`Process' patent holders profiting at the little guy's expense

April 22, 2004|By MIKE HIMOWITZ

IMAGINE THAT YOU decide to start up a grocery store. On opening day, a minute after your first customer rolls a cart through your checkout line, three lawyers in Armani suits rush in and threaten to sue you for patent infringement.

They say their client, EverGreed Inc., holds the patent on using a grocery cart to check out of a market and your store is infringing on it.

Puzzled, you ask, "Did EverGreed invent the grocery cart?" Well, no.

So did EverGreed invent the cash register? Nope - not that, either.

So what the heck did they invent?

Well, it seems EverGreed got the U.S. Patent and Trademark Office to issue a patent on the idea of loading groceries into a cart, wheeling them up to a cash register and rolling the groceries out to a car.

"Ridiculous," you say. "How could anybody patent something as obvious as checking out of a grocery store?"

The lawyers grin and reply, "See you in court, buddy - unless, of course, you want to make a deal with EverGreed. They'll license the checkout patent to you for a buck a customer. Just sign on the line."

Not being a fool, you go to your own lawyer. "Sure you can fight it in court," he says, "and maybe you'll even win. But it'll cost you at least four million bucks and take three years to find out. Just pay the guy."

As outrageous as this sounds, it's happening every day. Not in the real world of supermarkets, of course, but in the world of online commerce. Since early 1990s, the Patent and Trademark Offices has been handing out patents for a wide variety of "business processes" that involve no inventions, or even specific software, but applications of real world practices.

In fact, behind almost every new technology there's a patent, and armies of lawyers fighting over them. Patents have become a critical commercial tool - largely to shut out the competition, but just as often to extort money from the weak.

For years, critics have said the patent office is overwhelmed and undermanned. In fiscal 2003, there were more than 355,000 patent applications, an increase of almost 90 percent over the previous decade. And the law - as interpreted by the courts since 1980 - has created a much looser definition of what can be patented. Once upon a time, you had to invent something new to get a patent. Now you merely have to describe it - or find something that everyone is using but nobody has ever thought of patenting because it's just so, well, obvious.

The government's examiners are often unequipped to determine whether new technology claims really qualify for patents - whether they're inventions or they represent techniques or processes that are already common (as "prior art"). As a result, more than 70 percent of applications are approved - and once a patent is granted, only a corporation with deep pockets can afford to challenge it.

So what gets patented? The Electronic Frontier Foundation, a nonprofit digital rights organization, this week announced 10 targets in a "Patent Busting Project" aimed at challenging some of the worst Internet related awards. First is Amazon. com's patent on "one-click online shopping," followed by OpenMarket's patent on online shopping carts.

Others include patents on video streaming, popup windows, targeted banner ads, online credit card payments and Web browser frames, all of which are either "obvious" or extensions of real-world technology to electronic commerce.

While fights once involved corporations with legal departments, EFF notes that "some patent holders have begun to set their sights on the new class of technology users - small organizations and individuals who cannot afford to retain lawyers. Faced with million-dollar legal demands, they have no choice but to capitulate and pay license fees - fees that often fund more threat letters and lawsuits."

The group also fears that patents - and the ruinous costs of challenging them, threaten the development of open-source software and freedom of expression online, given the dependence on e-mail, instant messaging, blogging and other technologies that could be subject to patent lawsuits. Its position paper is at www.eff.org/Patent/.

Although somewhat less strident, the National Research Council came to many of the same conclusions in a report released Tuesday. "The system should reward only inventions that meet statutory tests of novelty and utility, and that are not obvious to contemporaries skilled in the relevant technology," the council concluded.

The NRC also called for a streamlined process to make it easier to challenge recent patents of doubtful validity without a horrendously expensive court battle. You can read the report at http://books.nap.edu/catalog/10976.html.

In November, the Federal Trade Commission issued a report calling for similar reforms, citing concerns that the current climate of easy patent awards and expensive challenges is hindering innovation and restraining competition. It's available at www.ftc.gov/opa/2003/10/cp report.htm.

There are also some interesting guerrilla operations sniping at dubious patents. A small nonprofit group called the Public Patent Foundation set up shop in New York in November to challenge dubious patents and help small businesses and organizations do the same (www.pubpat.org). One of its first targets is the FAT (File Allocation Table) system Microsoft used to organize data on disk drives in its older versions of Windows and DOS.

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