Operations Research Management Science - INFORMS Online

<BODY bgcolor="#ffffff" link="cc0000" vlink="cc0000" text="#000000"> <img src="../cleardot.gif" width=1 height=1 vspace=4 border=0><br>   <table border=0 cellspacing=0 cellpadding=0 width=480><tr valign=top> <td width=10><img src="../cleardot.gif" width=1 height=1 hspace=4 border=0></td> <td width=470> <FONT face="verdana, arial, helvetica" SIZE=2><B><I><A HREF="../../ORMS.shtml" TARGET="_top">OR/MS Today</A> - December 2003</I></B></font><BR> <hr size="1"> <img src="cleardot.gif" width=1 height=1 vspace=4 border=0><br> <font face="times new roman, times"> <img src="../cleardot.gif" width=1 height=1 vspace=4 border=0><br> <FONT face="verdana, arial, helvetica" SIZE=2><B>INFORMS Online</B></FONT><br> <IMG SRC="../barbluehook.gif" WIDTH="468" HEIGHT="4"><br> <img src="../cleardot.gif" width=1 height=1 vspace=8 border=0><br> <FONT SIZE="+2"><B>More on Software Patents</B></FONT><BR> <img src="../cleardot.gif" width=1 height=1 vspace=6 border=0><br> <FONT face="verdana, arial, helvetica" SIZE=2><B>By Matthew Saltzman</B></FONT><br> <hr size="1"> <img src="../cleardot.gif" width=1 height=1 vspace=12 border=0><br>    If you work at a university involved in distance learning, or if you work at any company involved in serving streaming media, then your employer is likely to be hearing soon from a company called Acacia Research Corp. About two years ago, Acacia purchased a portfolio of patents that it claims covers the basics of streaming content over the Internet. The process consists of the following steps (how would you design such a system?): <OL> <LI> A video or audio clip is digitized. <LI> The digital file is compressed. <LI> The compressed file is stored on a server. <LI> The server transfers the compressed file to the client upon request. <LI> The client decompresses and plays the file. </OL> <P>Acacia has begun demanding royalties from purveyors of streaming content including hotel pay-per-view movies, Internet radio and pornography. They have recently started contacting universities that stream content for distance learning and other applications and are demanding royalties to the tune of 2 percent of revenues generated. <P>Acacia Technologies Group (the subsidiary that holds these patents) is not a technology developer. Their corporate strategy is to acquire patents developed by others and make money by licensing them. Companies in this business often exploit "stealth patents"  patents that go unenforced for a period of time while the covered technology takes hold and becomes commonplace. They frequently attempt to enforce their patents first against small players who they believe will pay "modest" royalties rather than defend themselves in court, in hopes that early successes will establish a precedent. <P>The Acacia patent has not yet been tested in court, but it is likely to eventually stand or fall on these questions: Are its claims overly broad? Are they obvious to someone with "ordinary skill in the relevant art"? And is there "prior art" that implemented the claimed process before the patent was filed? There is a strong case  at least with respect to software and business process patents  that the U.S. Patent and Trademark Office (USPTO) has become overly lax in granting patents that fail these tests. <P>The Federal Trade Commission (FTC) has recently weighed in with a report that proposes several steps to "promote innovation through balancing competition with patent law and policy." The report points out that at the rate of arrival of patent applications, a patent examiner has about 8 to 25 hours to "read and understand each application, search for prior art, evaluate patentability, communicate with the applicant, work out necessary revisions, and reach and write up conclusions." In his 2000 article, "The Anatomy of a Trivial Patent," Richard Stallman, founder of the Free Software Foundation and the GNU software project and longtime advocate for the freedom to develop software, describes what patent officers are up against in trying to decipher patent applications where simple ideas are often couched in arcane language and confounded with standard information technology concepts to make them appear complex. <P>The problem of obviousness does not only affect software patents. In his opinion on <I>The Great Atlantic and Pacific Tea Co. vs. Supermarket Corp.,</I> 340 U.S. 147 (1950), Justice Douglas quoted Justice Bradley's opinion in <I> </I> 1017 U.S. 192, 200 (1882): <P>"It was never the object of [patent] laws to grant a monopoly for every trifling device, every shadow of a shade of an idea, which would naturally and spontaneously occur to any skilled mechanic or operator in the ordinary progress of manufactures. Such an indiscriminate creation of exclusive privileges tends rather to obstruct than to stimulate invention. It creates a class of speculative schemers who make it their business to watch the advancing wave of improvement, and gather its foam in the form of patented monopolies, which enable them to lay a heavy tax upon the industry of the country, without contributing anything to the real advancement of the arts. It embarrasses the honest pursuit of business with fears and apprehensions of concealed liens and unknown liabilities lawsuits and vexatious accountings for profits made in good faith." <P>The impact of patents in the software industry and others is described by economists Bessen and Maskin in their paper "Sequential Innovation, Patents, and Imitation." They maintain that innovation in the software industry is "sequential [i.e., incremental] and complementary." They argue that the rate of innovation has stagnated since the 1980s, and that the slowdown is a direct consequence of the extension of patent protections to software. <P>The European Parliament voted on Sept. 24 to adopt the first reading of a restrictive software patent regime and to deny business process patents. The FTC report promotes a number of reforms to current patent law to restore the balance between patent protection and promotion of competition, including: easing the process of invalidating patents, lowering the standard of evidence for invalidating from "clear and convincing" to "preponderance of the evidence," limiting damage awards to "willful infringement," and increasing funding for the USPTO. It remains to be seen whether these recommendations will be implemented. <P>(My primary source for information about the Acacia patents is <I>The Chronicle of Higher Education,</I> Nov. 7, 2003, pages A35-A38. The FTC report can be found at <A HREF="http://www.ftc.gov/opa/2003/10/cpreport.htm" TARGET="_new">www.ftc.gov/opa/2003/10/cpreport.htm</A>. Stallman's article, Justice Douglas's quote, and Bessen and Maskin's working paper are among several links at the League for Programming Freedom's Web page at <A HREF="http://progfree.org/Patents/patents.html" TARGET="_new">http://progfree.org/Patents/patents.html</A>.) <BR> <img src="../cleardot.gif" width=1 height=1 vspace=4 border=0><br> <IMG SRC="../barbluehook.gif" WIDTH="468" HEIGHT="4"><br> <img src="../cleardot.gif" width=1 height=1 vspace=2 border=0><br> <FONT face="verdana, arial, helvetica" SIZE=2><I><B>Matthew Saltzman</B> (<A HREF="mailto:mjs@ces.clemson.edu">mjs@ces.clemson.edu</A>) is an associate professor of Mathematical Sciences at Clemson University and the editor of INFORMS Online.</i></font><BR>  <img src="../cleardot.gif" width=1 height=1 vspace=5 border=0><br>  <img src="../barblue.gif" width=468 height=1 border=0 alt=" "><br> <img src="../cleardot.gif" width=1 height=1 vspace=8 border=0><br> <CENTER><script type="text/javascript"></script> <script type="text/javascript" src="http://pagead2.googlesyndication.com/pagead/show_ads.js"> </script></CENTER><br> <img src="../cleardot.gif" width=1 height=1 vspace=8 border=0><br> <FONT face="verdana, arial, helvetica" SIZE=1> <LI> <A HREF="tocfr.html" Target="_top"><I>Table of Contents</A><br> <LI> <A HREF="../../ORMS.shtml" TARGET="_top"><I>OR/MS Today</I> Home Page</A><br>  <img src="../cleardot.gif" width=1 height=1 vspace=8 border=0><br> <img src="../barblue.gif" width=468 height=1 border=0 alt=" "><br> <b><i>OR/MS Today</i></b> copyright © 2003 by <A HREF="http://www.informs.org/" target="_new">the Institute for Operations Research and the Management Sciences</a>. 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