Monday, October 04, 2004

Kodak wins patent suit against Sun over Java

Kodak won a jury verdict against Sun on Friday, October 1, 2004, and will be seeking approximately one billion dollars in damages.

Kodak's litigation involved three patents that it purchased from Wang Laboratories in 1997, several years after Java was created. These patents -- numbers 5,206,951; 5,421,012; and 5,226,161 -- were directed to the integration of data between object managers, and between data managers, and to the integration of different programs that were manipulating data of different types.

Kodak took the position in court that these patents covered the method where an application "asked for help" from another application -- such as in Java's object-oriented programming.

Pamela Jones of Groklaw was quoted by zdnet

"The rest of the world will out-innovate US companies, because they won't be running with the patent ball-and-chain attached to their ankles, holding them back. Protect your software with copyright and trade secrets, but using patents for software inevitably blocks progress. If you must have it, rope it off severely so it doesn't hurt anyone like this. At a minimum, patents that aren't actively being used by the patent holder in any way in any product shouldn't be available as a weapon against a company actively bringing an idea to fruition and use."

Of damages, the Rochester Democrat and Chronicle reported:

-->Kodak in pre-trial documents indicated it would ask for $1.06 billion in lump-sum royalties – a figure that represents half of Sun's operating profit from the sales of computer servers and storage equipment between January 1998 and June 2001. The argument: Java provides the engine for such computer equipment. Sun executives have publicly estimated that Java is a "key factor in 90 percent of Sun's sales," Kodak said.

The damages phase will likely be sharply litigated, according to a local patent lawyer. "Kodak will (probably) be urging for a broad royalty base and a reasonable royalty, and I'm sure Sun will argue that the use was small and the royalty base should be lower," said Thomas Fitzgerald, a patent lawyer for the past three decades.<--

**Hoisting on one's own petard?

In the past, Kodak has been the loser in some notable patent suits. Further, as to Sun, from the net (Mike Gunderloy):

--> "there's the new from an SEC filing that Sun has reportedly applied for a patent on a "method for licensing software to an entity, including determining a per-employee cost for the software, determining a number of employees of the entity, and determining a total licensing cost using the number of employees and the per-employee cost, wherein the total licensing cost comprises a software license for all employees of the entity and all customers of the entity."

One would think that with this sort of insanity going on, Sun would notice that the system was broken - but instead Sun President Jonathan Schwartz chose to use weblog for a stirring defense of intellectual property rights just a day after a jury in Rochester nailed his company's hide to the wall. He does say he's not in favor of spurious patents or those acquired only for litigation, but given the attempt to patent a licensing plan, it's hard for me to see where he would draw the line.

And in the grander scheme of things, I thoroughly disagree with those who, with Schwartz, hold that software patents encourage innovators to innovate. We are now dangerously close to the point where no innovation in software will be possible, because any new software is an invitation to lawsuit. I assume Sun thought Java was innovative - are they prepared to admit otherwise now that the Wang patents have been applied against them? And what are smaller companies, without a billion dollars in the bank, supposed to do?<--

There was some discussion of potential liability of HP, IBM, and Microsoft to the Kodak patents in question. It appears that they have licenses to the patents.

from computerworld

-->Kodak's patents, developed by Wang Laboratories' imaging software unit before it was purchased by Kodak in 1997, essentially cover a technique for allowing two pieces of software to agree how to interoperate — a key concept in object-oriented programming that dates back before the patents were filed to the Simula computer language, created in the 1960s, Eunice says.

"This is one of the things when you hit your head and say how can this possibly be valid," he says. "If Java does these things and infringes, then what doesn't?"

Java developer Adam Baker agrees with Eunice that the techniques covered in Kodak's patents were developed years before the patents themselves were issued.

"I'd be surprised if either via the appeals process or a separate application to the patent office the [patents don't] get rejected, although these things are never certain," says Baker, a senior consultant engineer in the UK who asked that his employer's name not be published.

"I think some serious overhaul of the patents system is required to avoid patents on trivial intentions, which would probably stop most, if not all, software patents," Baker said in an interview via instant messaging.

Though industry analysts like Eunice initially speculated that Microsoft could be vulnerable to a similar lawsuit over the techniques used by its .Net platform, that scenario now does not appear to be likely. Microsoft, IBM and HP are all licensees of the patents involved in the Sun litigation, says Jim Blamphin, a spokesman for Kodak.

The patents in question are US Patent & Trademark Office patents numbered 5226161, 5206951, and 5421012, Blamphin says.

Blamphin declined to comment on any plans for future litigation, or whether Kodak was actually using the patented technologies in question. "We're just not talking about it now because it is still a matter under litigation," he says.

Kodak did release a short statement about the case, which said the company was pleased that the court had validated Kodak's intellectual property rights.

Sun issued a statement saying it was "disappointed with the federal jury's decision" and that it was examining options as the jury begins the liability phase of the trial, where it will consider Kodak's billion-dollar damage request.

One likely outcome would be for Sun to join HP, IBM and Microsoft and simply license the technology, says Jeffrey Neuberger, a partner with Brown Raysman Millstein Felder & Steiner. "Once the jury's verdict is in, more often than not the case is ultimately settled with the jury's verdict being a factor in the settlement," he says.

A second option would be an appeal of the ruling, which would stand a good chance of being overturned, according to Dan Ravicher, executive director of The Public Patent Foundation in New York. Software patent case decisions are reversed about half the time in appellate court, he says. "In the patent world, the chance of reversals are so high that having a trial verdict doesn't leave you with the ability to predict the outcome of a case."

Coincidentally, Jonathan Schwartz, Sun's president and chief operating officer, had commented on the role of intellectual property in his company's business a day before the Kodak verdict. In a weblog posting entitled I Believe in IP, Schwartz wrote that intellectual property is "the foundation of world economies, and certainly the foundation upon which Sun Microsystems was built. Copyright, trademark, patent — I believe in them all."

Following Friday's verdict, Sun executives may now be more aware of the flaws in the US patent system, Ravicher says. "Sun is seeing firsthand ... how the patent system can have negative impact on technology," he says.<--


News of a settlement for $92 million was released on October 8, 2004.

Prior to the settlement, BusinessWeek had criticized business method patents (below). In that discussion, note the incorrect reference to the Eolas patent ("USPTO rejected it"); as of this time, the final decision on the re-examination of the Eolas patent is still pending; there is a non-final Office Action rejecting the claims of the Eolas patent, and Eolas has an opportunity to respond to that Office Action.

-->The Java case is merely the latest in a string of patent suits hitting the industry. A year ago, a jury ruled that Microsoft's (MSFT ) Internet Explorer browser violated a patent of Chicago-based Eolas Technologies covering so-called plug-ins and decided that the software giant should pay Eolas $521 million. In March, though, the U.S. Patent & Trademark Office reviewed the patent and rejected it.

"SPURIOUS LAWSUITS." Five years ago, giant e-tailer Amazon (AMZN ) sparked outrage when it patented a one-click online ordering system and then sued rival (BKS ), alleging infringement. The outfits eventually settled the dispute.

As nettlesome as the issue of software patents can be, even those stung by suits aren't always opposed to the concept. Sun President and Chief Operating Officer Jonathan Schwartz argues in his Sept. 30 Web log that patents are an important tool to protect intellectual property. "From drug discovery to academic work, the protection of IP is part and parcel of what incents inventors to invent, and investors to invest," Schwartz writes.

Nonetheless, although he doesn't mention the Kodak case, Schwartz is critical of "the cynicism of spurious lawsuits." Officially, Sun's comment about the Kodak case is that it is "disappointed" and "examining our options."

Critics worry that the ruling could encourage businesses to exploit their patent portfolios to squeeze revenue from innovators who pioneer technology. Kodak is angling for more than $1 billion from Sun in the penalty phase of the trial, which comes next. The ruling could still be subject to appeals. But if it's upheld and Sun is hit with such a large judgment, the real penalty may be to software innovation. <--


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