Taking on a new challenge

In my last blog I talked about the PeerToPatent project and how it is attempting to improve the U.S. patent system one patent at a time. As you may see in the press today, my interest in PeerToPatent is not benign. Starting back on June 1 I have joined New York Law School as a visiting professor and as executive director of the new Center for Patent Innovations, home of PeerToPatent.

Those who know me well know I am no fan of either software or business method patents. As covered thoroughly by Jim Bessen and Mike Meurer in their recent book, Patent Failure, the cost of software patents to industry players in the form of infringement litigation exceeds the income being derived from such patents. This is a nonsensical situation, and one of the chief culprits is patents that issue that shouldn't issue. That is what PeerToPatent is seeking to address.

In electing to work to reform the patent system by engaging with it, I am not giving up on the great need for broad patent reform. From my perspective, such changes as apportionment of damages and post-grant opposition remain critical. However, given the strong emotions on both sides of these issues and a nearly divided Congress, such broad reform will certainly not occur this year (given that it is an election year), and it unlikely that either political party will emerge from the elections with sufficient strength to push through the most contentious elements of patent reform.

When approached by Rick Matasar, Dean of New York Law School, and Beth Noveck, the law professor at NYLS who formulated the idea for PeerToPatent and, with the help of a number of corporate sponsors and foundations, garnered the funds to push it to fruition, I simply saw an opportunity to have an immediate impact on the patent system and for the better. PeerToPatent is not simply about improving the identification of prior art (preexisting inventions) for use by patent examiners, it is about citizens engaging with their government to improve decision-making.

Today the U.S. Patent and Trademark Office announced that the pilot program for PeerToPatent is being extended for a second year and that the areas of innovation it covers is being broadened to include e-commerce and business methods. This is a huge opportunity. The first -year success of PeerToPatent is well documented in its annual report. Now we have the opportunity to build from that successful first year to show that PeerToPatent has the ability to scale.

In the coming weeks I will talk about PeerToPatent, why it is important, what it accomplishes and what it doesn't do, and why open source developers should embrace it.

DIY Patent Reform

As I noted in my last posting, there is little likelihood of legislative action on patent reform, certainly not comprehensive action, this year. While disappointing, especially to those in the software industry and, perhaps, those in the industries most impacted by so-called business method patents, that doesn't mean there is nothing to be done. In fact many in those industries can impact their own future through participation in the Peer-to-Patent pilot project run by New York Law School in cooperation with the U.S. Patent and Trademark Office.

Peer-to-Patent is a test program to determine whether individual citizens, expert in fields of technology, are willing to contribute their time and effort to identify prior art (existing patents, trade publications, academic papers, or other bibliographic information that either disclose the invention or some important aspect of the invention or suggest the invention) that may then be used by a patent examiner in the examination process. By assisting patent examiners in finding such prior art, these "peer reviewers" contribute to a narrowing of claims actually allowed or patents issued, i.e., reducing the number of poor quality patents that issue.

Poor quality patents - those that should never have been issued or should not have been issued with the broad claims they contain - result in unnecessary and costly litigation and an inefficient marketplace for ideas. While true innovation can and should be rewarded, issued patents that lack merit inhibit innovation by others.

Although Peer-to-Patent only addresses patents individually, the project's first annual report indicates it has improved the quantity and quality of information available to patent examiners, and the patent examiners clearly appreciate the help. A wide range of companies have subjected their patents to such "enhanced" examination, including IBM, Microsoft, General Electric, Hewlett Packard, Intel, and Red Hat. More than 2000 potential reviewers have signed up to keep abreast of the project, and of these almost 400 have been actively engaged in the review process.

There is no cost to patent applicants to include their applications in the program (see requirements). While some have suggested that such participation only contributes to a slowing of the application process, under the pilot program the reverse is true. Applicants who submit to the peer review process see their applications bumped to the head of the examination line, potentially shortening the time to issue by as much as a year.

There is also no obligation placed on peer reviewers. They can select which, if any, applications they wish to work on.

An extended and expanded Peer-to-Patent pilot is expected to be announced any day now. So while you wait for legislative action, how about chipping in to contribute to patent reform right now!

Where Now With Patent Reform

Given the failure of pending patent reform legislation (S. 1145) to make it out of committee in the U.S. Senate this spring, it is unlikely that we will see any form of comprehensive patent reform legislation this year. This should not be surprising given that this is a major election year and the fact that there are a few other issues on the table (Iraq, Afghanistan, Iran, Middle East peace, soaring gasoline prices, soaring food prices, housing market in the ditch, Midwest flooding - shall I go on?). So what might we expect.

The major stumbling block for the comprehensive legislation seems to have been the issue of apportionment of damages. Technology companies have complained for some time that damages should not be assessed against the entire price of a device or piece of software where the patent covers only one small component, unless that component can be shown to have been the principal driver for the device or software. Other industries, including the pharmaceutical industry, are concerned that such a change in standards would drastically reduce damage awards against directly competing, infringing products. Don't expect any easy resolution of that issue.

However, there are a number of changes upon which all of the different factions seemed to be okay, and that fact may open the possibility to more limited, but non-controversial, reform legislation. Exactly what the scope of that legislation may be remains to be seem. Certainly the move to a first-to-file system would be included since such a change would conform U.S. practice to the rest of the world.

In the meantime, the USPTO continues to work on changes in their practices that can be implemented through rules changes, as opposed to legislation and that will potentially improve the quality of patents being issued. Among these initiatives are first-action interview, complex work unit, and peer review prior art (the Peer-to-Patent pilot run by New York Law School).

I'll talk more extensively about Peer-to-Patent in a follow-up.

No Longer Quiet - Red Hat and the Patent Settlement

Sorry to have been gone so long. I really didn't expect to be quite so quiet. But between teaching at Duke Law and NCCU Law, a little bit of consulting work, and generally trying to enjoy retirement, well, time slipped away. But now I'm back, and I want to weigh in on Red Hat's settlement of the patent infringement lawsuits filed by FireStar and its successor DataTern. Under a confidentiality agreement with Red Hat I was given a chance to review the agreements. By the way, they won't remain confidential for all that long.

Although I had to repress my initial gag reflex at every settling these cases (the amount of prior art identified against the original patent asserted by FireStar was/is almost mind boggling), the settlement is a rational response to such claims. Red Hat disposed of the claims in a fiscally responsible manner given the cost of patent litigation. However, that is the far less interesting aspect of the settlement. The truly admirable part of the settlement were the terms that Red Hat and its legal team extracted from DataTern and its financial backers. Not only did Red Hat obtain license terms that protect its products, including Hibernate, it did so in a manner that I believe is entirely consistent with both versions of the GPL. That is no small feat. And we are not talking about a Microsoft/Novell style license. On top of that, Red Hat didn't stop with the asserted patents; they made sure that DataTern and its portfolio of patents aren't going to be a problem for Red Hat and its licensees for a long time to come.

Well done.

Half A Loaf

“Compromise used to mean that half a loaf was better than no bread. Among modern statesmen it really seems to mean that half a loaf is better than a whole loaf.” - G.K. Chesterton

With the European Commission's announcement earlier today that it had reached a settlement with Microsoft in the long-running competition battle, many on both sides of the Atlantic are probably breathing a sigh of relief. Perhaps it is time to move on. While the public does not know exactly to what the Commission and Microsoft have agreed, there are hints in the Commission's statement.

Clearly, the Commission believes it has obtained free and unfettered access to the Microsoft work group server protocols that will benefit open source developers. Had the Commission used the terms open source or open source developers one more time in their press release, one would have come to the conclusion that open source was the sole focus of the case. A careful parsing of the Commission statement makes clear, however, that the Commission may have obtained access to the protocol documentation from a copyright and/or trade secret standpoint, but the same cannot be said on the patent front. Noticeably missing from the Commission statement is any affirmation that open source software developed to implement the protocols will be free from patent concerns. If anything, the Commission is clear that it has not solved the patent equation for those deploying open source solutions implementing the protocols when it states:

"Initially, Microsoft had demanded a royalty rate of 5.95 % of revenues for a combination of access to the secret interoperability information and for a patent licence and had refused to make the licence compatible with the open source business model.

In a statement of objections of 1 March 2007 the Commission warned Microsoft of penalty payments over its unreasonable pricing (IP/07/269). The Commission also stated that it would ensure that open source developers could have access to the non-innovative parts of the interoperability information (IP/05/673).

In addition to the two licences Microsoft will publish an irrevocable pledge not to assert any patents it may have over the interoperability information against non-commercial open source software development projects.

These measures will ensure that Microsoft’s competitors in the work group server market, including those following the open source business model, will have access to the interoperability information on reasonable terms which will in turn lead to more competition and innovation in this market."

Yes, open source will have access to the interoperability information on "reasonable" terms (ask independent open source developers how many can afford to cough up the $15,000 such access will cost), but nothing in this statement indicates the Commission has overcome Microsoft's "refusa[al] to make the [patent] licence compatible with the open source business model." In fact, we can expect that nothing about that patent license will be compatible with the most widely used open source license, the GNU General Public License.

So what has been accomplished. The Commission appears to have successful forced Microsoft to open its work group server protocols to viewable access by all, including open source developers. It also appears to have assured that such developers will be able to implement the protocols, at least from a copyright and/or trade secret perspective. At the same time the Commission appears to have been unable to change Microsoft's stance on the patent issue other than drastically reducing the royalty that Microsoft is to be paid. [N.B. - Having started out demanding 5.95% as a comprehensive royalty and finally agreeing to a low 0.4% comprehensive royalty, all of a sudden those "highly valuable" Microsoft patents don't look so valuable any more.]

So we are left with half a loaf, and perhaps that is the best the Commission could do under the law and under the circumstances. I, for one, just wish the Commission had gone a bit easier on the open source rhetoric. It is misleading from the standpoint that the settlement does not resolve all or even the biggest issues that open source will have with implementing these protocols. Why give Microsoft the public relations benefit of insisting it is open source friendly when it clearly isn't? I can't wait to see the limitations of the patent pledge alluded to in the press release and how Microsoft plays that one up.

We will know more when all of the agreements are out in the open. For now, I give the Commission an A for effort but a B- for follow through. Harsh grading? What the heck, I'm a law professor now.

Dear Steve

Dear Steve,

I know you are quite concerned that Red Hat is not showing due respect for your (unidentified) patents, but it strikes me as a little rich that you or Microsoft should be lecturing anyone on the proper respect for the patents of others given all of the following parties that believe that Microsoft does not respect their patents:

Performance Pricing Sues Microsoft for Patent Infringement - October 2007
Premier International Associates - September 2007
Lo Sues Microsoft for Patent Infringement - August 2007
JuxtaComm Technologies Sues Microsoft for Patent Infringement - August 2007
Aloft Media Sues Microsoft for Patent Infringement - July 2007
Paone Sues Microsoft for Patent Infringement - July 2007
Achates Reference Publishing Sues Microsoft for Patent Infringement - June 2007
Veritical Computer Systems Sues Microsoft for Patent Infringement - April 2007
James Taylor Sues Microsoft for Patent Infringement - April 2007
Multimedia Patent Trust Sues Microsoft for Patent Infringement - April 2007
F&G Research Sues Microsoft for Patent Infringement - April 2007
i4i Limited Partnership Sues Microsoft for Patent Infringement - March 2007
VirnetX Sues Microsoft for Patent Infringement - February 2007
Fenner Investments Sues Microsoft for Patent Infringement - January 2007
Gobeli Research Sues Microsoft for Patent Infringement - December 2006
Alcatel Sues Microsoft for Patent Infringement - November 2006
PalTalk Holdings Sues Microsoft for Patent Infringement - September 2006
Computer Acceleration Corp. Sues Microsoft for Patent Infringement - July 2006
International Automated Systems, Inc. Sues Microsoft for Patent Infringement - July 2006
Anascape Sues Microsoft for Patent Infringement - July 2006
z4 Technologies Sues Microsoft for Patent Infringement - June 2006
Veritas Operating Corp. Sues Microsoft for Patent Infringement - May 2006
Triton IP Sues Microsoft for Patent Infringement - April 2006
Softvault Systems Sues Microsoft for Patent Infringement - January 2006
Mallory Ventures Sues Microsoft for Patent Infringement - January 2006
Sklar Sues Microsoft for Patent Infringement - January 2006
Visto Sues Microsoft for Patent Infringement - December 2005
Data Encryption Corp. Sues Microsoft for Patent Infringement - July 2005
Carlos Armando Amato Sues Microsoft for Patent Infringement - May 2005
Forgent Networks Sues Microsoft for Patent Infringement - April 2005
Compression Labs Sues Microsoft for Patent Infringement - April 2005
American Video Graphics Sues Microsoft for Patent Infingement - March 2005
Burst Sues Microsoft for Patent Infringement - March 2005
Spreadsheet Automation Corp. Sues Microsoft for Patent Infringement - March 2005
BTG Sues Microsoft for Patent Infringement - July 2004
Lextron Systems Sues Microsoft for Patent Infringement - February 2004
Motionless Keyboard Co. Sues Microsoft for Patent Infringement - Feburary 2004
Immersion Sues Microsoft for Patent Infringement - 2003
TC Interactive Data Sues Microsoft for Patent Infringement - May 2002
Network Commerce, Inc. Sues Microsoft for Patent Infringement - December 2001
Priceline.com Sues Microsoft for Patent Infringement - October 1999
Eolas Sues Microsoft for Patent Infringement - February 1999
Goldtouch Technologies Sues Microsoft for Patent Infringement - December 1998

By now you should be getting the picture. That isn't to say all of these complaints have or had merit, and I'm sure some have been resolved. It's just that someone who wants to talk so much about respecting intellectual property should do a little respecting himself, don't you think?

Logic From Another Planet

Ever have one of those experiences where you wonder whether you are from the same planet as another person who has just uttered the unbelievable? That was my reaction when I read Assistant U.S. Attorney General Thomas O. Barnett's comment on Monday's decision by the European Court of First Instance upholding the European Commission's finding that Microsoft had acted in an anti-competitive manner. To quote Mr. Barnett in pertinent part:

"We are, however, concerned that the standard applied to unilateral conduct by the CFI, rather than helping consumers, may have the unfortunate consequence of harming consumers by chilling innovation and discouraging competition. In the United States, the antitrust laws are enforced to protect consumers by protecting competition, not competitors. In the absence of demonstrable consumer harm, all companies, including dominant firms, are encouraged to compete vigorously. U.S. courts recognize the potential benefits to consumers when a company, including a dominant company, makes unilateral business decisions, for example to add features to its popular products or license its intellectual property to rivals, or to refuse to do so."

Oh, really. Let's remember that this is the same Andrew Barnett who, to quote the NY Times:

"had until 2004 been a top antitrust partner at the law firm that has represented Microsoft in several antitrust disputes. At the firm, Justice Department officials said, he never worked on Microsoft matters. Still, for more than a year after arriving at the department, he removed himself from the case because of conflict of interest issues. Ethics lawyers ultimately cleared his involvement."

Mr. Barnett, according to the same Justice Department that claims torture is not torture, the Geneva Convention is antiquated, and firing of U.S. Attorneys for purely political reasons does not constitute a violation of law, is an unbiased source when it comes to Microsoft. Okay, I'm getting a bit catty, but you have to admit that the credibility of the Justice Department in the U.S. is not exactly at its apex today. Any way, enough of that.

Why did Barnett's comments strike a nerve with me? I suppose the first thing that comes to mind is Mr. Barnett's lack of presence in that court room in Luxembourg in April 2006. I was there, and to the best of my recollection, he wasn't. I heard the legal counsel for the European Commission and its intervenors present overwhelming, plausible evidence that Microsoft's actions in bundling products and denying interoperability information to others in the industry had little to do with Microsoft's desire to innovate. No, according to that evidence at each step of the way Microsoft's actions seemed designed to destroy or diminish the demand for a competing and often times innovative technology. True for Netscape. True for Real Networks. True for SAMBA.

In the end, the decision by the CFI does not pose a wide ranging threat to U.S. or other companies unless such companies are market dominant AND by their demonstrable actions have moved to destroy competition. To follow Mr. Barnett's logic competition doesn't come from competitors, it comes from consumers, and the only companies that innovate are super dominant companies, so let's leave them alone. If they are super dominant, they must be innovative. Didn't Microsoft invent the word processor, the spreadsheet, presentation graphics, the web browser, the media player, e-mail, identity management, and the world wide web?

No, they didn't.

Anyway, enough about Mr. Barnett's silliness. I am looking forward to the day he heads back to private practice.

In the meantime, we have a decision from the CFI that speaks to the facts in the Microsoft case and says, when those facts are examined in the light of the legitimate interests of the citizens of the European Union, they demonstrate a violation of law. Yes, it is precedent. No, it will not have the dire consequences that Mr. Barnett fantasizes because, you see, the decision seeks to restore competition unfairly lost.