Sunday, March 26, 2006

Alan Murray of WSJ on bad patents

Alan Murray: In the business world, the new villains are "patent trolls." The term was coined five years ago by Peter Detkin, then head of litigation for Intel Corp., to vilify companies "that try to make a lot of money off a patent that they are not practicing and have no intention of practicing and in most cases never practiced."

The trolls earned their place in the public imagination thanks to NTP Inc., whose patent lawsuit threatened for months to interrupt service to about three million BlackBerry users until it was settled this month. For many of us addicts, the only thing worse would have been shutting down Starbucks. Anyone own that patent?

Next week, the titans of technology take their antitroll crusade to Washington. On March 29, the Supreme Court will hear arguments in a case involving online auctioneer eBay Inc., which is squaring off with a company called MercExchange LLC, which claims to own the patent on eBay’s popular "Buy It Now" process. [IPBiz: the issue is that "buy it now" is accused to fall within the scope of claims of MercExchange patents.] Touted as the most important patent case to hit the U.S. high court in a decade, this one revolves around whether companies like MercExchange and NTP should be granted injunctions to shut down patent infringers. [IPBiz: the issue is whether the rule of the Federal Circuit that once infringement and validity are established, an injunction should issue, absent exceptional circumstances, is correct or whether the traditional injunction inquiries should be made; separately, the Supreme Court asked for briefing on the 1908 case Continental Paper.]

The following week, Congress gets into the act. Republican Rep. Lamar Smith of Texas plans hearings beginning April 5 to look at, among other things, the BlackBerry fiasco and the role of trolls. [IPBiz: trying to jump-start H.R. 2795 and congressional patent reform]

But patent trolls are getting a bad rap. For one thing, most U.S. research universities fit Detkin’s definition cited above. Does anyone think Stanford University deserves less patent protection than, say, Microsoft, because it doesn’t make or sell products?

Moreover, Detkin himself is now managing director of Intellectual Ventures, which also fits that definition of a troll. Founded by former Microsoft chief technologist Nathan Myhrvold, Intellectual Ventures is an "invention company" that both conceives and patents its own inventions, and acquires patents from others.

Myhrvold, an outcast among his tech colleagues on this topic, argues there is no reason a company should be given less protection under the law simply because it chooses not to commercialize its patents.

After all, Thomas Edison, who nabbed more than 1,000 patents, didn’t manufacture his inventions. Why should modern-day Edisons be penalized for selling their inventions to others, who have the legal infrastructure necessary to enforce them? [IPBiz: as Clinton might say, it depends on what you mean by manufacture. Edison, with backing of financiers, set up an electrical generating system and electric lights in the Wall Street area circa 1880. Edison had an interest in manufacturing electric lights and phonographs, and on-and-off motion picture cameras.]

A look at friend-of-the-court briefs filed in the eBay case shows that troll-bashers, while riding high on the current fears of BlackBerry addicts, remain a minority in the world of business. Filing briefs supporting eBay are Yahoo, Microsoft, Intel, Oracle and-no surprise here-BlackBerry maker Research in Motion.

Weighing in on the "troll" side are all the brand-name pharmaceutical companies, the entire biotechnology industry, as well as General Electric, 3M, Procter & Gamble and DuPont. At a time when the U.S. advantage in global trade is its intellectual property, weakening patent protection, these companies all argue, would be a big mistake.

There is a problem in the patent world, but it isn’t companies that don’t commercialize their own patents. Rather, it is bad patents. These days, too many are granted, too often for "inventions" that seem to the initiated to be as obvious as air-such as one patent granted in 2002, and later rescinded, for an online restroom-reservation system. [IPBiz note: Murray fails to mention that this patent was to IBM.]

In part, that happens because the Patent and Trademark Office is understaffed and overwhelmed. A good first step would be to beef up the patent agency. This is one form of regulation that, if practiced properly, is clearly good for the economy, not bad for it. [IPBiz: people have been asking for fee diversion to end for a long time. Note that H.R. 2795 does nothing about fee diversion.]

Second, change the patent laws to allow opponents of new patents to weigh in earlier. Right now, examiners often work in a vacuum. If patent applications were published prior to final approval and allowed to be contested - a process that already occurs in many parts of the world - fewer bad patents might be issued. [IPBiz: patent applications are published prior to allowance and issue. People can file protests and submit art. After issuance, re-examination is permitted. One notes that the quality issue, as submitted by Quillen/Webster and ratified in the eBay brief, lurks behind this, even though those numbers are not correct.]

The end result may mean more work for lawyers - the one group that unequivocally benefits from this patent mess. Nearly a third of the $612 million Research in Motion paid NTP ended up in the hands of NTP’s law firm, Wiley Rein & Fielding LLP. Defining intellectual-property rights will always be a lot harder than defining real property rights. It is worth getting it right.


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