Patent Wars:
Is your Internet site waiting for the bill to come due?
Are you aware that using most "specialty scripting software", even Java and style sheets, can result in a 30-100,000 dollar debt?
This is a very serious issue that every web page owner should understand fully before doing business. If you are not interested in the facts, get your lawyer to look at this. He will be very grateful to learn what to avoid. Links are provided below for the sources and current events.
The question comes down to this: Does anybody own the Web and e-commerce? Absurd notion, you think? Yet, a growing number of companies and individuals have proved they do, and are claiming patent rights to such things as hyperlinks, online auction procedures and even Web-based access to databases. The court cases that have been settled so far create a very gloomy picture for e-commerce businesses that are not aware of the certain and eventual storm that brews in their future.
Amazon.com, British Telecommunications, Priceline.com, Open Market, DoubleClick - and now an obscure Lawrence Berkeley Labs computer scientist by the name of Allan Konrad - are among those sending shock waves through the online business community as they assert ownership over core e-commerce methods.
They're armed with what are called e-commerce method patents granted by the U.S. Patent and Trademark Office or foreign patent offices. And as patent holders staking claim to technology or business processes, many of them have launched patent-infringement lawsuits against competitors, ISPs or large corporations with deep pockets that do Web-based e-commerce.
"Whatever comes out of the Patent Office can impact you," says Bradley Wright, patent attorney at Washington, D.C., firm Banner & Witcoff, whose clients include AT&T, Nike and Microsoft. "Some of the patents are very broad, some are narrow."
Patents have also become weapons used to scare online retailers into forking over licensing fees - (typically $30,000 for small sites, hundreds of thousands for larger or highly commercial sites) - to keep their cases out of court.
"Cases seldom go to court," Wright says, because there is very little you can argue with once a patent (or copyright) has been identified and infringed. All of the major world markets (and even most of the lesser ones) exist in countries that have signed USPTO (U.S. Patent Office) reciprocal enforcement law agreements.
Individual companies doing business on the Web are the eventual "gold mine" targets for patent-infringement suits. These companies typically face the choice of forking over a chunk of change - typically a $30,000 to $60,000 licensing fee (most are term-limited, or annual) - to rid themselves of the lawsuit or spending perhaps hundreds of thousands of dollars fighting it out in court. And that cost is just for one of the "e-commerce functions" which are now considered solely owned -there are so far, over 40 valid claimants with USPTO judgments who are collecting fees from Internet sites. Of course, they start at the biggest "pockets" and eventually work their way down to the smallest. After that, the intent is to make a "blanket DNS registration block" against remaining smaller sites to prevent client access until the fees are paid.
Sometimes the patent is used to "cut off air" to a competitor, as Amazon.com did in its suit against Barnes & Noble's online store. Winning the first round in court last year in a case now under appeal, Amazon.com forced barnesandnoble.com to stop letting customers shop in a one-step online process. That's because Amazon.com holds a patent on "one-click ordering" and convinced a court to see things its way.
Priceline.com, the site where consumers shop through a reverse-auction process that reduces prices, has a patent for that process. Priceline.com has sued Microsoft's online travel service Expedia to block its use of reverse auctions. This important case, yet to be settled, will decide whether Priceline.com owns the online reverse-auction process - a legal determination that will broadly impact Web commerce in business-to-business and business-to-consumer markets.
British Telecom has claimed to hold a patent on hyperlinks, granted back in 1989, and is going after ISPs, not individual users, to make them license such links. But we will all pay that bill, in increased fees/costs that are passed along to the customers.
One extraordinary case involves a patent-infringement lawsuit brought earlier this year by Allan Konrad, a computer scientist working at Lawrence Berkeley Labs, who is suing three dozen corporations, including General Motors, Ford, Boeing, DaimlerChrysler, United Airlines, Kodak and Hilton.
The reason? Konrad holds three patents granted between 1996 and 1999 that together constitute a "Remote Information Service Access System Based on a Client-Server Service Model." In simple terms, this means making use of a Web site that provides interactive database operations, according to Konrad's lawsuit.
Konrad, who appears to be holding the patent to Web-based delivery of information, is going after corporations serving Web information from back-end databases. Konrad and his attorney at Dallas firm Zell, Hofmann, Voelbel and Gette, declined to reveal details about the lawsuits.
As to why a Californian like Konrad has instigated his lawsuits in Texas, the answer is simple, according to patent attorneys. Texas courts have been congenial to plaintiffs in these types of cases, says Jerry Riedinger, attorney at Seattle firm Perkins Coie, a powerhouse in patent law. Riedinger's firm represents Amazon.com in its case against barnesandnoble.com.
The U.S. Patent & Trademark Office (PTO) last year received 289,000 applications for patents, with 2,600 of them for computer-related business method patents. The PTO approved 160,000 patents in all, with 583 of them being computer-related business method patents.
It costs about $8,000 to apply for a patent, and each patent examiner is encouraged to help the applicant through the process, which typically takes two to three years. But the federal government had made the PTO self-sustaining, meaning it has to earn its revenue. In what amounts to a quota system, patent examiners win points for shepherding patents through.
Although public amazement and outrage predictably erupt every time a new e-commerce business process patent is issued, experts say the system leaves business people with no choice but to rush to the PTO with their latest brainstorm. If they don't, someone else might get there first and get the software-related patent.
The PTO's guidelines for patent review say a technology or business method can't be "obvious" and must be "new." Moreover, there cannot be evidence of "prior art," meaning technology or method wasn't in use prior to the patent claim.
The examiners search for prior art. They pore over previous patents and public information such as press stories for evidence that someone else got there first. If the patent application appears unhindered by prior art, the examiner may issue the patent, giving the patent holder the legal rights to important technologies. At times, though, the PTO will re-open a patent examination, especially when there's a public outcry.
Brigid Quinn, spokeswoman for the PTO, based outside Washington, D.C., in Arlington County, recalls a few years back how a patent for fixing the Y2K problem triggered a lot of public commotion. The PTO withdrew the patent on the second review.
The PTO keeps patent applications secret until they're awarded. Not knowing what basic Web technologies or innovations may be covered under a new patent creates risks for those building million-dollar Web sites.
"We would never violate a patent, and if we were aware of a patent and were developing technology we thought was similar, we would avoid it," says Rich Secor, chief information officer at SmarterKids.com, an online site for educational toys and learning materials.
Secor adds that SmarterKids.com has applied for a patent to cover how an e-commerce site can do "product recommendation."
Although technology patents inflame many, patent attorneys argue that start-ups get the funding to develop their technology in part because they've convinced venture capitalists that the start-up has patent-worthy technology that will give the fledgling operation leverage in the future.
"The patent system has been extremely successful in providing venture capital to the high-tech community," says Perkins, Coie patent attorney Riedinger.
But critics charge that the PTO examiners don't know what's happening in Internet technology or e-commerce, much of which isn't documented in ways likely to be found during a search for prior art.
"They have no idea what's going on in industry," asserts Greg Aharonian, a technical consultant running the subscription-based Internet Patent News Service.
"I bust patents for a living," says Aharonian, who helps lawyers find evidence of prior art. He doesn't believe the Priceline.com patent on online reverse auctions will hold up in court, which is an opinion shared by a number of others following that case. But about 60% of patents withstand all appeals processes, Riedinger says. "In fact, I'm not aware of any significant e-commerce patent that has been overturned," he says.
Another important legal battle under way involves GeoWorks, which claims to have patented the Wireless Application Protocol (WAP), according to patent attorney Wright at Banner & Witcoff.
"GeoWorks has been telling everyone 'You better sign up for this WAP patent,' but Phone.com recently sued them in California to declare the patent invalid," Wright says, adding, "If you look at the patent, no where does it lock up WAP." This case is pending.
In addition to its controversial "one-click buying" patent, Amazon.com is stirring up the e-commerce community with a patent on online affiliate programs for Internet-based customer referral.
Spokeswoman Patti Smith said Amazon.com, which has about a dozen technology patents, has not tried to force other online merchants or service providers to license its affiliate program patent. Amazon.com is taking a low-key approach after weathering a public storm over the one-click patent and the barnesand noble.com battle. In fact, Amazon.com CEO Jeff Bezos felt compelled to try to mollify the masses with a letter posted on the Web.
"I now believe it's possible that the current rules governing business-method and software patents could end up harming us all," Bezos writes. However, he still insists that "despite the call from many thoughtful folks for us to give up our patents unilaterally, I don't believe it would be right for us to do so."
Why not? For one reason, Bezos notes, patents, unlike trademarks, can be enforced on a case-by-case basis without the risk of losing rights to them.
Bezos suggests that business-method and software patents should not have 17-year protection of rights, as they do now, but perhaps only three to five years. Bezos says he wants to meet with members of Congress on the subject of crafting a new patent system.
There is no shortage of voices calling for change.
While not opposed to software patents in general, Duke Law School professor James Boyle says much of their impact is "socially bad" and "economically hurtful." Patents are essentially tremendous prizes handed out by the PTO, Boyle argues, but these days there are too many prizes being handed out on questionable claims. "The Priceline.com [online reverse auctions] patent is silly and blindingly obvious," he complains. "It is an example of a system gone wild."
Wild or not, e-commerce method and software patents are rolling out from the PTO like a spring flood, with companies seeing little choice but to swim for their lives.
Open Market, for instance, has a total of eight e-commerce patents, and more in the pipeline. The best-known is its so-called shopping-cart patent (U.S. patent #5,715,314), which covers a network-based sales system connecting a buyer computer, the merchant computer and a payment computer programmed to receive payment messages.
For more than a year, Open Market has been seeking to license this patent. Rumors abound among patent lawyers that Open Market has gotten credit card companies Visa International and MasterCard International to license the shopping-cart patent.
"I wouldn't deny it, but it's not announced yet," says Winn Treese, Open Market's vice president of technology. "We didn't want to drag everyone into court right away, but the claims we have on the shopping carts are fairly broad."
Treese defends the PTO, saying examiners are "careful" about prior art and the general process. But there's no question, he adds, that many patent holders are making aggressive claims on software vendors and businesses engaged in e-commerce.
Prominent International lawyers are saying this represents a massive threat of revenue enforcement on all on-line businesses worldwide. This is very good news or very bad news, depending on whether you are a patent seeker... or worried about being in debt to one tomorrow. Even without realizing you are using royalty-due processes, the legal precedent is solid: "Ignorance of the law (using intellectual property) is no excuse". Those who use e-commerce automation are in for a big bill down the road, for all years of use, that will cripple many medium sized companies, and certainly bankrupt millions of small companies. The International Software attorneyŐs Association is advising all its e-commerce clients to pay the token fees of 30 thousand or less, now rather than pay exorbitant 6-figure interest down the road. Their stand is firm: If you want to protect your assets, either pay now to be free of obligations, or donŐt use anything beyond automatic browser mailers as a web sales tool.
RELATED STORIES:
These links provide current info, so I pasted in the links. Some links may be so old that they are unavailable by the time you read this, if the news site does not maintain continuity-link archives. But you can easily verify the data by doing a search for any title below, since these are all previously published CNN, IDG, USPTO, and court archive news links.
Net-patent boom forces Patent Office to seek help
EMC, IBM settle patent disputes
Sony will resubmit patent claims against Connectix
Turning patents into profits The Industry Standard
Hitachi, Rambus end all patent disputes
BT flexes muscles over hyperlink patent
Patent squatting ( EM LinuxWorld /EM )
Summary/SchlosStudios Note: It should be noted that ALL of the former Warsaw Pact countries, including Russia and Romania have signed the USPTO patent reciprocity agreement, (and enforce its penalty measures immediately, when a USPTO order arrives). Therefore, only the ostrich can "pretend not to be affected". The strategy of these rogue owners is clearly to use search engines to assemble lists, hire asset investigators, compile "hit lists", wait intentionally until the market is ripe for plucking, then hammer YOU when the bank says you are holding a big balance. Then, after they have taken ALL the big pockets, they plan to hit all domain name owners with a "blanket generic bill due" that blocks INTERNIC addresses until the bill is paid. That means, your site is legally dead (nobody can load it externally from the internet) until you pay the ransom! Can you afford to have someone hit you with several 100,000 dollar surprise judgments that cannot be defended? Nobody can!
Consequently, I have removed all disputed Java scripting features and other patented marketing modules from all of my sites, and advise ALL of my former clients to do so. If the "patent" owners came to me with USPO enforcement orders, ANY time they chose to collect would be a threat to solvency. Why? Because the bill is due instantly, and allows attachments, liens, and judgments to be filed in the same "arbitrary" fashion as are IRS/tax collection orders. (There are no "hearings", "respondent's rights", "arguments", or legal recourse available) . . . Poof! Assets disappear instantly, or become so encumbered with legal complications restraining title/ownership that they can no longer be liquidated.
Give this advice the credence it deserves. Consult your attorney if you are skeptical. If you have the affected software on your site (almost every form of Website logging/database collection/processing and referral JavaScript is tainted) you will become the next victim, eventually. The only web functions that are truly free of threat is the "a href" and search engine registration, or the meta tags that redirect those functions. Everything else has been claimed, and will cost you retroactively, for every second of use that can be established.
How likely is that you say? Simple to do. I myself can use any public advanced search engine function for free, to search "compressed image files" for my own digital stamp, which I put inside the JPG or GIF images. So even if someone copies my images, renames them, and publishes them, it is VERY easy for me to find a list. I actually have made more money on all the copyright infringement settlements I have collected in the past 10 years, than I have on directly commissioned images! A USCO (U.S. Copyright Office) infringement order has terrible clout, and nobody in their right mind contests it unless they want to abuse their lawyers. So now, let me say that finding JavaScript is FAR easier, because the "language" is restricted, and must be very precise. You link your page with "shopping basket Javascript" on the search engines, or you have no visitors. So the patent owner does a search for ALL documents with this:
>---(Java process/fn name)---<
Then he has a list of all users! Copy that to disk, send the list to the "collectors" for asset analysis. This is far easier than collecting my image theft, since the scripting language cannot be altered, or it will no longer function.
There is a way around all this. I have made simple text-based in-house search engines that will provide search functions for ANY web site without java. I have devised simple "e-mail indexing" that very effectively replaces on-line Java ordering scripts (and actually provides some better statistical results). I doubt that any Java process exists that cannot be replaced by creative text-based processes that exclusively incorporate (free) "public technology". Try me, I will take on any dare, on delivery/solution speculation.
Don't be foolish. Be well advised. The ides of March will come for everyone who is using "stolen processes", so you are living on borrowed time already. Removing processes when first aware of usage cost (provided it is prior to a collection action) is sufficient remedy to remove most (or all) debt obligation.