Patenting Air or Protecting Property?

[Dave Farber <dave () farber net>]

Delivered-To: dfarber+ () ux13 sp cs cmu edu
Date: Fri, 12 Dec 2003 12:30:09 -0500
From: Jonathan Krim <KrimJ () washpost com>
Subject: in case there is interest
To: dave () farber net



Patenting Air or Protecting Property?
Information Age Invents a New Problem

By Jonathan Krim
Washington Post Staff Writer
Thursday, December 11, 2003; Page E01

Universities, corporations and tens of thousands of Web site providers 
across the country probably never imagined they would be rooting for the 
pornography industry.

But millions of their dollars could be riding on a court fight between a 
coalition of Internet video-porn providers and a small California research 
firm, which early this year began enforcing the eye-opening claim that it 
owns the patents on how most audio and video is sent over the Internet.

Acacia Research Corp. started by targeting dozens of adult entertainment 
companies, demanding royalties of as much as 4 percent of their revenue 
from audio and video streaming. Now the firm is seeking fees from 
universities that use Web video for remote learning, from companies that 
serve up movies to hotel rooms, from cable and satellite providers, and 
from major streaming-media companies such as RealNetworks Inc. and America 
Online Inc.

"It's pretty much the sky's the limit as to where the impact might fall," 
said a chagrined John H. Payne, director of educational technologies at the 
University of Virginia's division of continuing education, which uses 
online video for lectures and courses. "It's like patenting air."

The Acacia case highlights why a growing chorus of corporate and government 
officials is warning that the U.S. patent system is broken, threatening to 
stunt technological innovation.

They argue that an overwhelmed U.S. Patent and Trademark Office is simply 
approving too many dubious and overly broad patents, especially in the 
software and Internet realms.

The potential result: a digital world carved up into so many pieces that it 
loses its power to easily link people, communities and ideas.

The country "needs to revamp not just the patent system, but the entire 
system of intellectual property law," said Andrew S. Grove, chairman of 
Intel Corp. "It needs to redefine it for an era that is the information age 
as compared to the industrial age."

Critics hope that the impending departure of patent office Director James 
E. Rogan, whose resignation for personal reasons was announced Tuesday, 
might lead to consideration of a new approach.

Overall, the number of patents has nearly doubled since 1990, fueled in 
large measure by the high-tech boom. The patent office now has a backlog of 
450,000 applications pending for all types of inventions; software and 
Internet-related patents account for more than 15 percent of all patents 
granted.

In recent months, several of those patents have spawned court disputes, 
involving such high-profile technology as Microsoft Corp.'s Internet 
browser, the BlackBerry e-mail device, and eBay Inc.'s online shopping system.

In a lengthy report released in October, the Federal Trade Commission 
bluntly questioned the rapid proliferation of patents, especially those 
covering high-technology advances.

"More patents in more industries and with greater breadth are not always 
the best ways to maximize consumer welfare," the report stated, summarizing 
months of public comment. "Many panelists and participants expressed the 
view that software and Internet patents are impeding innovation."

The National Academy of Sciences, an organization of top scientists that 
advises the government on science policy, has similar concerns and will 
release its own report next year.

Controversy has followed patents since the system was created in 1790. 
Patents are granted for inventions deemed unique, useful and non-obvious, 
and the system has periodically yielded curious inventions, such as a 
diaper for pet birds.

But these are viewed as exceptions to an otherwise successful system for 
encouraging innovation by granting inventors a temporary monopoly on their 
work.

Software and Internet patents, which the courts began allowing in the past 
20 years, pose deeper problems, critics say.

Software patents, for instance, can protect a single line of code that 
tells a computer to do a specific task. This might include telling one 
computer program to activate another program.

Such narrow slicing of software development can hinder invention of fully 
formed technologies, which often are built on the work of others, critics 
argue.

Internet method patents, meanwhile, allow companies to protect broad ways 
of doing business on the Internet, rather than a specific product or its 
underlying technology. These controversial patents include Amazon.com's 
method of "one-click" shopping and the use of online shopping carts.

The two forms of patents have sparked an escalating patent war as companies 
use patents to extend and defend their turf.

Small firms have an increasingly difficult time breaking through patent 
"thickets" amassed by large firms. International Business Machines Corp., 
the world's patent leader, received 22,357 from 1993 to 2002 and earned 
roughly $10 billion in licensing fees from them.

"When you have so many competing property rights, the cost of clearing 
permissions is very large, and it becomes a greater and greater tax on what 
people can do," said Tim O'Reilly, whose O'Reilly & Associates Inc. 
publishes software books.

Bigger companies find themselves prey to clever entrepreneurs like the 
original owners of Acacia's digital media patents, who skillfully 
anticipate the direction of certain technologies and then quietly wait for 
someone else to commercialize a related product. If they guess right, they 
can demand lucrative licensing fees.

Intel's Grove derides such patent holders for showing little interest in 
producing goods with their inventions in favor of demanding licensing fees 
from others. "We call them trolls," he said.

Acacia's patents lay dormant for 10 years, until the original company was 
bought out by some of its minority investors. Management is now making it 
one of many companies specializing in the business of generating money from 
patents, rather than using them to develop products directly.

Robert A. Berman, general counsel for Acacia, said that many inventors and 
companies don't have the sophistication, expertise or money to 
commercialize their inventions.

"We provide a service," he said, noting that a handful of adult and other 
firms, such as LodgeNet Entertainment Corp., which provides movies in hotel 
rooms, have agreed to license Acacia's patents. "We take the risk. It's not 
an abuse of the patent process at all."

In addition to supporting calls for more patent-office funding, the FTC 
urged the office to increase the burden on applicants to justify getting 
patents, while at the same time making it easier for patents that have been 
granted to be challenged and possibly overturned.

"This is certainly more than just a resource issue," FTC Chairman Timothy 
J. Muris said in an interview. "We're talking about the questions the 
[patent office] asks."

Jon W. Dudas, deputy director of the patent office, responded that his 
agency was "very impressed" with the FTC recommendations on increased 
resources. The office's 21st Century Strategic Plan envisions a new 
procedure for challenging patents, Dudas said, although details have yet to 
be worked out.

But the agency is not contemplating developing new criteria for patent 
grants or treating industries differently, Dudas said, noting that the 
office is constrained by U.S. court decisions and international treaties.

"We're focused on making sure that we're kicking out the best quality 
patents," he said, adding that the office already requires a double layer 
of review for business-method patents. But he said the agency would need to 
hire 650 to 750 additional examiners each year for the next several years 
to its current roster of roughly 3,600 just to reverse the growing backlog 
of applications.

The agency, along with the business community, is pushing Congress to let 
the office keep all patent fees it collects, rather than diverting some of 
the revenue to the Treasury, to fund improvements to the review system.

R. Jordan Greenhall, chief executive of streaming media firm DivXNetworks 
Inc., agrees that resources are a significant problem.

But he argues that the philosophy behind patents -- that they provide 
incentive for innovation by granting a 20-year monopoly to the inventor -- 
falls apart in the software and Internet arenas.

Greenhall argues that the cost of software innovation is lower than in 
other industries and noted that extensive software invention occurred well 
before the courts first allowed software patents.

If nothing else, Greenhall said, 20-year patents on software, which quickly 
becomes obsolete, are "asinine to the point of ludicrosity."

The alarm over patents comes as a string of high-profile court cases have 
stung corporations that provide popular consumer technologies.

Microsoft, eBay and Research In Motion Ltd., maker of the popular 
BlackBerry wireless e-mail device, all are appealing court orders to pay 
damages for patent infringement to small firms.

In many of these cases, including the Acacia dispute, the patents are being 
challenged on the grounds that the patent office missed examples of "prior 
art" that would invalidate the patents because they were not original.

Those that survive will be held up by some in the patent community as 
examples of the system working to benefit the small inventor.

"People who are asked to pay for patents they infringe always whine about 
it," said Nathan Myhrvold, former chief technology officer of Microsoft, 
who now runs a private company that is inventing technologies, acquiring 
some patents and buying others.

"We've seen all this before," adds Marshall C. Phelps Jr., Microsoft's 
recently named deputy general counsel in charge of intellectual property. 
Phelps, who joined Microsoft recently after spending 28 years helping IBM 
become the world's top patent acquirer, said that new technologies are 
always born and that the system always adapts over time.

The key, he said, is to improve the quality of the patents issued.

But to critics, the system is used primarily by big companies to shake down 
the little guy, and they are even suspicious of some of those now calling 
for reform.

"Those of us who work with emerging technologies have been living with 
this," said Silicon Valley attorney Gary L. Reback, who often represents 
start-ups in battles against large, entrenched competitors. "But it has 
gotten so badly out of control that companies the size of Intel are 
beginning to be disadvantaged."

Reback often tells the story of how a team of IBM patent lawyers went to 
Sun Microsystems Inc. in the 1980s and claimed that the then start-up was 
infringing on seven of its patents.

After Sun engineers explained why they were not infringing, the IBM lawyers 
responded that with 10,000 patents, they would be sure to find some 
infringement somewhere, Reback says.

Instead, Reback said in a 2002 Forbes magazine article, IBM said Sun could 
"make this easy and pay us $20 million." After some negotiation on the 
amount, Sun cut a check.

Jerry Rosenthal, IBM's vice president of intellectual property, denied that 
the incident occurred the way Reback described. He said IBM supports 
several improvements in the patent process, including additional challenge 
procedures.

"But we need to get off this issue of too many patents," he said. "It's the 
quality of patent." That view is generally shared by the powerful community 
of patent lawyers. The American Intellectual Property Law Association also 
supports increasing patent application fees to provide more resources to 
the patent office.

Gregory Aharonian, publisher of a widely read patents newsletter, said that 
companies could have pushed long ago for improvement at the patent office.

Instead, they tend to benefit more from low-quality patents than the 
occasional entrepreneur who might come along and shut them down.

Aharonian thinks software and Internet patents are legitimate. The problem, 
he said, is that most of those that are granted shouldn't be.

What's needed is much more rigorous research into prior art, and higher 
standards.

"I would love it if Intel would give me one of its buildings" to build a 
patent research facility. "I'd buy all the old user manuals; that would be 
very useful. Just give me one week's worth of Andy Grove's stock options."







> http://www.washingtonpost.com/wp-dyn/articles/A54548-2003Dec10.html
>
>
>
> ----------------------------------------
> Jonathan Krim
> Technology Policy Writer
> The Washington Post
> krimj () washpost com
> 202.334.6758 (w)
> 202.841.3671 (cell)
> 202.496.3816 (fx)

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