Business

The Software Patent Mess

Why the eBay Supreme Court case matters so much.

  • Wednesday, March 22, 2006
  • By Sam Williams

In monetary terms, the Supreme Court case being heard next Wednesday -- pitting online retail giant eBay Inc. against its left-in-the-dust competitor MercExchange -- might seem trivial. MercExchange, which won the original suit in 2003, by proving to a Virginia jury that eBay's "Buy it Now" direct purchase feature had infringed on a 1994 patent filed by its founder Thomas Woolston, received $29.5 million in compensatory damages -- a mere rounding error measured against eBay's $4.5 billion in revenues last year. Consider that BlackBerry device manufacturer Research In Motion just agreed to pay $612.5 million to end its own long-running legal battle with Network Technology Partners (NTP).

But don't be fooled by the small stakes in eBay's appeal. By taking its case to the highest court in the land, the company is looking to even a playing field that many of its supporters say currently favors the plaintiff in almost every patent dispute. With patent reform still trudging through Congress, only a clear signal from the Supreme Court can keep a $612.5 million settlement from becoming the norm -- now that plaintiffs' patent attorneys have tasted blood.

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"If eBay is successful, patent trolls will have one less weapon to use against legitimate firms," says University of Chicago law professor Douglas Lichtman, one of 52 legal scholars who have signed a friend of the court brief supporting eBay's position.

That "weapon," in both the original MercExchange filing and the more recent Research in Motion resolution, is the "general rule" observed by federal district courts in granting a permanent injunction -- a severe legal penalty, in which, in the wake of a successful plaintiff verdict, a judge orders a defendant to shut down a disputed technology pending appeal.

The roots of this general rule lie in the U.S. Constitution. According to Article I, Section 8, a U.S. patent holder enjoys not just ownership of an idea, but also the "exclusive right" to determine how that idea will be presented or marketed to the public. Over time, courts have come to interpret that "exclusive right" as a directive to err on the side of the plaintiff during the appeals process.

Proponents of the rule see it as a check against foot-dragging by a defendant. Without the threat of substantial revenue loss caused by an injunction, deep-pocketed defendants could tie up litigation, draining the monetary resources of small-time patent holders. Proponents also emphasize the limited time protection granted to U.S. patent holders -- 20 years from the date of the first application filing -- as another reason for the rule. "By its very nature, the patentee's loss of its finite exclusivity period is irreparable," notes a pro-MercExchange brief jointly filed by the American Intellectual Property Law Association and Federal Circuit Bar Association.

Those on the opposing side point to the increasing number of patent claims in software technology and Web services -- two realms where shared standards, haphazard documentation, and the recent convergence of once-independent technology platforms have created a target-rich environment for savvy patent plaintiffs. Given the U.S. Patent and Trademark Office's eagerness to hand out patents on broadly defined concepts, such as one-click Internet shopping, the automatic injunction threat has become a Sword of Damocles, hanging over not only defendants but also customers who rely on their services.

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Guest (small inventor)

  • 2155 Days Ago
  • 03/22/2006

patent law

The article is full of hypocrisy and innacurate statements.

So, if some crook sells stolen goodies to the public for cheap and everybody (except the actual owner of goodies) is happy, the crook should be allowed to continue selling stolen goodies, right ?

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Guest (markit)

  • 2155 Days Ago
  • 03/22/2006

can't reform something wrong on it's root

Since software patents are radically an error, every measure to make them "better" is a ridicolous compromise.
If law thinks they are right, the owner has to be strongly defended from "thieves". But since software patents are a big erro, of course the system is going to collapse.
So the only way to escape, is to remove this orrendous mistake

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Guest (Dr. A. J. Wolf)

  • 2155 Days Ago
  • 03/22/2006

Intellectual Property vs Industrial Theft Without a Patent

If the US Supreme Court rules in favor of eBay's billions against MercExchange's property, then there will no longer be any research and development protection for inventors. MercExchange has a working Ubid online auction company that is functioning well.

The Supreme Court's decision could allow big money interests to simply copy IBM or Bill Gates Windows technology without patent protection and would nothing could be done to stop them.

Our scientists, drug companies, technology development would simply leave the US and move to a company where intellectual property rights are protected no matter how much money can be brought to bear with legal manuevering.

eBay must lose their battle against Woolsten and MercExchange or this country could face financial ruin.

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Guest (Russell Salsbury)

  • 2155 Days Ago
  • 03/22/2006

Wrong conclusion

The idea that eliminating software patents would allow wholesale copying  of techonology is wrong.  Software is protected against copying by copyright, by licensing, and by a prohibition against reverse engineering.

Given that software is patentable, the real problem is that the PTO is doing a terrible job of validating patent applications.  Every application has a huge amount of prior art; the PTO doesn't know how to find it.  I would say that the Amazon One-click patent is prior art to MercExchanges's patent, and any application that used an onscreen button is prior art to either.  I wrote some before Amazon existed.

The only uses that are made of software patents are to harass companies that actually reduced the concept to practice, for negotiation, and to impress VCs.

Dr Wolf's assertion of finantial ruin if eBay wins is totally absurd.  The software industry prospered before software patents and we will do even better after them.

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Guest (patent holder)

  • 2155 Days Ago
  • 03/22/2006

patents are PROPERTY !

If this great country has any respect for private property EBay must lose.

>Software is protected against >copying by copyright, by >licensing, and by a prohibition >against reverse engineering.

And NO, software is NOT protected by copyright, leaving alone "a prohibition against reverse engineering" (Ha-ah-ha-ha-ah..)

Just tell me how RSA algorithm could be protected by copyright ?

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Guest (AJ)

  • 2152 Days Ago
  • 03/25/2006

Reply to Russell

Sorry but software technology is intellectual property that must be protected from theft.

Your contention that Amazon One-Click patent preceded MercExchange patent is false. Amazon's patent was issued in 1999 and Woolsten's patent predated Amazon.

Amazon One-Click patent....

http://patft.uspto.gov/netacgi/nph-Parser?Sect1=PTO1&Sect2=HITOFF&d=PALL&p=1&u=/netahtml/srchnum.htm&r=1&f=G&l=50&s1=5960411.WKU.&OS=PN/5960411&RS=PN/5960411

Microsoft's patents are software based and if the US Supreme Court finds in favor of eBay then I will form an invetment group to duplicate Microsoft's patents and simply use the Supreme Court's decision to fight any attempt by Mr. Gates to obtain an injunction against my new Macrosoft Company.

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Guest (AJ)

  • 2152 Days Ago
  • 03/25/2006

Federal Govertnment Sides With MercExchange

MercExhange 'Buy-It-Now' patent was issued in 1998 while Amazon's One-Click was issued in 1999. The USPTO has again recently reviewed Woolsten's patents for 'prior art' and 'obviousness' and found them non meritorious.

http://www.washingtonpost.com/wp-dyn/content/article/2006/03/10/AR2006031001918.html

"The federal government yesterday took a position against eBay Inc. in a patent dispute that threatens to shut down one of the online auction site's popular shopping features.

The Office of the Solicitor General said in a brief filed with the Supreme Court that eBay willfully infringed on patents held by Great Falls-based MercExchange LLC and should be enjoined from using its "Buy It Now" feature, which allows users to buy goods at fixed prices rather than compete in auctions. Goods sold using that system account for about a third of eBay's business."

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Guest (Colin)

  • 2151 Days Ago
  • 03/26/2006

Linux Vs SCO

Am I missing something here, or is the big elephant in the room (that no one sees) the Linux Vs Microsoft/SCO patent dispute?

Seems that the eBay case is a warmup for the title match.

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Guest (Colin)

  • 2151 Days Ago
  • 03/26/2006

Laughter & Such

First they ignore your invention.

Then they laugh at it.

Then they say they thunk it up first and their lawyers beat the stuffing out of you.

Reply

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