Which companies are milking a flawed patent system, and which are trying to get paid for legitimate breakthroughs? It's a complex question, and the answer depends on your perspective.
Chip manufacturers denounce Rambus and often other intellectual-property companies as opportunists. Rambus has for years licensed chip designs and other inventions for royalties.
Executives at these IP companies counter privately that firms such as Intellectual Ventures are the ones to blame for the industry's negative reputation. What's the difference? Rambus specializes in one area--chip design--and it helps customers implement technologies. Intellectual Ventures doesn't do as much to assist customers with implementation, and it has patents in areas as disparate as medical implants and nanotechnology. Critics say such companies are less interested in establishing prototypes and building a market for an invention.
Intellectual Ventures' Nathan Myhrvold responds in kind, noting that at least his company invents things. He accuses outfits like Acacia Research, which concentrate almost exclusively on patent acquisition, of creating the problem.
Acacia's Paul Ryan, for his part, asserts that companies such as his are giving a lifeline to individuals who don't have a powerful company behind them. His company supports people such as Carl Elam, who invented a V-chip-like technology.
Lawyers for big companies play the game, too. Though IBM gave 500 patents to open-source software developers in January, in 2004 it obtained 3,248 other patents in the United States alone--more than any other company or individual for the 12th straight year. In all, IBM garnered $1.2 billion through intellectual-property licensing last year.
Microsoft, which complains about spending $100 million in legal fees annually on patent actions alone, last year hired Marshall Phelps, the lawyer who put together IBM's lucrative licensing program. And aggressive patent reformers such as Bruce Perens and Lawrence Lessig routinely criticize patent companies but then defend copyrights, which give plaintiffs a much longer monopoly on their materials.
According to James Pooley, a partner specializing in intellectual property at Milbank, Tweed, Hadley & McCloy, there is only one foolproof definition of who's to blame for the patent systems problems: the other guy.
----Michael Kanellos
Copy editor: Edward Moyer
Design: Ellen Ng
Production: Ellen Ng, Mike Markovich
By Michael Kanellos
Staff Writer, CNET News.com
July 20, 2005 4:00AM PDT
Citing Thomas Jefferson, Paul Ryan talks about helping the little guy stand up to big corporations and protecting kids from unsavory TV programming. So it may come as a surprise that, to many people in the tech industry, he's public enemy No. 1.
Ryan is the CEO of Acacia Research, a technology development company that has made waves in the past two years with its controversial practice of acquiring patents from other companies, then seeking royalties and licensing fees from those that may be violating them.
"If you look at the great inventions of the 1920s, none of those were invented by large companies," Ryan said, noting that his company often helps small inventors who don't have big corporations behind them. "Patent protection is a fundamental right. It is why some people left Europe."
Others see a less noble side to the patent business, arguing that intellectual-property companies and other litigants unfairly exploit the loopholes of an overworked patent system in a form of legalized extortion. U.S. law gives a patent holder a 20-year monopoly for an invention from the date the application is filed.
Still, Acacia and other patent companies say their work helps protect the pioneering spirit that has historically defined the American way. Inventors and patent holders say they must constantly fight an uphill battle against wealthy multinationals that deploy legions of lawyers and invariably want to exploit their ideas for little or no cost. Common tactics include persuading small companies to submit their ideas to standards organizations, which subsequently license them cheaply or for free, and filing counterclaims against small companies in an effort to force them into cross-licensing arrangements.
Regardless of which side is right, the intellectual-property business is thriving. Companies such as Forgent Networks and Intellectual Ventures, an incubator company co-founded by former Microsoft Chief Technology Officer Nathan Myhrvold, are rapidly expanding their patent portfolios, both by buying patents and coming up with ideas that can be broadly licensed. One of the latest entrants in the intellectual-property field is Applied Minds, a company funded by the Silicon Valley venture capital firm Kleiner, Perkins, Caufield & Byers. Applied Minds comes up with product ideas and then works with established companies to bring them to market.
"Patent work is no longer just a defensive insurance policy," said Kent Richardson, vice president of intellectual property at Rambus, an intellectual-property company. "It is part of your product offering."
Acacia alone has collected more than 120 patents, signed hundreds of technology-licensing agreements and filed several lawsuits on patents relating to, among other ideas, electronic bar codes, credit card fraud, video-on-demand services and chips for setting parental controls on TV use. The company's list of licensees includes National Instruments, Nokia, Playboy, Petco, Sunglass Hut and Walt Disney. Texas Instruments and Intel are defendants in a pending Acacia lawsuit.
Depending on the circumstances and the clout of the players involved, the stakes can be astronomically high.
That was made abundantly clear in 2002, when Forgent reviewed its portfolio and came across U.S. Patent No. 4,698,672, which it obtained when it acquired Compression Labs in 1997. The patent purportedly gave Austin, Texas-based Forgent the rights to the JPEG method for compressing digital video images.
In the last three years, the company has received more than $100 million in fees from Adobe Systems, Macromedia and others. A pending lawsuit against dozens of defendants, including Dell, and pending licensing deals could boost total royalties from the patent to $1 billion. Last week, Forgent filed a lawsuit against 15 more companies, saying it has the right to collect royalties on digital video recorders, or DVRs.
"The patent, in some respects, is a lottery ticket," said Jay Peterson, chief financial officer of Forgent, which didn't realize at first that it could claim the rights to JPEG, which isn't actually called by that name in the patent. "If you told me five years ago that 'You have the patent for JPEG,' I wouldn't have believed it."
Another company that could benefit from lucrative license fees is Picture Marketing Inc., which says it holds a patent for embedding photos in electronic messages sent for marketing purposes. The company, which has retained a former Microsoft attorney to represent it, will seek to collect royalties from companies that send (or have been sending) advertising e-mails that contain pictures. The patent was obtained in the late 1990s.
"Up to 1998, the patent office didn't grant many Web patents," said Mable Yee, chief executive of PMI, which has already signed some licensees. "They opened up from 1998 to 2000, but then they shut the window down."
Established companies such as IBM are also expanding patent licensing operations. One of the unintended consequences of the Sarbanes-Oxley Act is that companies must now comb through their patent files to make sure they're not wasting any valuable, unexploited assets. Some are also picking for gold among the bones of dead dot-coms.
As Acacia's Ryan puts it, "There's a lot of IP floating around out there without a home."
He and other supporters of the patent system say it provides necessary protections for companies and individuals that might otherwise stand little chance of getting paid for their ideas.
Inventor
Going to the mattresses
Intergraph was a flailing workstation manufacturer when it filed an antitrust suit against Intel. After that failed, the company pursued claims that Intel chips infringed on Intergraph's Clipper processor patents, resulting in settlements and verdicts that have thus far totaled $675 million and royalties that will continue to 2009.
The goal of patent companies does not always involve litigation. Sometimes they consult with licensees to help them develop products; other times, they just provide an idea. But if voluntary licensing fails, legal action could result in monetary damages or an injunction that prevents the defendant from selling the disputed product.
Still, as Intergraph's case shows, asserting a patent takes more than reciting a magic incantation.
"Some people have tried the Rumplestiltskin process, but it generally doesn't work," said Ron Epstein, a principal at IPotential, which advises companies on how to handle their intellectual property. For smaller inventors, the cost of seeking protections can be prohibitive.
Years ago, filing a patent might cost about $800 in legal and processing fees, said Elwood "Woody" Norris, who has invented various types of speakers and
Continued ...
Patents level the playing field, so I say keep innovating, inventing and patenting!
What a bunch of crock. Is this guy telling me that James Watt did not patent his steam engine in the UK during the XVIIIth century?
The fact is, USA industry largely rose through the XIXth century by blatant copying of European technology without paying patent royalties to the original European inventors (how about the incandescent lightbulb, invented by Europeans before Edison?). Much like China does right now. Selling that technology provided funds for further R&D development in the USA.
They are a way to keep people from innovating out of fear of infringing on the bogus patents of companies like this.
Meanwhile these lawsuit companies make loads of money. People like Paul Ryan are destroying the lead America used to have on American innovation, because innovation thrives by building on the ideas of others. If those ideas are locked up in legalities, the technology can only be innovated upon by the patent holder, instead of the entire world.
We DO need patents to protect innovation. But we do NOT need them to protect every idea imaginable. There is a happy medium, and this country enjoyed that medium for almost a couple of hundred years, but now corporations large and small have discovered the use of a patent as a weapon to extort revenue, not as a defense against others stealing ideas.
The patent system as it exists today makes it almost impossible to do any kind of independent creative software development. Whatever you work on, you can rest assured that if it becomes even a little bit popular, you will face a bevy of lawsuits at such an expense as to make it financially impractical to defend against them. We're already at the point now where only large corporations can afford the millions of dollars required to defend themselves against these allegations, and we as a country are paying a hefty price for it. Our technological edge is slipping away at a rapid pace, and is already completely gone in many areas.
<a class="jive-link-external" href="http://en.wikipedia.org/wiki/Joseph_Swan" target="_newWindow">http://en.wikipedia.org/wiki/Joseph_Swan</a>
Edison also copied work by William Sawyer. You can read all about it here:
<a class="jive-link-external" href="http://en.wikipedia.org/wiki/Incandescent_light_bulb" target="_newWindow">http://en.wikipedia.org/wiki/Incandescent_light_bulb</a>
Several people independently and simultaneously invented incadescent lightbulbs, but Edison was *not* one of them.
Patents are a good way of stopping innovation. I'm sure Microsoft and IBM aggree.
Patents are a good way of stopping someone from innovating a thrown out idea into something useful.
Someone should patent the 'Submit' button so I can't send this reply.
Gawd I was happy when the EU rejected the patent proposal...
They are nothing but opportunists and money run amuck.
What they are doing to the adult industry is horrendous, and will have far reaching consequences to the world.
We need to see past the rhetoric spouted in the article about 'the American spirit' and judge patents on basis of their net addition or detraction from our society.
Patents are fine for brick-and-mortar things because:
1) people can understand such things and easily see if they if they are rubbish or genuine
2) most of the obvious and important physical inventions were already in the public domain when patents were first issued (e.g. the wheel, nuts, bolts, rivets, glueing, the use of string ...)
3) in the real world patents are therefore fairly specific.
In the software world now:
1) not all the really obvious inventions are free
2) software often uses so many more different 'moving parts' than in hte physical world that it has turned into a minefield of 'rights'
3) there seems to be no way (neither in Europe nor in the US) to prevent the issuance of totally daft patents, by which I mean patents that are blindingly obvious to anyone who can program and who is faced with a particular problem. (e.g. the 1-click patent, the patent on including pictures in email, the patent on using XML for word-processor documents, patents on the use of databases to track information from people who visit your website and buy things, a Microsoft patent on the concatenation of two logical operators).
And let's not fall into the trap of believing that just because someone can now charge people for some silly patent, 'value' is created. It's not! If the patent had never been issued everyone in society would have been able to use it, thus removing
a) the cost of the patent to everyone
b) the cost of enforcing the patent
As in macroeconomics: patents don't create anything: they just channel flows of money.
Now patent proponents have a strong case that monetising new ideas provides an incentive to keep producing them. Granted.
But ....
That's simply not how the patent system works. The vast majority of patents are held by very large companies, and not by small innovators. It would allow inventors to sell an idea, but not so much to exploit it (that would require acess to lots of other patents which they don't have). Just look at all the 'patent cross-licensing' deals that seal many lawsuits.
As a matter of fact, the same large companies who own most of the patents (e.g. IBM and Microsoft) now wish to see the patent system reformed to avoid current excesses.
I fear that the net effect of the (US) patent system is to wreck the tap water system in favour of selling 'bottled water'. If that is 'creating value' then I'll pass, thanks.
That context isn't my area of concern.
When it comes to "software" patents, however, it seems that not only is there not sufficient review in many cases by the patent examiner (resulting in bogus patents that fail the obviousness test from the start), but many of the patents granted are patents for extremely generalized concepts and processes, not for specific implementations.
That allows for the equivalent of something like "transporting a heavy body by using a wheel on an axle" or "moving an item in a store from a shelf to a shopping cart with a single hand movement"to be patented in a software context.
Many of the things being successfully patented these days are things which are OBVIOUS to anyone who has any training or experience in software design, but which were not obvious to the patent examiner who granted them. While the courts will sometimes correct the situation, the process of taking someone to court to have a nonsense patent overturned can be extremely expensive.
A more efficient method of reviewing patent applications is needed. Perhaps some sort of peer review requirement? And a more viable method for overturning (or at least formally challenging) bogus patents needs to be created.
It's getting to the point where even interface elements and file/communications formats are being flooded with patents, making it impossible to write a simple Hello World program in some cases without shelling out cash to the appropriate parties...
Additionally, significant new legislation is now before congress to introduce post-grant opposition proceedings, much like those in existence in Europe.
This line makes it sound like patents and copyrights provide the same level of protection, which is hopefully obviously false to anyone. What patents and copyrights protect is fundamentally different, and I don't mean that they protect different categories of items.
A copyright protects a single work, as written. A patent protects a process, and though people like to argue this, patents, as least in software and business practices, do protect ideas. Yes, the definition you will read in law texts will say that patents protect inventions, not ideas. That's a pretty fine line and many patents do seem to cross it, so the semantic difference many people always seem to bring up in defense of patents seems to be talking about theory, not practice.
Let's say I've written an application with some kind of unique algorithm for image processing. Let's say someone else, working completely independently from me and knowing nothing of my project, writes a very similar application with essentially the same algorithm, but completes it a month later.
If I try to sue based on copyrights, the judge should throw the case out, because the other developer didn't infringe my copyright in any way. His work is completely separate; he didn't even use my code as a basis, so I can't even argue his application is a derivative work. This is the level of protection that I think is entirely appropriate; he did the same amount of work I did.
On a lawsuit based on patent infringment, I can win. Why? Because if I have a patent on the image processing algorithm, I can force him to license it or prevent him from distributing his algorithm, because even though he developed it on his own, I developed the same algorithm first. If the algorithm was extraordinarily complex, this isn't so much of a problem, but patents are being granted for very general and obvious algorithms.
What if the image processing algorithm I developed was very simple, just new? (Not likely by now, I agree, but for the purposes of argument). Let's say I just encountered a unique problem, and this algorithm was a solution pretty obvious to virtually any software developer. There are a number of patents covering such algorithms. In this case, I will have totally blindsided the other guy; it's too simple for him to even think someone would patent it.
This is situation that software patents are putting software developers into, and it's because many of these patents cover algorithms that shouldn't even be considered "inventions" because they are too simple and obvious. That, to me, crosses the line between "invention" and "idea".
Either way, the point is that the author's statement makes it sound like calling for patent reform in software and supporting software copyrights is a position that does not make sense. I suspect that this is to due to an attempt to keep things brief, but it resulted in a misleading implication. It makes perfect sense to have problems with software patents and yet not be opposed to software copyrights, and I hope the author realizes this.
The only ones that suffer from the process are those with great ideas that dont have the money or the time and those that would steal the idea.
Patents introduce artificial scarcity into a market. Patents are a negative and unnatural right in that you can prevent a third-party from independently developing the same thing and competing with you in the market when there is no physical reason why it must be this way. It is taxation without representation.
The original argument in the USA constitution was that limited patents were preferable to trade secrets to the society as a whole and this is why the constitution allows patents. For the case of software, it is highly dubious that patents serve any such disclosure role. In fact, none of the software patent proponents want it for that. They just want a state blessed monopoly.
Does USPTO says anything to this?