory information
 on the item desired by the bidder. With this information, electronic mail
 messenger 27 constructs 84 an electronic mail message informing the bidder
 that he or she has been outbid. Once constructed, the electronic mail
 notification message 24 is sent to the bidder as shown at step 85.
 One skilled in the art to which the present invention pertains will
 recognize that the various components of the electronic auction system can
 communicate between themselves in a variety of ways. In a preferred
 embodiment, bid validator 21, auction manager 26, and electronic mail
 messenger 27 communicate by adding, marking, and updating records in the
 various databases. Each of these components periodically checks at least
 one of the databases to see if anything relevant to their respective
 functions has changed and take action accordingly. However, the components
 could send direct messages between themselves or call each other by means
 of program subroutines to signal important events that would require one
 or the other component to update its state.
 One skilled in the art to which the present invention pertains will further
 recognize that a variety of different auction formats may be implemented
 using the basic technique described above. The simplest is the "Standard
 Auction" format, whereby the electronic auction system awards the
 merchandise to the top bidder or bidders in accordance with their bids
 once bidding has stopped. Using this format, if there is a plurality of a
 specific item, the system awards the merchandise to the top bidders.
 Bidders may bid on more than one unit, and different successful bidders
 will, in general, pay different prices for an item.
 FIG. 9 illustrates the Standard Auction format where bid manager 55, shown
 in FIG. 6, determines which bids to mark as successful or unsuccessful, as
 shown in step 66 in FIG. 7. Bid manager 55 begins by sorting 91 the bids
 by amount of the bid. If there are bids remaining to be processed,
 determined at step 97, the highest remaining bid is selected 98 to be
 checked. If the bid is below the minimum bid allowed for the particular
 merchandise item, as determined at step 93, the bid is marked 99 as
 unsuccessful. If not, the bid is checked 94 to see if the quantity may be
 satisfied. A bid may be satisfied if the quantity of the item bid upon is
 available. This information is available from auction database 29. If not,
 then the bid is marked 99 as unsuccessful. Optionally, the system could
 ask the user if a lesser quantity than bid upon will be acceptable, as
 shown in FIG. 2 at box 310. If the bid quantity can be satisfied, as
 determined at step 94, then the bid is marked 95 as successful and the
 item quantity remaining, recorded in auction database 29, is decremented
 96 by the bid quantity. After the quantity remaining is decremented 96,
 and if, as determined at step 97, there are still bids remaining to be
 marked, the next highest bid is selected 98 and the steps of FIG. 9 are
 repeated.
 The electronic auction system of the present invention also provides a
 "Dutch Auction" format, wherein the electronic auction system awards the
 merchandise to all of the top bidders for whom there is available
 inventory at the price bid by the lowest successful bidder. This format
 may be preferred by customers for being the most fair when a plurality of
 a specific item is being auctioned. As with all bidding, there will be a
 range of bids submitted. In the Dutch Auction format, the highest bidders
 are awarded the merchandise but at the same price for all successful
 bidders, the price bid by the lowest successful bidder.
 FIG. 10 illustrates the Dutch Auction format whereby bid manager 55 shown
 in FIG. 6 determines which bids to mark 66 as successful or unsuccessful,
 as shown in FIG. 7. Bid manager 55 begins by sorting 111 the bids by
 amount of the bid. If there are bids remaining to be processed, as
 determined at step 97 the highest bid is selected 98 to be checked. If the
 bid is below the minimum bid allowed for the particular merchandise item,
 as determined at step 93, the bid is marked as unsuccessful 99. If not,
 the bid is checked 94 to see if the bid quantity may be satisfied. If the
 bid cannot be satisfied, then the bid is marked as unsuccessful at step
 99. If the bid quantity can be satisfied, then the bid is marked as
 successful at step 95 and the item quantity remaining is decremented 96 by
 the bid quantity. At this time the MinWin price is recorded 117. The
 MinWin price is the price above which a new bidder must bid in order to be
 successful in the Dutch Auction format were the auction to close at that
 moment. The MinWin price is, in general, the bid price of the lowest bid
 that is marked as successful. After recording the MinWin price at step
 117, where there are still bids remaining to be marked, as determined at
 step 97, the next highest bid is selected 98 and the steps of FIG. 10 are
 repeated.
 The electronic auction system of the present invention also includes a
 "Progressive Auction" format, wherein the electronic auction system awards
 the merchandise to the top bidders based on price bid. As with the Dutch
 Auction format, the highest price bids are awarded the merchandise up to
 the quantity available of the item being auctioned. However, unlike the
 Dutch Auction format, the system awards the merchandise to the successful
 bidders at different prices depending on the quantity bid. In a preferred
 embodiment, a successful bidder for a single unit of an item is awarded
 the item at the price of the lowest successful bid for a single unit of
 the item. A successful bidder for a higher quantity of the same item is
 awarded the item at the price of the lowest successful bid at that
 quantity or any lower quantity. For example, a successful bidder for a
 quantity of five would pay the lowest price for any successful bid for
 quantity one through five of the item. The price paid for a given quantity
 is termed the "MinWin" price for that quantity. The Progressive Auction
 format ensures that successful bidders for a quantity of an item pay the
 lowest price paid by any other successful bidder at that quantity level or
 below. Use of this format leads to lower prices for those who successfully
 bid on larger quantities of an item, provides an impetus for volume
 buying, and therefore leads to greater sales volume.
 FIG. 11 illustrates the Progressive Auction format, wherein bid manager 55
 shown in FIG. 6 determines which bids to mark as successful or
 unsuccessful 66 as shown in FIG. 7. Bid manager 55 begins by sorting 131
 the bids by amount of the bid. If there are bids remaining to be
 processed, as determined at step 97, the highest bid is selected 98 to be
 checked. If the bid is determined to be below the minimum bid allowed for
 the particular merchandise item at step 93, the bid is marked as
 unsuccessful 99. If not, the bid is checked at step 94 to see if the bid
 quantity can be satisfied. If not, then the bid is marked 99 as
 unsuccessful. If the bid quantity is checked and found to be satisfied at
 step 94, then the bid is marked as successful 95 and the item quantity
 remaining is decremented 96 by the bid quantity. The MinWin price is then
 recorded 137. The MinWin price is the price above which a new bidder must
 bid in order to be successful in the Progressive Auction format were the
 auction to close at that moment. The MinWin price is, in general, the bid
 price of the lowest bid at the current bid quantity or lower that is
 marked as successful. After recording the MinWin price 137, if there are
 still bids remaining to be marked, the next highest bid is selected 98 and
 the steps of FIG. 11 are repeated.
 The electronic auction system also includes a "Buy Or Bid" format wherein
 the electronic auction system awards merchandise to bidders who place bids
 at or above a posted selling price. The item remains for sale until the
 available quantity is purchased. Bids that are below the posted selling
 price are maintained in reserve by the system. If a certain sales volume
 is not achieved in a specified period of time, the electronic auction
 system automatically reduces the price by a predetermined amount or a
 predetermined percentage of the price and updates the merchandise catalog
 page accordingly. The lower price may be at or below some of the bids
 already in the bid database. If such bids are present, they are then
 converted to orders and the quantity available is reduced accordingly.
 Similarly, if a certain sales volume is exceeded in a specified period of
 time, the electronic auction system automatically increases the price by a
 set amount or by a set percentage of the price and updates the merchandise
 page accordingly. These automatic price changes allow the seller to
 respond quickly to market conditions while keeping the price of the
 merchandise as high as possible to the sellers benefit.
 FIG. 12 illustrates the Buy Or Bid format whereby bid manager 55, as shown
 in FIG. 6, determines which bids to mark as successful or unsuccessful 66,
 as shown in FIG. 7. Bid manager 55 begins by sorting 151 the bids by
 amount. If there are bids remaining to be processed, as determined at step
 97, the highest bid is selected 98 to be checked. If the bid is below the
 current price of the merchandise item, as determined at 93, then the bid
 is marked 99 unsuccessful. If the bid is not below the current price, as
 determined at 93, then the bid is checked 94 to see if the bid quantity
 can be satisfied. If not, the bid is marked as unsuccessful 99. If the bid
 quantity can be satisfied, then the bid is converted into an order 155 at
 the current price of the item and the item's quantity remaining is
 decremented 96. The bids remaining to be processed, as determined at 97,
 are then checked and the steps of FIG. 11 are repeated. From time to time,
 the current price of the merchandise item may be raised or lowered either
 by manual input from an operator 300 as shown in FIG. 1 or by
 automatically using the "markdown" feature described below with reference
 to FIG. 14.
 FIG. 13 illustrates in more detail the step of determining if the bid
 quantity can be satisfied 94. If the bid quantity is determined to be less
 than the available quantity of the merchandise item at step 171, then the
 test is found satisfied at step 174. If not, then the bid is checked at
 172 to see if the bidder is willing to accept a reduced quantity.
 Preferably, when placing a bid, the bidder indicates its willingness to
 accept a partial quantity in the event that an insufficient quantity of
 the item is available to satisfy the bid if successful. If the bidder is
 found willing to accept a reduced quantity at 172, then the test is found
 satisfied at 174. If not, the test fails at 173 and the bid is marked as
 unsuccessful at, for example, 99 in FIG. 9.
 The electronic auction system also includes a "markdown" feature, wherein
 the electronic auction system of the present invention awards merchandise
 to buyers who place orders at the currently posted selling price. The item
 remains on sale until the available quantity is purchased. If a certain
 sales volume is not achieved in a specified period of time, the electronic
 auction system automatically reduces the price by a set amount or a set
 percentage and updates the merchandise catalog page accordingly. This
 lower price encourages buyers to take advantage of the new price. If a
 certain sales volume is exceeded in a specified period of time, the
 electronic auction system automatically increases the price by a set
 amount or a set percentage and updates the merchandise page accordingly.
 These automatic price changes allow the system to respond to market
 conditions while keeping the prices of the merchandise as high as possible
 to the seller's benefit.
 FIG. 14 illustrates the Markdown price adjustment feature whereby auction
 manager 26, as shown in FIG. 4, periodically adjusts 54 the sales prices
 or minimum bid prices, of the merchandise items according to a
 predetermined schedule as shown in FIG. 6. If more merchandise items are
 found in the merchandise database at 181, a merchandise item is selected
 183 for Markdown. If a Markdown event has occurred for the item, as
 determined at 184, the item's price is adjusted 185 according to the
 schedule preset for the individual item. Alternatively, the adjustment
 could be relative to prices offered for the merchandise. The merchandise
 item is then updated 186 in the database with the new sale price or
 minimum bid price. The steps of FIG. 14 are then repeated for each
 successive merchandise item in the merchandise database.
 The electronic auction system of the present invention preferably includes
 a "Proxy Bidding" feature that may be applied to any of the auction
 formats described above. FIG. 7 fully describes auction manager 26
 including the Proxy Bidding feature. When Proxy Bidding is employed, a
 bidder places a bid for the maximum amount they are willing to pay. The
 electronic auction system, however, only displays the amount necessary to
 win the item up to the amount of the currently high proxy bids of other
 bidders. Typically, the currently high bids display an amount that is one
 bidding increment above the second highest bid or bids, although a
 percentage above the second highest bids may be used as well. When a new
 bidder places a bid that is above a currently displayed high bid, the
 proxy feature will, in general, cause the currently high bid to move up to
 an amount higher than the new bid, up to the maximum amount of the
 currently high bidder's proxy bid. Once a new bidder places a bid in
 excess of the currently high bidder's proxy bid, the new bid becomes the
 current high bid and the previous high bid becomes the second highest bid.
 This feature allows bidders to participate in the electronic auction
 without revealing to the other bidders the extent to which they are
 willing to increase their bids, while maintaining control of their maximum
 bid without closely monitoring the bidding. Participation is engaged in
 automatically on the bidder's behalf by the inventive system. The feature
 guarantees proxy bidders the lowest possible price up to a specified
 maximum without requiring frequent inquiries as to the state of the
 bidding.
 One skilled in the art to which the present invention pertains will
 recognize that a variety of different auction formats may be implemented
 in addition to those described above. One skilled in the art will also
 recognize that the electronic auction system of the present invention can
 employ a "Floating Closing Time" feature whereby the auction for a
 particular item is automatically closed if no new bids are received within
 a predetermined time interval. This feature would typically be implemented
 in a manner similar to that used to close auctions of old items, as shown
 at step 53 in FIG. 6. This feature forces the bidding activity to occur
 within a shorter amount of time than would otherwise be achieved because
 bidders are aware that the item will automatically close if no new bids
 have been received in a timely manner. Thus, bidders have an incentive to
 stay active in the bidding process to avoid closure of an item before
 maximum, and most potentially winning, bids have been entered. The
 Floating Closing Time feature also allows more items to be auctioned
 during a period of time since each item is closed once bidding activity
 ceases; the bidding period is not protracted to an artificial length as is
 the case when an item closes at a preset date and time. The Floating
 Closing Time feature of the present invention may be employed either in
 conjunction with or independent of a fixed closing time for an item. When
 employed in conjunction with a fixed closing time, the auction is closed
 either when the preset fixed time period has expired for the item or when
 no bidding activity has occurred within a preset time interval. This
 forces the bidding to cease at a particular time in case the bidding
 activity becomes artificially protracted.
 A general description of the present invention as well as a preferred
 embodiment of the present invention has been set forth above. Those
 skilled in the art to which the present invention pertains will recognize
 and be able to practice additional variations in the methods and system
 described which fall within the teachings of this invention. For example,
 although a preferred embodiment of the present invention chooses winning
 bids according to monetary amount included in the bid, preference for bids
 may also be determined according to time of submission, quantity of
 merchandise bid for, total bid value, or some other combination of these
 characteristics. Accordingly, all such modifications and additions are
 deemed to be within the scope of the invention which is to be limited only
 by the claims appended hereto.