“Alternate Revenue Streams” – by “Ryan W”

Microsoft and Barnes & Noble are dueling it out over B&Ns Nook reader which runs on Android OS. Microsoft alleges that the Nook infringes on multiple MS patents for things ranging from “tabbing through content” to “document interaction and web surfing”.  Microsoft expert Mary-Jo Foley asserts that this is a part of a larger strategy to combat Googles rising market share in the OS market. MS essentially attempted to extort exorbitant royalties from BN for the various infringing features or else face massive lawsuits.

Mike Ros at Buisness Insider points out “Android includes Linux at its core, and Microsoft established years ago that it thinks Linux infringes its patents. (That claim never been tested in court, but tons of Linux distributors have signed licensing deals anyway — which boosts Microsoft’s future claims.) Last year Microsoft began trying to strike deals with Android smartphone makers. HTC signed a deal. Motorola didn’t, and Microsoft sued.”  In effect allowing MS to profit from Android’s success.

Is this a misuse of Patent Law? Are they getting a bad rap and in fact they did innovate these features and deserve to be rightfully compensated (ie create an alternate revenue stream)? Or is Microsoft evolving to the next stage in it’s trajectory toward being the panultimate, anti-competitive patent troll?

It has been suggested that the recent House approval of the American Invents bill will generate jobs, and patent reform is a crucial part of economic recovery. The money collected by the Patent Office will be retained by the organization and allow them to expand and more quickly process patent applications. In a way this aspect of the reform does very little to address the bloody tech-giant patent wars, and in fact adopts a similar strategy to microsoft. The alternate revenue stream: Funds generated via the problematic infrastructure of our current patent system.

Patent Reform on Two Fronts – by “Bill T”

Congress is currently on the verge of passing its most comprehensive patent reform in decades. The America Invents Act would overhaul much of the organization of the US patent system by creating a patent-specific Trial and Appeals board among other reforms. This is the back end of patent reform. Congress is seeking to adjust the principles on which the USPTO bases its practices in order to overhaul the system. While I do think the proper way of solving the problems with the Patent system is from the inside out, I personally think that the America Invents Act falls short of what needs to be done. But the back-end reform is not all that’s going on.

A front-end adjustment is also in the works. Until the cuts made in staving off a government shut-down this year, the USPTO had been expecting a sizeable increase in funding which would be used to help streamline its operations with new offices, increased personnel, and other practical reform efforts. Indeed, one major provision of the America Invents Act was to give the USPTO full autonomy over the fees it brought in, rather than divert some of it elsewhere in the budget. The $2.3 billion that the patent office was expecting, however, was cut to $2.09 billion, funds remain diverted, and many of the front-end reforms have been forced on hold. At once, Congress has sought to enact and limit patent reform. And the consequences of that limitation could be disastrous. Not only are developments like an expedited application process or a midwest satellite office held indefinitely, but hiring is frozen, overtime is eliminated, and employee training is reduced. This budget doesn’t just place an obstacle before progress in patents, it forces us to regress.

To me, this indicates an ignorance on the part of Congress of the problems of patent law. This contradictory approach to the patent system would not occur if Congressmen understood the scope of what needs to be adjusted, on both the front end and the back end.

Patent Troll Wins 5Mil from Google – by “Wesley W”

The conclusion of a suit filed against Google in 2009 by Bedrock Computer Technologies(a company accused of being a patent troll) has been decided. The jury decided that Google’s use of the Linux kernel in its servers was infringing on a Linux patent. The court ruled that Google should pay 5 million dollars for the infingment.

This ruling is interesting because Linux is widely used in the open source community and the finding of infringement has implications for other users of open source software. The ruling could hurt Google in other patent lawsuits regarding Android software, which also makes use of the Linux kernel. Bedrock also has pending cases against Yahoo, Paypal, Myspace, Amazon and other companies. While the ruling was only for 5 million dolllars it shows that Bedrock may be successful in suing many others who use the Linux kernel. It could open the door to more software patent trolling.

The troubling thing about the ruling is that the use of the Linux kernel on Google’s servers was considered infringing. Bedrock could use this ruling as grounds to file suit against a huge number of open source users who use Linux effectively taxing anyone who uses the software. Oddly enough the patent lawyer responsible for the activities of Bedrock in this instance also works with PubPat, an organization that works against undeserved patents and bad patent policy. This is either highly ironic or a shrewd attempt to make a public example of how flawed the current patent policies are. But, as things stand now Google has been trolled to the tune of 5 million.

The docket naming other defendants in the case can be found here.

Going from Inquisitorial to Adversarial – by “Victor W”

Bearing resemblance to inquisitorial systems, the present patent system lays a lot of responsibility on patent examiners who serve as the primary investigators and judges. With hundreds of thousands of applications a year, it’s no wonder patent examiners are overworked and backlogged.  It’s become a tradeoff between quality and quantity, which could be tempered by making the system to be a bit more adversarial.  Doing so would require the Patent Office to not only consider the perspective of a patent applicant, who is obviously incentivized to see the application move forward, but also consider the perspective of a highly motivated opposition. While more information may lead to better decisions, it may also require too much work.  However, several changes to the current system could be made that simultaneously improve the quality and quantity of patent examinations.

Peer to Patent was a great first step by opening up the process to public input. Outside parties could upload prior art which would invalidate frivoulous patent applications.  The next step would be to open up the process further and invite the equivalent of amicus briefs by outside parties who may have an interest in the outcome.  They could file explanations of why the patent-pending invention was obvious or somehow unqualified to be patented.  This process change would make patenting more in line with receiving other government licenses and approvals that require public hearings.

Google Patents could serve as inspiration for a web application that serves as an automatic adversary against patent applications.  The idea would be to run the claims of patent applications through Google Patent search to return the most relevant existing patents and surface possible prior art.  It could go further by searching the websites and presentations of patent filing companies to identify possible prior art.  It could also expand the search automatically to academic journals and online press.  All of this information could be compiled automatically into a succinct dossier for the patent examiner to start the examination with.

At some point, Peer to Patent could get more social by actually automatically inviting parties to oppose an application.  It could identify businesses and parties affected by a patent application by searching for related patent filers and holders.  It then would mail or email the relevant parties about the patent application and solicit opposing arguments or prior art.

Of course, all of these changes rely on valid and meaningful information being provided by opposing parties.  Requiring a nominal fee for accepting 3rd party material would help discourage frivolous information from being submitted.  Certifying information to be true under the threat of federal criminal charges of perjury will also discourage false information from being submitted.

If all these technical and procedural changes aren’t enough, a simple legal change could make a huge difference.  In actual patent lawsuits, the current legal standard for throwing out a patent is “clear and convincing” evidence that a patent is invalid.  Microsoft is currently arguing the standard should be lowered to simply a “preponderance of evidence” as is the case in civil lawsuits.  Lowering the bar would make patent lawsuits much more focused on the validity of the patents in question.  It would actually bring patents into the adversarial legal system we already have.

All in all, the patent system would have much to benefit from a progression towards a more adversarial process.  Does anyone disagree or does everyone accept my findings which are based on a cursory examination of the facts?

Victor Wong is the author of two patent applications for online advertising related technologies.

Innovation Impediment: Out of Control Business Method Patents – by “Robert C”

The debate over software patents has now raged for decades, with no sign of slowing down. Last June, the eyes of the software industry were trained squarely on the Supreme Court when they handed down the decision in Bilski v. Kappos, a case with significant implications for the patentability of software. To the disappointment of many anti-software patent crusaders, the Court found against Bilski but failed to set a wider precedent and strike down business method or software patents in general. Proponents of software patents claim that legal protection encourages economic growth, job creation, and protection for innovators. However, more and more entrepreneurs, investors, and even large corporations have come to disagree with this view, realizing that software patents often impede invention, result in costly legal battles, and are used as bully sticks by competitors or non-practicing patent trolls to extract expensive licensing fees and concessions.

Property rights are a vital component of modern society that allow markets to function and economies to flourish. Intellectual property rights lend legal protection and recourse for ideas, designs, art, and writing and their owners, and are particularly important to foster a culture of innovation. Time and again, studies have demonstrated that stability and predictability in legal systems encourage economic growth. Few countries in the world have been as entrepreneur friendly than the United States ove the course of the last century. However, as the rate of technological innovation has increased, our nation’s legal framework has not kept pace. The U.S. Patent system is sadly outdated, and ill designed and poorly equipped to handle the inventions of a software age.

The idea of patenting “one-click” checkout on an e-commerce site or a means of “determining and displaying relationships between individuals who have entered personal information” seems ridiculous, yet Amazon and Friendster hold patents for these particular online functions. The 2008 Berkeley Patent Survey, which interviewed over thirteen hundred startups (more than seven hundred of which were software companies) showed staggering results that run counter to traditional academic beliefs regarding patents. The study reported “in general, the technology startup executives responding to our survey report that patents offer relatively mixed to weak incentives to engage in innovation.” Surprisingly, the study found that only 24% of software firms had even bothered to file a patent, and showed that many industry executives saw little value in spending time and money for what amounts to minimal defensibility.

While the benefits of software patents are disputed and somewhat unclear, the costs are certainly quantifiable. According to a 2008 report from an insurance industry trade organization, software firms bear major costs of litigation associated with securing and defending intellectual property – amounting to over $11 billion per year, which vastly exceeds the profits from the products disputed in those patent cases (see figure below for profits vs. litigation costs for software patents).

The United States Patent system is not adequately coping with the realities of modern innovation, resulting in uncertainty, long delays, and high cost litigation. While the United States has long been the world leader in innovation, in order to remain so patent law will need to adapt for modern inventions and developments in software. While there has been talk for many years about a major patent reform bill, and in recent days both the House and the Senate have put forward versions of the “Patent Reform Act of 2011”, neither draft of legislation takes a real crack at better defining business method or software patents. While there are certainly flaws in the patent process that merit attention (the long delays in patent reviews, first to file vs. first use, and the lack of funding for the USPTO), any true patent reform act will alter patent rules to better accommodate software inventions rather than only addressing the mechanics by which patents are reviewed and approved.