As Amazon reportedly considers a move to compete directly against Shopify, the Ottawa-based e-commerce company continues to build its intellectual property portfolio, seeking to patent innovations including the ability to price in multiple currencies in its core e-commerce platform as well as features like product returns in emerging business lines like shipping and fulfillment.

Shopify holds few patents, and IP lawyers say it could have moved sooner to protect its intellectual property. But analysts expect it to hold off the competition, and say the company’s recent patent push naturally follows the development of its technology. “They’ve invested a lot of time and money into diversifying the platform and offering many different types of services,” said Richard Tse, managing director at National Bank Financial. “That has created a significant moat.”

Founded in September 2004, Shopify waited more than a decade to start patenting. The risks section of the firm’s 2019 annual report warns that it holds “a small number of issued patents,” limiting its ability to stop competitors from using its proprietary technology. Rivals are also able to “dedicate substantially greater resources to developing and protecting their technology or intellectual property rights.” In February of last year, The Logic reported the company seemed to be changing its IP strategy, beginning to acquire and file patents.

According to data from Google Patents, Shopify now has at least 41 pending applications. The first of these was filed in August 2018, for a user interface feature related to the checkout on the e-commerce sites merchants use its technology to build and maintain, developed by employees on its Montreal-based financial solutions team. The public database also shows the company now owns 14 granted utility-patent families, all but one of which Dallas-headquartered AT&T re-assigned to the Ottawa-based firm in late 2019. Shopify may have more filed, but thus far unpublished, applications.

A company can use patents to try and prevent competitors from implementing the same or similar features, said Matthew Zischka, managing partner at IP-focused law firm Smart & Biggar. They can also generate royalty revenue through licensing or be used as bargaining chips if the holder is sued for infringement by another organization.

Amazon is one of the world’s largest tech holders and filers of patents. The Seattle-based firm and its subsidiaries hold 11,060 families, according to the IFI 250 ranking, with 2,244 new U.S. patents granted in 2020 alone. While many of the ideas for which it seeks protection may never be implemented, it has licensed or litigated to enforce others, like its 1-Click feature.

Shopify and Amazon are integrated to allow the former’s million-plus merchants to sell on the latter’s marketplace. But the two e-commerce giants could soon become more direct competitors. In December 2020, The Wall Street Journal reported Amazon had set up a team called Project Santos “dedicated to studying the Canadian company and copying parts of it.”

Analysts say the U.S. firm’s traditional business model and reputation will hinder any such attempt. Shopify is “largely a platform … enabling merchants to set up their own stores,” said Tse, noting that Amazon has “been primarily a marketplace,” a single online shop where the firm and third-party vendors sell to consumers. By offering store-builder technology, the company would effectively be creating more competition for its own sites, said Ygal Arounian, vice-president of equity research at Wedbush Securities. In March 2015, Amazon announced it was shutting down Webstore, a platform that let vendors set up their own sites, later directing users to migrate to Shopify, instead.

Retailers go solo instead of listing on a marketplace to “own their brands, own their customer relationships [and] own their data,” said Arounian. “That control is really powerful.” By contrast, brands have accused Amazon of using data about their products to launch competing private-label ones.

The company did not answer The Logic’s questions about Project Santos, including whether it infringes on Shopify’s patents. “Amazon respects intellectual property rights,” said spokesperson Kristin Gable. Shopify did not respond to multiple requests for comment for this piece.

Still, Shopify is trying to protect some of its innovations. Two utility patent applications filed in June 2019 cover parts of a feature launched earlier that year, which automatically calculates a store’s prices and other fees in foreign currencies based on current exchange rates. Another two submissions of the 13 that month are for technology to recommend discussion groups merchants might want to join based on their store category and settings on the platform; Shopify’s community forum has more 779,000 members. On Friday, BetaKit reported that those two applications had been approved.

Other pending filings—including ones acquired from AT&T—involve innovations in relatively new lines of business for the company, such as the Shopify Fulfillment Network, announced in June 2019, which handles warehousing and shipping for merchants. Tse said the firm has been diligent about ensuring its new services and features will work and are ready to scale up. “The developments in recent years have had time to incubate and be tested and vetted, and I think we’re at the point that they are ready for primetime,” he said. “That’s probably why you’re seeing the number of those [patent] filings increase at this point.”

Zischka said it’s not unusual for startups to delay turning their inventions into intellectual property, citing costs and other priorities like being first to market. “When companies become larger, more sophisticated [and] have more of a surplus budget, they end up taking patenting more seriously,” he said. But for some, “it’s too late,” and competitors are able to launch “near-copycat” products.

Internet and software businesses “run on IP and patents,” said Arounian. “Those are their assets.” But he attributes Shopify’s success to creating “one big seamless offering that just works really well,” more than any individual innovation or feature.

The company’s filings also claim it’s a tough act to follow. The “skills and ingenuity of our employees, as well as the functionality and frequent enhancements to our platform, make our intellectual property difficult to replicate,” the 2019 annual report states.

Arounian echoes the sentiment, crediting its management with foresight about the e-commerce space. “Go and try and copy Tobi [Lütke, CEO] and Harley [Finkelstein, president] and see if you can actually do it,” he said. “Not anyone can just do what they do and replicate what they’ve done.”