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Archives: Patents & Technology

Court of Appeals Strikes Down the Broadcast Flag

In American Library Association v. Federal Communications Commission, the Court of Appeals for the District of Columbia ruled today that the FCC lacked authority to mandate the Broadcast Flag.   The Broadcast Flag provision of the FCC rules adopted in November of 2003 would have required that every device capable of receiving a digital video transmission also recognize an encoding within the transmission that would control the manner in which the content could be used.   The American Library Association and several individual consumers challenged the provision alleging that 1. The FCC lacked authority to enact the provision. 2. The provision directly conflicted with existing copyright laws.

Without reaching the question of how the Broadcast Flag rule conflicts with existing copyright laws, the court of appeals held that the FCC exceeded it's Congressionally delegated authority under the Communications Act of 1934. Because the Flag Rule did not directly regulate communication via video or wire, but rather attempted to control consumer electronics and the use of content after transmission the court concluded that the rule was not within the FCC's specific grant of statutory authority. 

Neither did the FCC have valid ancillary jurisdiction.  Ancillary jurisdiction is limited to circumstances where congress has delegated authority to regulate in a certain area, and the regulation proposed is reasonably related to the commissions statutory responsibilities.  Although the FCC has authority to regulate wire or radio communications, it has no delegated authority to regulate consumer electronics when they are not engaged in the receipt of a broadcast.

The Broadcast Flag Provision of the FCC rules was adopted in 2003 in response to concerns  of copyright owners that the nation's pending shift from analogue to digital television reception by December 31, 2005 created a "threat of mass indiscriminate distribution."    In adopting the provision, the FCC claimed that the threat was not imminent, but forthcoming and that a preemptive measure was needed to ensure the continued availability of high-value video content.

Opponents of the Flag Rule appear joyous and perhaps shocked by this victory.  However, everyone expects that this issue will be revisited in Congress before it is revisited in the courts. 

Hatch to Head IP Subcommittee

A new Senate subcommittee on intellectual property was created last week, with Senator Orrin G. Hatch (R-Utah) named as its head.  Hatch has been a vocal proponent of expanding copyright protections; some readers may recall that Hatch once suggested that those who download copyrighted materials from the Internet should have their computers automatically destroyed.  Although Hatch has not mentioned plans to pursue this response, he has said that the subcommittee will have an an "aggressive agenda."

USPTO Goes on Hiring Spree

The USPTO announces plans to hire close to 1,800 patent examiners over the next two years, a staff increase of nearly 50 percent. The hiring spree is in response to an expected year-end backlog of 580,000 applications.

EU Parliament Throws Out Software Patent Proposal

Faced with the onerous task of approving or rejecting the European Council proposed Patent Directive, protests, and several states that had already vowed to oppose the law, the European Parliament opted to send the Council back to the drawing board.  The directive, based on an agreement reached in May 2004 by the European Commission was designed to align the patent laws of the 25 member states and afford union-wide patent protection to computer implemented inventions.  Proponents of the law claimed uniform protection is essential to encouraging technological innovation. Opponents claimed that the bill would over-Americanize European Patent law by allowing patents not only on software inventions but also on computer implemented business methods such as the Amazon.com one-click shopping system.

PTO Declares Chimera Unpatentably Human

In Greek mythology, the Chimera was a beast with the head of a lion, the body of a goat, and the tail of a serpent.  Today, these anthropomorphic fantasies appear to be entering the laboratories at New York Medical College and with them comes a revival of the biological patents debate.  Although the USPTO finally denied Stuart Newman's patent application for the alleged invention of a part human-part animal creature, the decision draws few lines between patentable and unpatentable biological inventions. 

The decision states only that the proposed creature was "too human" to be patentable.  But, Deputy Patent Commissioner, John Doll says, "I don't think anyone knows in terms of crude percentages how to differentiate between humans and non-humans...It would be very helpful to have some guidance from congress and the courts."

In Diamond v. Chakrabarty, the Supreme Court declared that a patent may issue on "anything under the sun made by man," and overturned the patent office's rejection of a patent on a man-made bacteria capable of digesting oil spills.  Since then, patents have issued on several man-made life forms including a mouse with a human immune system.
Newman's proposed invention would, apparently, have resulted in a creature much more human than not.  And, Newman himself appears to consider the rejection a victory against "the privatization of the biological world."

UK Pushes Ahead While States Battle Over Stem Cell Funding

Today, as Massachusetts Senate Robert Travaglini was proposing yet another Stem Cell Research Bill, Scottish Scientist Ian Wilmut was granted the second UK license to conduct stem cell research.  Following the landslide passage of California's proposition 71 which promises three billion in funding for stem cell research over the next decade, many states are attempting to jump on the bandwagon before losing scientists to California.  Recently, New York announced legislation to commit 1 billion to stem cell research, while New Jersey Governor Richard J. Cody called for  380 million for stem cells.  Washington State is also considering legislation that would commit 1 billion to stem cell research.  These states are moving aggressively at a time when stem cell research is highly controversial and not funded by the federal government.

Embryonic stem cells are believed to be pluripotent,  having the potential to develop into any kind of cell in the human body.  In the context of the stem cell debate, cloning refers to somatic cell nuclear transfer during which the nucleus of an unfertilized embryo is replaced with the nucleus of an adult cell. Dolly the sheep, created by Dr. Ian Wilmut in 1998  was the first cloned mammal to survive to maturity.  Today, the UK government, the first to legalize embryonic stem cell research, awarded Dr. Wilmut it's second research license for embryonic stem cell research.  Dr. Wilmut plans to clone cells from patients suffering motor neuron disease and compare the evolution of cells in affected embryos against those in healthy embryos.  There is no intention of developing an embryo to maturity.

For more on stem cell research visit the National Institute of Health.

Read the text of the Presidents remarks on stem cell research, August, 9, 2001.

The United Nations will  take Up the proposition of a global stem cell treaty again in March.

The Failure of CAN-SPAM

The "Controlling the Assault of Non-Solicited Pornography and Marketing" Act of 2003 (CAN-SPAM) was widely publicized and highly approved when it became affective on January 1, 2004.  Yet, today SPAM makes up 88% of all incoming email and it is estimated that American workers spend a total of ten working days per year dealing with unwanted emails.  The cost of SPAM, in terms of lost productivity and network maintenance is estimated to be 50 billion dollars a year,17 billion in the United States.  SPAM has increased more than 20% since the passage of CAN-SPAM. 

CAN-SPAM empowers the Federal Trade Commission to enforce it's provisions, and creates a cause of action for Internet Service Providers (ISPs), but not individual SPAM receivers.  Microsoft  has filed suit gainst seven spammers alleging failure to label sexually explicit content in violation of the act's "brown paper bag provision."  AOL, YAHOO!, and Earthlink have tried similar approaches in addition to bringing claims under state law.  Verdicts against prolific spammers have reached as high as 1 billion dollars.  Yet spammers, who work in an industry where the cost of production is virtually zero and receive 25-50% commissions on any sales of products marketed through SPAM may be taking a "law and economics" approach to CAN-SPAM.  Is it a situation where as long as the profits significantly outweigh the costs the risk remains worth taking?

Other possible explanations for the continuing proliferation of SPAM are that CAN-SPAM is essentially  toothless.  SPAM remains legal under the act, and rather than enact an "opt-in" requirement similar to the European and Australian Anti-Spam Laws, Congress chose the "opt-out" approach placing the burden on the individual to let each spammer know that future messages are unwelcome.  Meanwhile, the FTC has filed only two CAN-SPAM claims against alleged spammers, claiming they are next to impossible to identify.  Thus far, the FTC is not using the provisions of the act which empower it to bring claims against companies employing Spammers.  While pithy commentators are calling CAN-SPAM the "Permission-to-Spam" Act,  Senators are divided on the potential efficacy of the act.

Trademark Application Files Available Online

The U.S. Patent and Trademark Office is making full files for trademark applications— including decisions made by examining attorneys— available online.

The Trademark Document Retrieval (TDR) system makes available, as downloadable and printable PDF files, over eight million document pages.  This represents the approximately 400,000 trademark files created since USPTO moved to the paper-free First Action System for Trademarks (FAST).  The remaining 1.2 million  pre-FAST trademark registrations will be converted and moved to TDR over the next five years.

USPTO's Jon Dudas explains, "The TDR system improves our ability to provide timely and useful information to business owners as they develop their marks and prepare to file trademark applications.”

Marlin and Digital Rights Management Dillemma

Attorneys reading today's news may hearken back to Universal City Studios Inc. v. Corely, and recall that this Digital Millennium Copyright Act case started when Norwegian Teenager, Jon Johanson, found himself unable to view a recently purchased DVD on his Linux platform computer.  Johanson diligently set about circumventing the DVDs content scramble system (CSS) to achieve compatibility.   Today, Sony, Phillips, Matsushita, and Samsung, among other hardware producers, have joined forces to create a "standard" Digital Rights Management (DRM) system that will enable consumers to play copyrighted digital products on the device of their choice.  The stated goal of Marlin Joint Development Association (MJDA) is to consolidate existing DRM systems and let consumers enjoy appropriately licensed products on the device of their choice.

DRM has been developed to counter advances in the copying art that enable consumers to make near perfect copies of digital works.  The rash of lawsuits between the RIAA and online music providers and individuals provides an example of how prolific this copying can be.  Two familiar DRM devices are Adobe, which enables the author or online publisher to determine whether or not to allow copying and how much copying to allow, and CSS, which scrambles the content of a DVD to prevent copying or playing in an incompatible player. 

Without a common standard, manufacturers of digital works under copyright can ensure that the goods play only on a device manufactured by a licensee of the DRM technology encoded in the work.  Music downloaded through a Microsoft System will not play on an IPod.  A DVD purchased in the U.S. will not play on a DVD player purchased abroad.  MJDA proposes to solve these interoperability problems, and promises a RAND license to interested manufacturers.  However, critics point to Microsoft's developing Coral platform and suggest that achieving total interoperability is unlikely and suggest that a device that will allow unlimited downloading and "enjoyment" of digital works may not offer the kind of copyright protection that DRM users are seeking.

The Standard Dilemma

A. Jose Cortina, of Daniels, Daniels & Verdonik, P.A., points out a dilemma facing technology companies when it comes to participating in standard-setting.  One the one hand, it is beneficial to any company to have it's patented technologies become part of a standard.  This ensures compatibility and requires consumers to purchase other proprietary components from the source company.  Cortina suggests that Microsoft has taken this approach. 

On the other hand, most standard setting organizations require disclosure of all patents existing or pending on technologies submitted for consideration.  Standard-setting organizations (SSO) also require a company whose technology becomes part of a standard to license that technology for a reasonable and non-discriminatory royalty (RAND License). The existence of a RAND license could trigger "most favored nations" clauses in private license agreements.  "Most favored nations" clauses require that the patentee provide the technology to the licensee on terms at least as favorable as the most favorable terms licensed to anyone else.  Meanwhile, Cortina suggests, even without a "most favored nations" clause, a court in an infringement suit may see the terms of a RAND license as a benchmark for damages in a non-standards suit.

Today in the Patent Market...

Patent consultant Greg Aharonion claims, " [portfolio building] is becoming a business in the sense of products, markets, and supply and demand...it will attract new entrants, with consolidation, and winners and losers like any business."  Consider today's news:

1. Acacia Research Group announces it's intention to purchase a portfolio of an additional 27 patents covering technologies used in credit card receipt processing, peer-2-peer file sharing, spread-sheet processing.  Acacia is not a software manufacturer, it is a portfolio firm whose aggressive licensing program has become somewhat infamous in the past six months.

2. Sony and Samsung have signed a cross-licensing deal that will provide the companies with joint access to a portfolio of 24,000 patents.  Both companies claim that the deal will, "foster the uniqueness of each company and competition in the market."

3. Sprint and Nextel have proposed a merger that will leave only four competitors in the national mobile phone service industry.  At first blush, it looks like a recipe for disaster as the companies operate on distinct proprietary systems.  However, the merger may be a way-out for Nextel which operates on iDEN, a system that can not be upgraded to high-speed data services.  Speculation is that the combined firm, "Sprextel" may leap frog competitors in implementation of third generation technology.  Partnerless T-Mobile, which also operates on iDEN and has the smallest market share of the remaining firms, may find itself the biggest loser resulting from the transaction.  But, phone manufacturer, Motorola will also take a hit when it's exclusive license to sell iDEN phones suddenly becomes valueless.

4. Symantec has made a bid to acquire Veritas and create the fourth largest software company in the world.  The companies claim the merger is, "a means to remain competitive in a consolidating market."  Veritas is the market leader in data storage software, and Symantec is the market leader in security software.

5. First stop?  The first stop for everyone getting a new patent portfolio this holiday season may be the European Patent Office in Munich. The Council for the European Union has announced that it will pass the EU patent directive.  The broad language of the directive allows patenting of "computer-implemented inventions."  The announcement has caused some dissent from businesses in the United Kingdom, and has raise the rancor of Linux kernel creator, Linus Trovolds who warns that software patents are, "dangerous to the economy at large," and will serve to lock out smaller competitors and lead to a patent arms race "as is already the case in the United States."

Monolithic Files Antitrust Action Against Litigious Rival

The number one risk factor disclosed by Monolithic Systems Inc. (Monolithic) in it's registration with the SEC is the pending patent litigation brought against it by 02Micro Systems International Ltd (02Micro).  One of the patents allegedly infringed involves an integral technology to Monolithic's CCFL Backlight Inverter, a product that made up 69.8% of the company's total revenue in 2003.  The risks to investors posed by the litigation include: 1. Loss of freedom to operate in the U.S. and Taiwan, 2. Liability for customers who have been contractually indemnified by Monolithic Systems, 3. Loss of customers due to fear of liability, and 4. Volatility of stock price.   02Micro filed the original claim in 2001, and has since amended the claim to add allegations of infringements of additional patents.  Meanwhile, 02Micro has also filed claims against four of Monolithic's major customers including Hewlett-Packard.   Today, less than a month after Monolithic's IPO, the company launched an aggressive counter-offensive against 02Micro by filing an Antitrust action against it's litigious competitor.

Monolithic develops designs and markets advanced analog and mixed-signal semiconductors.  The company's proprietary products are used in notebook computer, cell phone, and digital camera displays.  02Micro competes directly in the market for Inverter IC's for digital displays.  Monolithic paints a dreary picture of the possible outcome of 02Micro's infringement action.  Of three allegedly infringing products, one represents 69.8% or annual revenues, a second account for 16% of annual revenues. and the third 14%.  The district court granted summary judgment of non-infringement in favor of Monolithic in February of 2004, but 02Micro has appealed the holding and continued to file claims against Monolithic customers in the U.S. and Taiwan.

Antitrust claims are a common, thought often unsuccessful response to patent litigation.  Monolithic alleges that 02Micro has obtained it's patents through fraud on the PTO and that the litigation is a sham intended to inhibit competition in the semi-conductor chip market. Enforcement of a patent is a presumptively valid legitimate justification for immediate harm caused to competitors and consumers. Hence, only if Monolithic can establish a relevant market in which 02Micro has market power that is enhanced by it's patent monopoly, prove that 02Micro intentionally defrauded the PTO, and raised it's claims against Monolithic with knowledge that the patents are invalid and with the intention of harming Monolithic can it prevail on it's claim.

Monolithic apparently does not allege that 02Micro is a monopolist in the semiconductor market: "The number of our competitors has grown due to expansion of the market segments in which we participate. We consider our primary competitors to include Intersil Corporation, Linear Technology Corporation, Maxim Integrated Products, Micrel Incorporated, Microsemi Corporation, National Semiconductor Corporation, O2 Micro International, Semtech Corporation, STMicroelectronics, and Texas Instruments. We expect continued competition from existing competitors as well as competition from new entrants in the semiconductor market.  The number of our competitors has grown due to expansion of the market segments in which we participate. We consider our primary competitors to include Intersil Corporation, Linear Technology Corporation, Maxim Integrated Products, Micrel Incorporated, Microsemi Corporation, National Semiconductor Corporation, O2 Micro International, Semtech Corporation, STMicroelectronics, and Texas Instruments. We expect continued competition from existing competitors as well as competition from new entrants in the semiconductor market."  With this in mind, Monolithic will likely face a significant up-hill battle in proving it's antitrust challenge against 02Micro.

 

Mystery Company Wins Commerce One Patents

Mystery company JGR Acquisitions won the bidding in the bankruptcy court auction of Commerce One's 39 internet business protocol patents against former Microsoft Cheif Technology Officer Nathan Myhrvold.  Myhrvold's IP portfolio startup, rumored to have recently received over 350 Million in investments from market leaders Microsoft, Intel, Nokia, Google and Ebay, went to only 11.5 Million in the auction at which JGR finally purchased the patents for 15.5 million.  Two other portfolio companies also connected with Myhrvold bid as high as 14.9 Million.  JGR attorney Mark Mullin of Haynes and Boone reportedly dodged reporters after the auction leaving observers wondering whether the Commerce One patents are about to become a royalty pain in the side of ecommerce companies.

The Commerce One patents cover a set of web services protocols, widely used to exchange business documents over the internet.  Prior to declaring bankruptcy, Commerce One licensed the technology on a royalty-free basis and both Microsoft and IBM are claimed to have incorporated the technology into their programs and corporate computer systems.  Speculation was and is widespread that the new patent owner may seek to recover royalties in excess of 100Million dollars from technology companies in a licensing extravaganza  underwhich the parties who had relied on the royalty free license will find themselves paying up to either JGR or their attorneys.

Prior to the auction, the hold-up potential of these patents caught the attention of the Electronic Fronteir Foundation, open-source giant Sun Microsystems, Oracle, and Google who banded together with  CommerceNet to attempt to acquire the patents in an innitiative that EFF Attorney Jason Schultz likened to "buying up nuclear material so it doesn't fall into the wrong hands."  CommerceNet, however, was not among the highest bidders at yesterday's auction.  But, even after the CommerceNet innitiative fell through, Schultz wrote to the bankruptcy court seeking to delay the auction and claiming that reliance parties had a right to continue using the technology on a royalty-free basis.

Technology companies large and small may be reaching for their lawyers either in preparation to defend infringment suits, strike licensing deals, or challenge the validity of the patents which are also widely accused of sharing the overbreadth of many early software patents.   Meanwhile, new owner JGR has yet to make any statement concerning it's future intentions towards ecommerce. 

Digital Angels for Christmas?

Thanksgiving weekend's traditional "Bondathon" gives way to controversy in the news over a real world digital identification device implanted into the human arm that can give anyone with an appropriate reader access to an individuals medical and/or financial records.  VeriChip Corporation, a subsidiary of Applied Digital Solutions (ADS) and Digital Angel Corp., has been battling for FDA approval to market the VeriChip as a medical device for the past two years.   Despite claims that the VeriChip can act as "a reverse bullet" when used in conjunction with an MRI machine, and concerns of privacy advocates about "scanable humans,"  the FDA approved the device in October and ADS has launched an aggressive marketing campaign describing the VeriChip as a potentially life saving medical device that can gives doctors access to medical records in the event of an emergency. 

About the size of a large grain of rice, the VeriChip is a radio frequency identification device similar to those currently used for inventory tracking, on wholesale pharmaceuticals, and in herds of livestock.  Human installation involves an outpatient procedure using local anesthetic and a syringe to insert the chip into the right arm just above the elbow.  When a scanner is passed over the chip, it emits a radio frequency which transmits the identification number of the chip which enables doctors, bankers or  in some cases, bar-keepers to access the chipped individuals information which is stored on the VeriCorps servers.

Marketing of the VeriChip for medical purposes is regulated by the FDA.  But, the device is also marketed as a security device, a financial management device, and a personal safety device are not regulated.  In addition to medical uses, ADS believes the VeriChip would be valuable as a tool to identify the location of employees in high security buildings.  According to Kris Hundley of the St. Petersberg Times, the VeriChip has gained popularity among Spanish club-hoppers who use it to pay for drinks, and the Mexico City Attorney General who uses the chip to access documents in drug investigations.

Although ADS Chief Executive Chris Silverman doesn't expect the chip to reach record levels of popularity among the American public over the next decade, VeriChip Corp will soon announce the December Schedule of the "Chip Mobile" for those who have $200.00 to spare and want a digital angel for Christmas!

FDA Pushes for RFID Monitoring to Protect the U.S. Drug Supply

The Food and Drug Administration (FDA) today announced new efforts to step up the adoption of Radio Frequency Identification (RFID) technology by pharmaceutical companies. The FDA released a new compliance policy guide for RFID feasibility studies and pilot programs. Meanwhile, an RFID working group has simultaneously been created to monitor the adoption of RFID in the drug supply chain and address regulatory issues as they arise. Civil-liberties groups are concerned that RFID labels on prescription bottles pose privacy risks in that employers or others may be able to determine which drugs a person is carrying in his pocket. On the other hand, the FDA believes that the ability to track drugs through the supply chain has the potential to significantly reduce counterfeiting and diversion of prescription drugs by establishing an  “electronic pedigree” tracing the chain of possession of prescription drugs. 

Purdue Pharmaceuticals, producer of the narcotic Oxycontin, plans to require RFID tags on all 100-pill bottles of the drug as early as this week. Oxycontin, sometimes called “hillbilly heroine”, is the most frequently abused medication in the U.S. As early as 2001, crime rings developed solely around the business of diverting the drug from wholesalers to the black market drug trade. Meanwhile, Pfizer also announced plans to tag all wholesale bottles of Viagra as early as possible in 2005. Viagra is one of the most frequently counterfeited drugs in world, and Pfizer faces other troubles with the drug including failure to comply with FDA regulations requiring disclosure of side effects in advertisements.

RFID is a wireless inventory tracking technology expected to replace the bar code as the primary tool for retail inventory tracking and management. Wal-Mart, Target, and The United States department of defense have already pledged adoption of the technology. But, the pharmaceutical companies are a welcome addition to the list of early RFID adopters since increased use will drive the costs associated with the technology down significantly.  Currently, RFID tags cost between 30 and 50 cents each and readers go at a cost of 2,000 dollars. One company, Intermec IP Corp. holds 135 key RFID patents, and until recently planned to insist on a royalty scheme requiring semi-conductor chip manufacturers to make a $750,000 royalty pre-payment to be applied to a 5% royalty on sales. Companies manufacturing RFID inlays, tags and labels would have been required to pay $1 million in royalty pre-payments and a 7.5% royalty fee on unit sales. 

On September 3 Intermec announced a sixty-day grace period during which time it will waive it’s IP rights on 14 of it’s RFID patents and allow companies manufacturing next generation RFID components to build prototypes based on the technology. However, Intermec doesn’t seem to have strayed too far from its initial policy against allowing the cost argument to deter it from asserting it’s IP rights. Upon announcing the sixty-day free license, Intermec Vice President, Mike Wills made it clear that the company is not giving competitors an open license to manufacture products for end user consumption. The free license appears more geared toward encouraging the submission of next generation RFID technology to the standard setting body EPCglobal, which is expected to announce a decided RFID standard around January 1. If Intermec gets lucky, it’s patents will be ensconced in the chosen standard and the company will be able to revert to its previous RAND licensing scheme.

GM & Ford Promise Stability Control for 2005 SUV's

According to the Insurance Institute for Highway Safety, 7,000 lives per year are lost to rolling SUV's.  Ford Motor Co. holds over 80 patents covering an advanced software technology that monitors and controls a car's roll motion during extreme maneuvers.  The technology attempts to prevent the vehicle from rolling by automatically slowing the engine and applying the brakes to particular wheels.  Together, GM and Ford promise the system will be standard equipment on 1.8 Million SUV's in 2005.  Gary Cowger, North American President of GM claims, "Except for the growing use of seat belts, we have rarely seen a technology that brings such a positive safety benefit to the driving public."  And, according to Ford vice president Sue Cischke, the company feels so strongly about the safety benefits of the system that it will be willing to license it's patents to other automobile manufacturers. 

Open Source Risk Management to Petition EU Parliament against Software Patents

On November 9^th Open Source Risk Management (OSRM) will launch an aggressive prior art documentation of software innovation that it hopes will cause the European Parliament to reject proposed amendments to EU patent law that would allow patenting of computer software. OSRM is the only vendor-neutral provider of risk mitigation and management solutions for open source software developers and marketers.  The group’s Patents and Prior Innovations Project will attempt to show that the history of software patents in the U.S. does not actually reflect intellectual history when it comes to software innovation. Since August, when the City of Munich decided to forestall it’s decision to implement Linux operating systems on 14,000 municipal computers citing fears that the EU parliament would choose of align it’s patent system to the U.S. model and begin granting software patents, open source supporters have been petitioning Parliament to defend the existing EU patent directive which clearly prohibits patenting of computer programs. 

Brian Kahin former White House senior policy analyst of technology and innovation explains that, “This project is being launched just as Europe considers whether to align its patent system closer to that of the US, a system that has a poor reputation within the software community.” Daneil Egger, founder and chairman of OSRM calls the U.S. patent system, "A patent system that misidentifies true innovators and fails to allow sufficient review by outside." He points out that "In the U.S., the average cost of patent litigation is about $3 million per lawsuit. Under such a system, those to whom a patent legitimately belongs must go to court to claim their benefits and protection - a costly and unfair tax on those who produce beneficial innovations. OSRM estimates that as much as fifty percent of the cost of defending against software patents is due to patents that never should have been granted in the first place."

The Patents and Prior Innovations Project will be sponsored by Grokline.net. The plan is to run a community-based open research project to trace the history of software innovations and patenting. The question presented is whether patents as granted reflect the actual history of software innovation. The goal is to generate a report to be presented to the European Parliament prior to the 2005 reconsideration of whether or not software patents should issue in the EU. A particular focus will be placed on the Munich list of software patents that Linux allegedly infringes. Billions of dollars for open-source developers hangs in the balance as it is widely perceived the final decision of the European Parliament will determine the fate of the commercial market for open source software in the world at large. 

Investors Prove Wary As California Awaits Stem Cell Boom

On November 2nd, the majority of California voters embraced Proposition 71 promising $3 Billion in bonds for stem cell research over the next ten years. The State Constitution of California will be amended to establish a right to conduct stem cell research and the California Institute for Regenerative Medicine. The amendment will prohibit the institute from funding human reproductive cloning research, and establish an ethical committee to oversee the institute. Republican Governor Arnold Schwarzenegger endorsed the bill and in the aftermath says, “This is not a victory for me; It is a victory for the people of California.” However, biotechnology stocks have fallen sharply since the reelection of President Bush. Stemcells, Inc. (STEM) shares were hit the hardest, falling 20% to $3.21 on Wednesday November 3rd. Geron Corp. (GERN) fell $1.10 closing at $6.82. Both companies are headquartered in California.

The executive branch has taken a very clear stance against stem cell research. Less than $25 Million in federal funds were disbursed by the National Institute of Health in fiscal year 2003. Proposition 71 will provide $350 million in annual funds for stem cell research, The push for a state initiative was driven in large part by the policy enacted by President Bush in 2001, limiting funding for stem cell research to funding research on lines that had been cultivated prior to August 9, 2001.

Meanwhile, the United Nations finds itself at a standstill once again in its annual attempts to establish global stem cell research policy. President Bush supports a total ban on stem cell research proposed by Costa Rica and backed by 59 other nations. Speaking to the United Nations President Bush declared that, “No human life should be destroyed for the benefit of another.” 130 nations including Britain, Japan and India back a Belgian proposal that will prohibit human cloning, but allow nations to set their own laws regulating stem cell research.

If the United Nations adopts a total ban on Stem Cell research, federal law will be amended to reflect the policy, the question then becomes whether or not California stem cell researchers will retain or lose their freedom to operate. The American Ban Association proposes that there is a first amendment right to do research. The ninth amendment protects the right of states to protect civil liberties more broadly than the federal government. However, the first amendment is limited where the exercise of a first amendment right may interfere with the constitutional rights of others. Recall that the Unborn Victims of Violence Act represented an unprecedented step in the direction of defining embryos as people of the purposes of federal law. However, just before the passing of Ronald Reagan, 43 Democratic and 14 Republican senators sent a letter to President Bush asking for relaxation of federal policy on stem cell research, suggesting that it is not an entirely partisan issue. Moderate Republicans have renewed their promise to push for federal funding for stem cell research.

Absentee Blogger

I apologize that this section has been inactive for the past few days. The links below lead to some of my favorite Patent Blogs and Technology News sites:
Topix.net
Technewsworld.com
Shashdot (Of course!)
Patently Obvious
Groklaw
Freedom To Tinker

Here is one of my all time favorite patents! Proving yet again that “anything under the sun that is made by man," is patentable subject matter under in the United States.

Back in a flash! Enjoy!

AOL Accepts New Microsoft Antispam Standard Proposal

Microsoft has amended its SenderID patent applications to distinguish Sender ID, it's proposed antispam standard, from Sender Policy Framework (SPF), a spam blocking technology currently being tested by AOL. Although AOL and the Internet Engineering Taskforce (IETF) rejected Sender ID as a possible antispam standard back in September, citing concern over Microsofts pending patent applications and potential interoperability problems with SPF. Microsoft will submit an amended proposal to IETF on Monday, and AOL has pledged support for the new specifications.

Entrepreneurial IP Consultants Strike Gold With Digital Camera Patents

Commentators are hailing the victory of St. Clair Intellectual Property Consultants Inc. in its patent infringement suits against the camera-producing giants Canon Inc., and Sony Corp. St. Clair specializes in IP consulting for startup companies. In the early 1990’s St. Clair invested in a company called Personal Computer Cameras Inc. founded by the inventors of the first digital camera. Personal Computer Cameras ran short of investment dollars in the mid 1990’s, and in 1995 sold its digital camera patents to St. Clair with the agreement that future royalties would be split 50/50 between St. Clair and the inventors. St. Clair and the inventors appear to have struck gold, winning a $25 Million jury verdict against Sony in 2003, and $34.7 Million against Canon earlier this month. St. Clair is currently awaiting a verdict in excess of $18 Million against Fuji Photo Film Co. Minolta, Nikon and four other companies named as defendants in the Sony suit have reached settlement agreements and taken licenses from St. Clair.

St. Clair is small firm comprised of two patent attorneys and six staff members that makes its home above a storefront in Grosse Pointe, Michigan. The firm holds a portfolio of twenty-one patents, five of which relate to digital camera technologies. According to St. Clair’s attorney, Ron Schutz of Robins, Kaplan, Miller & Ceresi, the infringed technology allows digital cameras to take pictures in more than one format, such as TIFF and JPEG files. The technology also covers cameras that can take short video clips in addition to still pictures.

St. Clairs wins are being celebrated as a victory for the little guys. St. Clair founder Thomas W. Baumgarten definitely recognized the value of the digital camera when he first viewed the prototype back in the early nineties. And, St. Clair has clearly done the job of an IP portfolio firm, defending and licensing its patents. But, is St. Clair so distinct from every other portfolio firm? Maybe the major asset of St. Clair is the ability to recognize an emerging technology and hold onto it even after other investors have bailed out. Meanwhile, entrepreneurial St. Clair founder, Thomas Baumgarten has gone on to manage buypatents.com, a fully internet based patent brokerage firm, designed exclusively by patent brokers as a resource to buy and sell patents as efficiently as possible.

DMT Licensing Proves Profitable For Acacia

Acacia Research Corporation reported its third quarter financial results today showing a more than 50% increase in revenues from licensing of it's Digital Media Tranmission (DMT) patents. Despite a Markman order issued by the Federal District Court for the Central District of California in the case of Acacia v. New Destiny Internet Group, Et al., Acacia has pressed ahead with it’s aggressive licensing program for it’s Digital Media Transmission (DMT) patent. 188 companies and educational institutions now hold royalty-bearing licenses to use DMT. 65 licensees have been added since Acacia filed suit against nine cable companies back in June. Acacia has a history of making good on it’s litigation threats, and in face of possible patent invalidity, the company has increased it’s DMT licensing revenues from $186,000.00 in 2003 to $740,000.00.

Recall that Acacia claims to hold four key patents on DMT claimed to cover everything from online video streaming to distance learning, cable television and hotel video-on-demand. Pending litigation against alleged DMT infringers includes 13 cable companies and more than 40 online adult entertainment providers. Acacia has also sent licensing demands 4,000 colleges and universities across the country. Among the most notable new licensees are Bloomberg Technologies, World Wrestling Entertainment, and Playboy. Meanwhile, the Electronic Frontier Foundation has named Acacia the number one target of the Patent Busting Project, and the law firm of Fish and Richardson, is maintaining the “Acacia Defense Fund,” to help support the adult entertainment defendants who have already spent over $1 million defending suits by Acacia.

David L. Robbins, Esq., of Foley & Lardner notes that Acacia has yet to file suit against a single university and suggests that the adult entertainment defendants may be “straw men,” deliberately chosen as unsympathetic parties:

Instead of suing colleges and universities, however, Acacia filed lawsuits against more than 50 Internet porn companies. Fifteen of these porn companies banded together to form a joint defense group. This litigation is still pending. Acacia's patent enforcement activities demonstrate the use of litigation to promote licensing endeavors. Patent owners may choose to sue unsympathetic defendants-like Internet porn companies-or confront smaller companies with lesser resources and use them as a "straw man" defendant. Once the patent owner has a favorable court judgment, his or her licensing leverage increases. "Straw man" defendants may not challenge the validity of the patent as thoroughly as larger companies.

To Playboy, Acacia said, “Nothing in this [Markman order] will prevent us from approaching potential licensees that we have already identified as potential infringers. We expect others to sign licensing deals. The only adjustment we’ll make is that rates will go up over time, and we certainly plan to raise licensing rates.” Whereas, to universities, Acacia claims, “We are looking to be reasonable business people.”

The company has certainly started considerable controversy, but at the end of the day, the question remains whether Acacia is realizing the royalties one would expect from its DMT licensing program? Considering that Acacia Technology Group's third quarter results reveal total revenues of $2,240,000.00, with DMT royalties accounting for $740,000.00 and the company’s V-Chip patent accounts for the remaining $1,500,000.00, it is clear that the DMT patent is an asset worth fighting for.

P.S. Is Wi-Fi Next In Line for Acacia Licenses or Lawsuits?

Sweating the Small Stuff: Challenges to Patenting Nanotechnologies

U.S. Companies and the Federal Government are tumbling over themselves to invest in the development of Nanotechnology (nanotech). IBM and Hewlett Packard are running programs to examine the possibility of molecular computing in which DNA could be used as a memory device. And, President Bush recently signed into law the 21st Century Nanotechnology Research and Development Act, devoting 3.7 billion dollars in federal funds to Nanotech research over the next four years. However, the infusion of federal funds into nanotech at the basic research level will not be enough to fund the research, development, and mass-production necessary to move commercial nanotech products to the market. Patents will be a critical selling point for Nanotech startups attempting to attract venture capital. However, attorneys from across the country, including from within the PTO have pointed out several patenting hurdles that will have to be overcome before nanotech can get the IP protection in needs.

The term Nanotechnology denotes objects, mechanisms, assemblies and systems built on size scales smaller than a micrometer and larger than one nanometer. To put size into perspective, a human hair is about 80,000 nanometers in diameter. The earliest nanotechnologies are based on nanoparticles. Sunscreens, abrasives, medical contrast agents, and adhesives already come enhanced by nanoparticles.

Since 1998, the USPTO has granted 3,000 nanotech patents a minisclule number in comparison to the number of patents granted annually in other areas. However, nanotech patent applications are entering the PTO in a steady stream. The PTO has taken steps to improve the handling of nanotech application examinations including bringing in nanotech scientists to educate examiners in developments in the art. However, there are currently no plans to develop a separate nanotech examining group.

PTO examiner Vivek Koppikar and patent attorneys Stephen Meabius and Steven Rutt suggest that nanotechnologies face several unique challenges to patentability. For example, an attempt to patent the nano form of a material or device that already exists in the micro form may be unpatentable under the doctrine of inherent anticipation. A patent should not issue where the device has been anticipated by prior art. The anticipation can be considered inherent in the event that the prior invention does not disclose the size, but it appears that reduction in size would be inherent to practicing the invention. Another potential problem is the non-obviousness requirement. Despite a clear difference in size, the patent examiner may think the invention would have been obvious to a person of ordinary skill in the art.

Koppikar, Maebius and Rutt also suggest that the enabling disclosure requirement of the patent application may also stand as a bar to successful patenting of nanotechnologies. A patent application is required to make disclosures sufficient to enable a person of ordinary skill in the art to practice the invention without undue experimentation. Patent examiners and courts may look at the enablement disclosure and use it to narrow the claims of a given application. For example, in the case of one biotechnology patent, the patent claimed the application of the technology in question to the “entire universe of cells”, but the disclosure only discussed the application to E. coli cells. The Court of Appeals for the Federal Circuit held that the patent grant only extended to the technology as applied to E. coli cells.

Finally, patent attorneys caution that, as was the case with both biotechnology and software, the PTO is likely to issue some overly broad patents in it’s initial round with nanotech. It was partially due to industry protest to the issuance of overly broad patents in the biotechnology sphere that the PTO established the biotechnology examining group in 1988. However, nanotech is cross-disciplinary in nature and may not be as amenable to compartmentalization. Currently, nanotech patent applications are routed to different art units of the PTO based on the subject matter claimed in the patent.

Ashcroft Launches The Most Ambitious Law Enforcement Effort Against IP Theft In History

Intellectual Property based industries make up approximately 6% of the nations gross domestic product, employ of five million people and contribute $626 billion to the U.S economy. Meanwhile, the recent report of the Department of Justice’s (DOJ) Task Force on Intellectual Property (IP) estimates that U.S. companies lose another $250 billion a year as a result of intellectual property theft worldwide. “Theft of this national resource has become an epidemic," said Attorney General Ashcroft, "This represents a hemorrhaging of the work product of American citizens." Ashcroft formed the DOJ Task Force on IP in March 31, 2004 to examine all aspects of how the department handles IP issues and to make proposals for future activities. The Attorney General declared that by implementing the Task Force’s recommendations the Justice Department will be launching, “the strongest, most aggressive legal assault against intellectual property crime in our nation’s history.”

Among the recommendations of the Task Force is a very strict international enforcement regime including the deployment of intellectual property law enforcement to Asia and Eastern Europe and the beginning of negotiations to include IP crimes in extradition treaties. Many Eastern European and Asian countries can be found on Special Watch List 301. List 301 is maintained by the office of the U.S. Trade Representative (USTR) to identify countries that deny adequate protection for intellectual property rights (IPR). Identified countries whose policies have the greatest actual or potential adverse impact on relevant U.S. products may face bilateral trade sanctions.

The DOJ also plans to open five new anti-piracy offices within the U.S., and the Task Force report recommends that ISP’s be required to turn over the names of suspected peer-to-peer filesharers. The report endorses the controversial Induce Act and the Piracy Deterrence and Education Act and opposes initiatives to amend the Digital Millennium Copyright Act. The RIAA and MPAA applaud the recommendations. Meanwhile, Phil Corwin, a lobbyist for the peer-2-peer software company Sharman Networks says, “They could be proposing here the greatest mass criminalization of conduct by otherwise law-abiding citizens since Prohibition. Congress should think long and hard before they treat noncommercial infringement by ordinary citizens...the same as prosecutions of organized crime.”

According to Attorney General Ashcroft, well organized criminal enterprises have increased the scale and scope of IP theft and counterfeiting, and, given the inconsistency of IP enforcement abroad it is imperative that the U.S. vigorously enforce the IP rights of its citizens. The RIAA and MPAA support the strict prohibitions against file-sharing and increased prosecution of copyright infringers and the pharmaceutical industry supports the proposed crack-down against the illegal importation of counterfeit or patent infringing drugs. Other observers may look at the proposed domestic policies and wonder if innocent (noncommercial) infringers will be subject to IP prosecution. They may also hearken back to the days when the young United States refused domestic protection to IP created abroad.

Is Patenting Smells Patently Ridiculous? Or Does It Smell Like Money?

Futurist Thomas Frey of the DaVinci Institute suggests that the discoveries of Drs. Richard Axel and Linda B. Buck have opened the door for taste and smell patent applications to begin wafting into the PTO. Drs. Axel and Buck won the Nobel Prize for physiology or medicine for discovering how people can recognize and recall up to 10,000 smells. In the past, a smell could only be defined by its own chemical composition. With Drs. Axel and Bucks discovery scientists can now accurately describe the process by which the chemical composition of a smell is received by genes in the nose and translated into a recognized scent. Frey suggests that with such a system in place for defining smells, patents cannot be far behind.

The breakthrough discovery of Drs. Axel and Buck came from a 1991 project in which the two scientists working together discovered a family of over a thousand genes producing different odor sensing receptors in the nose. Apparently, there are a few hundred types of odor receptors each of which is capable of detecting a limited number of smells. So, when a person sniffs something, different molecules flowing over the receptors activate the receptors primed to respond to those molecules. The brain interprets a smell based on the receptors that have been activated.

Critics responding to the proposed patenting of smells suggest that some fundamental patent law is missing from Frey’s analysis. For example, do smells meet the usefulness requirement of patent law? And, how could a chocolate manufacturer use patents to build an IP wall around the category of chocolate flavoring when the smell of chocolate has been known and used for ages? Will wine producers patenting the “nose” of their finest wine find themselves in cross-licensing deals with other producers whose “nose” is a new and useful improvement on the original?

Prior to launching the DaVinci institute, Thomas Frey spent fifteen years working as a designer and engineer for IBM during which time he received 270 awardsfor creativity and innovation. He is also a member of the Triple Nine Society, a society for those with IQ’s above the 99.9 percentile. Is patenting smells patently absurd, or is Frey correct when he predicts, “The systems for owning smells will open a rich treasure trove of opportunity for those interested in capitalizing on it. Many people will correctly guess that this one smells like money.”

Court of Appeals for the Federal Circuit Rejects "Access" Right and Protects the Universal Remote

The case of Chamberlain v. Skylink pushed the limits of §1201(a) of the Digital Millennium Copyright Act (DMCA) claiming that copyright infringement should be found where the defendants universal garage door remote control “accessed” Chamberlains copyrighted garage door opener technology without any other allegation of copyright infringement. The Court of Appeals for the Federal Circuit responded, “The broad policy implications of considering ‘access’ in a vacuum are both absurd and disastrous.”

As advancements in digital technologies enable consumers to easily and inexpensively make more and more perfect copies of digital works, copyright owners are increasingly turning to technical protections to guard against unauthorized copying and distribution. Encryption technologies that scramble the contents of digital works to prevent unauthorized viewing come standard in DVDs and CDs. And, the FCC is debating the parameters of the Broadcast Flag which will prevent unauthorized copying and redistribution of television programs. But where there’s an encryption code, a decryption code is sure to follow. If DeCSS is any example, it won’t be hard to get either. This is why Congress enacted §1201(a) of the DMCA.

17 U.S.C. §1201(a)(2) prohibits trafficking in devices whose primary purpose is to circumvent technological protections where the device has little commercially significant purpose other than to circumvent and is marketed as a circumvention device. This section has prompted significant concern as to whether congress has inserted into the copyright act protection for technological measures alone, making circumvention in itself infringement of copyright, and creating a separate “access” right in copyright.

Chamberlain claimed that Skylink had violated an exclusive “access” right to the copyrighted computer programs embedded in it’s garage door opener through trafficking in a universal garage door remote control. Chamberlain asserted that,

“By prohibiting the trafficking and use of circumvention technology the DMCA fundamentally altered the legal landscape. The DMCA overrode all pre-existing consumer expectations about the legitimate uses of products containing copyrighted embedded software. And, Congress empowered manufacturers to prohibit consumers from using embedded software products in conjunction with competing products.”

Naturally, the court raised the point that nothing in the copyright act preempts antitrust laws prohibiting companies from leveraging sales in aftermarket monopolies. But, has the court also laid to rest the proposition that an access right, separate and distinct from the exclusive rights of copyright is developing in U.S. copyright law?

The existing rights of copyright owners, enumerated in 17 U.S.C §106 all relate to the reproduction, distribution and performance of works. Congress has made exceptions to these rights in sections §107-§121 of the act to preserve public rights. In order for Chamberlains claimed exemption from antitrust and copyright misuse to exist, the court would have to determine that congress had created a new property right in copyright. This right would be termed the “access” right, granting copyright owners of digital works the right to control not only copying and distribution of their works, but also the exclusive right to hold circumventors liable for accessing the work even if the uses made are lawful.

In Chamberlain, the Court made it clear that no such access right exists. Recognizing that congress has granted the copyright owner of a digital work a right of action against direct circumvention (§1201(a)(1)) and trafficking in circumvention devices (§1201(a)(2)) and for facilitation of infringement (§1201(b)), the court looked to the legislative intent of congress. “Congress could not have intended such a broad reading of the DMCA,…,to conclude that no necessary connection exists between access and copyrights.” The court referred to the recent Supreme Court holding in Eldred v. Ashcroft that, “Congress’ exercise of it’s copyright authority must be rational,” and, “congress is assigned the task of defining the scope of the limited monopoly that should be granted to authors… in order to give the public appropriate access to their work product.” A finding of an “access right” would eliminate any public right of access to copyrighted works. The DMCA exempts the exercise of public rights from liability under §1201(a) in §1201(c)(1). And as for universal remote controls, circumvention for the purposes of achieving interoperability is explicitly exempted in §1201(f).

A Consitutional Challenge Against Diversion of Patent Fees

Each year 10% of patent filing fees, or 65 million dollars, are allegely diverted away from the USPTO into the general treasury. The American Intellectual Property Association, as Amicus Curiae in the pending action of Figueroa v. United States, suggests that if during the same time period, 1% of new small businesses were dissuaded from entering the market because of improvidently issued patents, then the overall lose in GDP for the same year would be 1.3 billion dollars. This is part of the argument that diversion of patenting fees is harmful to the U.S. economy overall, and is a violation of the intellectual property clause of the Constitution which grants to Congress the power, “to promote the progress of science and the useful arts, by securing for limited times to authors and inventors the exclusive right to their respective inventions and discoveries.”

Figueroa v. United States is a class action on behalf of all persons who have paid fees to the USPTO in connection with patent applications or issued patents during or after fiscal year 1995. The complaint alleges that due to budgetary constraints the Patent Office has been unable to hire or retain skilled professionals to meet the increasing demands of examining new patent applications, while patent pendency has increased to periods of 25 months and is expected to exceed 36 months by 2006. According to the complaint, the Omnibus Budget Reconciliation Act of 1990 added a surcharge to the statutory patent fees required by the PTO to examine patent applications and maintain issued patents. The U.S.P.T.O Reauthorization Act reinstated the increased fees in 1999 after the OBRA expired in 1998.

According to the plaintiffs, these surcharges, originally enacted to generate revenue for the PTO, have been diverted or rescinded to the general treasury since 1991. Plaintiffs raise their claims on the grounds that patent fee diversion, 1. Violates the patent clause by failing to promote the progress of science and the useful arts. 2. Amounts to an unconstitutional direct tax on private property. 3. Amounts to an unconstitutional taking of private property. The Court of Federal Claims held that Congress’ practices will be reviewed to determine if they are necessary and proper to promote the progress of science and the useful arts.

In a motion to dismiss the defendants asserted among other things that, 1. No funds had been diverted from the PTO under the legislation in question; rather fees collected that exceed appropriations are placed in special treasury accounts dedicated to the USPTO. 2. Plaintiffs lack standing to bring suit, as they are all small entity patentees and as such are beneficiaries of 35 U.S.C. §41 (h)(1) which entitles small business and independent inventors to a 50% discount on filing fees. These plaintiffs, it is argued, are subsidized by larger companies and hence could not have contributed to the surplus of fees allegedly diverted.

While the government argues that funds have not been diverted, rather appropriated according to perceived need, the American Intellectual Property Law Association insists that, “while Congress has been diverting funds from the USPTO, the pendency of patent applications has increased, and patent quality has become increasingly suspect.” Patent fee diversion they state, “Is harming the USPTO, the patent system and this countries economy.”

From the American Intellectual Property Law Association Amicus Brief:

“The diversion of funds from the PTO leads to increased patent officer burdens and examiner workloads and decreased patent quality. Diversion punishes instead of rewards patent applicants by making it more difficult to obtain a valuable patent right. It takes longer for patents to issue and the quality- therefore the likelihood that others will respect the grant of patent rights- is reduced.”