CA2289395A1 - Procurement and settlement system and method - Google Patents

Abstract

The present invention involves a system and method for enabling transfer of title in property (TIP) wherein the property is usually money, between a Source and a Destination according to the terms defined by parties to an agreement. The Destination sends the agreement specifications to the Central Controller (CC) for authorization. Once the CC authenticates the agreement, the CC initiates transfer in the TIP as per the terms during one or more transfers from a Source TIP to a collection trust. As the defined targets are reached in the collection trust, a portion of its contents is transferred to the Destination TIP. The system can be used to transfer TIP for property as diverse as real property, money, shares, other choses in action, wherein applications can range, for example, from transfer of regular payments from a paycheck to: service providers, goods providers, alimony payments, non-profit organizations, etc. The system may also be used by individuals or companies to transfer incremental ownership in land or shares in a company.

Description

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Title in property (TIP) is the formal right of ownership of property.
Generally, when buying an item or services, these are provided to the purchaser in exchange for an amount of money. If the money is considered to be the property, transferring money to a seller or service provider can be considered to be transferring title in the money in exchange for the item or service. It is the minority of transactions today, where cash is actually transferred. Rather, and especially true for expensive items, ownership in money is transferred from one banking institution to another.
Expensive items or services are not readily accessible to a wide cross section of the general population without the use of debt payment schemes. Payment methods are inevitably controlled by the banking sector, which usually charges the consumer for use of the consumer's own money in a procurement situation (eg; debit card and checking charges, lower interest yields on non-savings accounts, etc.).
As well the encouragement of debt financing via credit cards as a payment tool has tied up billions of dollars from the available consumer buying pool. This same outstanding credit card debt balance has also increased by more than of 23% on an annual basis for the last 19 consecutive quarters.
Estimates indicate that over 87% of travel products and 95% of Internet purchases are effected using credit cards. This causes the exclusion of 70% of the purchasing public from participating in these sectors, as: (1) only 50% of North Americans have or actively use a credit card; (2) of this percentage, 40% are either near or have reached their credit limit; and (3) not everyone has access to the Internet.
Based on credit alone therefore, 70% of the buying public are potentially excluded from using electronic commerce. Moreover as the volume of electronic commerce sector increases, the pressure to use credit cards will likely also increase, placing increased pressure on the overall credit available and resulting in either high interest rates or high credit checks.
From the retail perspective, merchant credit card accounts are becoming more difficult to obtain, often requiring a large sum on account prior to acceptance by major financial institutions. Additionally, transaction fees for smaller operations are increasingly steep, sometimes surpassing 5%. These conditions make it difficult for new retailers to transact in the evolving e-commerce world. As well, these new retailers are only given access to the limited buying market that can make purchases on credit.
From an Internet perspective, 95% of electronic commerce transactions are limited to credit cards with 5% offering electronic checking. No process allows a single account sweep or contracted, multiple, accruing sweeps.
The technology that is presently driving rapid changes in methods of doing business is electronic data interchange (EDI). Using EDI, one party can transfer information and legally relevant "documents"

electronically to another for direct processing in the other party's information systems. When an exchange occurs in a purely electronic environment, the threshold of legal determination revolves around whether the electronic messages establish an offer and acceptance given the absence of documentation, and in the case of EDI, the absence of human decisions in the automated exchange.
The exchange of electronic messages that offer and accept a contractual relationship should form a contract with respect to the specific order. An offer consists of an expression of a willingness to enter a contract when that expression occurs in a form sufficiently concrete to establish that agreement. Under this doctrine, an electronic message may constitute the necessary expression of intent. Problems exist where unauthorized people or inaccurate information trigger an offer from a system. These problems could be solved by methods of attribution or authentication. Once questions of attribution are resolved, and subject to considerations about the Statute of Frauds and the like, no requirement exists in law that a contract offer be in writing or that there be a conscious, immediate intent to make a binding commitment.
Contract rules provide that acceptance must be made in the manner specifically required by the offeror.
However, if no specification of the method for acceptance is made in the originating offer, acceptance may be in any manner and by any medium reasonable under the circumstances.
Thus, acceptance by electronic message should be valid.

Similarly, in legal systems based on the civil law, a meeting of the minds is necessary in order to have certainty in an agreement A further consideration in electronic commerce is to guard against fraud. For example, in the United States, for transactions involving a sale of goods for the price of $500 or more, U.C.C. Section 2-201 requires: (1) a writing; (2) containing a quantity term; (3) sufficient to indicate that a contract has been made; and (4) signed by the party against whom enforcement is sought. The critical aspect of the definition of "writing" deals with the reduction of the agreement to tangible form. The sufficiency of an electronic message as a "writing" under the Statute of Frauds depends on the manner in which one finds the message stored or produced. The enforceability of a purely electronic contract depends on how the computer system retains records of the transmitted offer (or acceptance) and whether the law will accept the idea that electronic records reduce the message to tangible form.
The writing requirement can be satisfied by other means. For example, if the electronic agreement is followed up by a letter or if the system routinely produces printed output, the requirement should be satisfied.
Authentication systems have been developed specifically to ensure the enforceability of electronic contracts. One such method of authenticating electronic contracts in order to make them legally enforceable is disclosed in U.S. Pat. No. 5,191,613. That system utilizes, among other techniques, digital signatures to authenticate electronic contracts.
There is therefore a need for a system that allows for ( 1 ) the transfer of TIP from a source to a destination; (2) of actual TIP (as opposed to TIP on credit); (3) the conditions of the transfer to be set by the source; and (4} the authentication of the parties.
SUMMARY OF THE INVENTION
It is an obj ect of this invention to provide a system and a method by which an authorized central controller can transfer TIP from a Source TIP into a collection trust according to an agreement between a Source and a Destination. The collected TIP is ultimately transferred to a Destination TIP.
It is another object of this invention to provide a system for enabling transfer of TIP between a Source and a Destination comprising the steps: determining the terms to an agreement;
sending the terms to a Central Controller for authorization; the Central Controller authenticates the agreement; the Central Controller initiates transfer in the TIP as per the terms during one or more transfers from a Source TIP
to a Collection Trust; and as the defined targets are reached in the Collection Trust, a portion of its contents is transferred to the Destination TIP.

BRIEF DESCRIPTION OF THE FIGURES
Figure 1 is a flowchart depicting the general flow of the system of this invention.
Figures 2a and 2b are schematic diagrams showing the logical flow of the registration of a Source and Destination with the system. The Source and Destination interface with a Central Controller (CC). In (a) Source is assigned a Unique Source Number (USN); in (b) Destination is assigned a Unique Destination Number (UDN).
Figure 3 depicts the process that CC follows before sweeping Source TIP.
Figure 4 is a schematic diagram showing the logical flow of an agreement modification by Source.
Figure 5 depicts the process followed by CC for the conditional acceptance to become binding.
Figure 6 is a block diagram showing one embodiment of CC.
Figure 7 depicts the process that CC follows when agreements are due to the same Destination.
Figure 8 illustrates the process CC follows for a rejection of an agreement modification.

Figure 9 illustrates a preferred embodiment, wherein the system is applied to the purchase of travel packages.
Figure 10 is a flowchart depicting the general flow of the system in one embodiment, comprising a buyer account, trust account, and seller account with Central Controller.
Figure I 1 shows one way of displaying the Collection Trust organization.
DETAILED DESCRIPTION OF THE INVENTION
The following terms, abbreviations and definitions are provided for clarity:
The term, Title in Property (TIP), means the formal right of ownership of property. Property may be defined as everything which is or may be the subject of ownership, whether a legal ownership, or whether beneficial, or a private ownership. Property may be corporeal or incorporeal, tangible or intangible, visible or invisible, real or personal. One becomes an owner by gaining TIP, commonly in receiving a thing by way of gift, entering into a contract for exchange or sale, or by finding an object that has been abandoned. When the property is considered bought, traded or given, it is actually the TIP

that is being transferred from party to party. Some traditional means of transferring TIP include cash, credit cards, mortgages and shares. In each of these cases, the TIP owned by a Source is ultimately transferred to a Destination. When the TIP is a gift, no other property is exchanged in return. When the TIP is part of a contract for exchange or sale, other property is ultimately transferred from the Destination to the Source.
The term, Source, means the party to the agreement from which TIP is transferred and may include a buyer of goods or services, a donor, a corporation, an alimony provider, among others.
The term, Destination, means the party to the agreement to which TIP is ultimately transferred and may include a seller of goods or services, a charity, an employee of a corporation, an alimony recipient, among others.
The term, Source TIP, means a location for which the Source has access and control over TIP and may include a financial institution account, paycheck, investment portfolio, among others.
The term, Destination TIP, means a location for which the Destination has access and control over TIP
and may include a financial institution account, investment portfolio, among others.
The term, Collection Trust, means a location to which TIP is transferred from Source TIP and held before it is transferred to a Destination TIP. In a preferred embodiment, the Collection Trust is a trust account.
The term, Central Controller (CC), means the management system that authenticates the parties, initiates and controls the transfer of TIP according to the agreement.
The term, offer, means a proposal by Source to transfer TIP accompanied by an expected acceptance.
In a preferred embodiment, the offer may be irrevocable. A buyer's irrevocable offer to purchase goods, for example, is necessary since it provides more certainty to sellers in the market place.
The term, conditional acceptance (CA), means an engagement to accept the offer on the happening of a condition. The condition is CC's approval of certain terms of the agreement, such as UDN, USN and the specifications.
The term, Unique Source Number (USN), means the identification assigned to a Source.
The term, Unique Destination Number (UDN), means the identification assigned to a Destination.
The term, Specifications, means terms in the agreement between Source and Destination that the CC
requires to authenticate the agreement such as the USN and UDN, the TIP to be collected, the mechanism and format of collection, the frequency of collection, the time period, the collection amount, the authorization to request TIP on behalf of the Source, etc.
The term, the Product, means the thing exchanged according to the terms of the agreement and may include real or personal property, services, etc. Not all embodiments of the system necessarily include products, such as the donor-charity example.
General Embodiment The general flow of the method and system of the present invention are presented in Figure 1. As is depicted, the system comprises a Source 100; a Destination 120; a Central Controller means 140; a Source TIP means 155; a Collection Trust means 170; and a Destination TIP
means 190.
The system and method of the present invention will be discussed in further detail with reference to Figures 1 through 11.
Parties to an agreement may be connected via an Internet connection using some form of a telecommunications network, such as those presently provided by a telephone company. Connection may also be provided by dedicated data lines, cellular, Personal Communication Systems, cable, microwave or satellite networks.

A Source 100 communicates an offer (which optionally may be an irrevocable offer) to a Destination 120 by transmitting certain specifications. In receiving the specifications, the Destination 120 conditionally accepts the offer. The Destination 120 sends the specifications and its UDN to the Central Controller 140 for authorization. Figure 5 depicts the process followed to authenticate an agreement. The UDN and USN are validated against respective databases, as depicted in Figure 6. In the case of a non-registered party, the offer is frozen pending registration 520.
The Central Controller 140 verifies that Source's specifications are permissible based as compared to factors such as the Source's previous history, time lines, etc. Non-acceptable specifications are rej ected 540 and parties are informed of the failed agreement 550. Otherwise an offer is accepted 560 and parties are informed of the confirmed agreement 570.
When authenticating the specifications, the Central Controller 140 will identify the Source's TIP, the sweeping mechanism and the preferred format. Generally, the TIP will be money.
Mechanisms currently known are pre-authorized deductions (PAD) and Deduction at Source (DAS). Depending on the parties and the Source's goals, the format may be a unitary sweep, such as for the one-time purchase of goods, multiple recurring sweeps such as for the recurnng payment of a utility bill or multiple accruing sweeps such as with a lay-away plan.
The Source TIP 155 is usually, but not necessarily, owned by the Source 100.
Once the Central Controller 140 receives the specifications, TIP from the Source TIP is transferred into the Collection Trust. This sweeping method continues until a defined target is reached 180.
For a unitary format, the target is usually reached after one sweep. With an accruing format, the target is defined by parameters such as time and sweep amount. Once collection is complete 185, a portion of the TIP in the Collection Trust is transferred to the Destination TIP 190, which is usually, but not necessarily, owned by the Destination 120. This portion, defined in the agreement, is usually but not necessarily the entire TIP for that agreement.
If a product is indicated in the specifications, it is usually transferred 195 from the Destination 120 to the Source 100, once the entire TIP for that agreement is sent to the Destination TIP.
As shown in Figure 6, Central Controller includes central processor (CPU), cryptographic processor, RAM, ROM, transfer processor, clock, operating system, interface and data storage device. A
conventional personal computer or computer workstation with sufficient memory and processing capability may be used as Central Controller 140. In one embodiment it operates as a web server, receiving and verifying UDNs and specifications transmitted by Destinations.
Central controller must be capable of high volume transaction processing, performing a significant number of mathematical calculations in processing communications and database searches.
Data storage device may include hard disk magnetic or optical storage units, as well as CD-ROM

drives or flash memory, among others. Data storage device contains databases used in the processing of transactions in the present invention, including Source database, Destination database, offer database, Source TIP database, Destination TIP database, confirmation database, specifications database, TIP transfer database and cryptographic key database. In a preferred embodiment, database software manufactured by Oracle Corporation, is used to create and manage these databases.
Source database maintains data on each Source with fields such as USN, name, address, phone number, social insurance number, electronic mail address, past system usage, Source TIP identification, public/private key information, etc. This information is obtained when the Source first registers with the system according to Figure 2a, or immediately prior to authenticating the Source's first offer. Similarly, Destination information is stored in Destination database generally prior to the transmission of offers, as shown in Figure 2b.
The present invention is described in further detail in the following non-limiting examples. It is to be understood that the examples described below are not meant to limit the scope of the present invention.
It is expected that numerous variants will be obvious to the person skilled in the art to which the present invention pertains, without any departure from the spirit of the present invention. The appended claims, properly construed, form the only limitation upon the scope of the present invention.

Example I: Purchase and Sale Embodiment In a preferred embodiment, the present invention provides the means for a buyer to purchase goods or services (the product) at a specified price for delivery at a future date by authorizing periodic transfers of the buyer's funds into a trust account, as depicted in Figure 10.
Communications between buyers and sellers are conducted using an electronic network and Central Controller.
The purchase and sale embodiment is a debit-based electronic payment plan whereby a good or service (the product) is generally delivered to the buyer once funds are accrued to the value of the contracted buy. A buyer is able to structure the payments for a product purchase according to ongoing cash flow considerations. Buyers only require a financial source such as a paycheck or an account in which funds can be withdrawn to be able to make electronic purchases with the present invention.
Since payment is made from the buyer's existing funds, no interest charges are ever incurred. The Central Controller acts as an anonymous interface between sellers and financial institutions.
A buyer 1000 who wishes to purchase a product accesses the seller 1020 who is located at a remote server. The buyer 1000 makes an offer (which may be irrevocable) to purchase a product by specifying factors such as the preferred date of delivery, frequency of payment and periodic payment amount. In a sale of goods or services agreement, the TIP that is collected is money.
The buyer 1000 attaches a USN to the offer and transmits 1010 the specifications to the seller.
IS

Receipt of the transmission constitutes a conditional acceptance (CA) of the offer, the condition being the approval by the Central Controller 1040. The seller then sends 1030 the specifications to the Central Controller 1040 for verification purposes. Under the present invention, the specifications may be transmitted via numerous means including a world-wide-web interface, electronic mail, voice mail, facsimile or postal mail, The Central Controller 1040 authenticates the UDN against a seller database and the USN against a buyer database. If the specifications are not approved, the offer is rejected and the Central Controller 1040 informs the parties that the agreement as specified is null and void.
Conversely, if the specifications are approved, the offer is accepted and the Central Controller 1040 confirms the new agreement with the parties.
Once the Central Controller 1040 approves the offer, it periodically arranges transfers of the buyer's funds from the buyer account 1055 into a trust account 1070. Transfer of funds may be accomplished via a pre-authorized deduction (PAD), deduction at source (DAS) or other mechanism that the buyer 1000 approves. The Central Controller 1040 makes a request for the funds 1050 from the buyer account 1055. Funds are transferred to the Central Controller 1040 who subsequently transfers the same 1065 to the trust account 1070. Sweeps of the buyer's funds are performed according to the format indicated in the specifications. For instance, sweeps may be performed every second Wednesday for 6 months. After every sweep, the Central Controller 1040 verifies that the collection is complete 1075.
Depending on the specifications, a portion of the funds accrued in the trust account 1070 is transferred to the seller's account 1090 once certain targets are reached 1085.
Ultimately, the product is transferred 1095 to the buyer 1000 in exchange for the accrued funds.
Example II: Travel Agency Embodiment In one embodiment, the system is applied to the purchase of travel packages.
This embodiment is illustrated schematically in Figure 9. In this embodiment the buyer purchases a trip (step 1) at a site such as a travel agency. Via the Internet, for example, the seller enters the information (step 2) concerning the sale and transmits the same to the Central Controller (step 3).
The Central Controller contacts the financial institution for a pre-authorized payment (step 4). When the payment is collected, the Central Controller transfers the amount to the company housing the collection account for management of the funds (step 5). The transaction is then posted to the General Ledger (step 6), When payments are completed, the company housing the collection account sends the funds to the seller, as directed by the Central Controller. The product, such as plane tickets from Ottawa to Vancouver, is finally delivered to the buyer (step 8).
Example III: Charity Embodiment In another embodiment, the system is applied to the recurring collection of charitable donations. The Source is a donor and the Destination is a charitable organization. The donor transmits an offer to donate money to the charity. Generally, there is no product in this type of agreement although a charitable tax receipt may be considered as the property that is ultimately transferred to the donor, The charity sends the specifications to a Central Controller for approval. The mechanism for transfer of the donor's funds may include pre-authorized deductions (from the donor's account) and deduction at source (from the donor's paycheck) among others. Once approved, periodic deductions of the donor's funds are made and ultimately transferred to the charity. This type of example also illustrates a recurring sweep, such as every month.
Example IV: Share Distribution Embodiment In another embodiment, a corporation may employ the system to distribute shares to its employees as part of a stock option agreement plan. The Source is the corporation and the employee is the Destination. The TIP that is transferred consists of corporate shares. Again, there is no product in this type of agreement, From the foregoing description, one skilled in the art can easily ascertain the essential characteristics of this invention, and without departing from the spirit and scope thereof, can make various changes and modifications to the invention to adapt it to various usages and conditions.
Consequently, such changes and modifications are properly, equitably, and intended to be within the full range of equivalence of the following claims.

Claims (3)

1. A system wherein an authorized Central Controller can transfer title in property (TIP) from a Source TIP into a Collection Trust according to an agreement between a Source and a Destination, and wherein the attainment of defined targets is reached, the Central Controller initiates transfer of a proportion of the TIP in the Collection Trust to a Destination TIP.

2. A system as in claim 1, wherein the property is money.

3. A system for enabling transfer of TIP between a Source and a Destination comprising the steps:
a. determining the terms to an agreement;
b. sending the terms to a Central Controller for authorization;
c. the Central Controller authenticates the agreement;
d. the Central Controller initiates transfer in the title in property as per the terms of the agreement during one or more transfers from a Source TIP to a Collection Trust;
e. as defined targets are reached in the Collection Trust, a portion of its contents is transferred to the Destination TIP.