In legal theory, exclusive intellectual property rights, such as patents, copyrights, and trade secrets, are supposed to serve as incentives for technical innovations. The idea is that when entrepreneurial individuals are provided with limited monopolies over their proprietary technologies, those individuals will invest further in their technology, and hopefully spur more innovation and economic growth.
Unfortunately, theory does not always translate to reality. The practical advantages of intellectual property rights have become less clear. Serious problems originate in both the U.S. Patent and Trademark Office (USPTO), which is struggling to keep up with the ever-changing world of technology, and in U.S. patent law in which a suitable standard for patentability has yet to be determined.
The route to securing a patent is a long and expensive one. First, an applicant files an application in the USPTO, which assigns the applicant a patent examiner (supposedly qualified in the relevant technology). The examiner then conducts a search of the existing body of technological information related to the application in question, otherwise known as "prior art", and performs a technical analysis to determine patentability of the claimed invention.
Because of limitations in both the available prior art database and examiner expertise, as well as misunderstandings over what an invention or its prior art is, questionable patents are sometimes issued -- patents which are then presumed valid in court.
Compton's New Media's patent entitled "Multimedia Search System Using a Plurality of Entry Path Means Which Indicate Interrelatedness of Information", which would have covered virtually all multimedia technology, is one such patent. And when such broad "basic" patents are issued, there is almost always some uproar in the particular industry over the validity of the patent in view of prior art.
In Compton's case, however, the patent was deemed so questionable by the multimedia industry that USPTO commissioner Bruce Lehman initiated a reexamination of the patent himself. Ordinarily, the validity of the patent would have been tested through patent litigation in federal court or through a reexamination initiated by a third party, or even by Compton's itself. Perhaps this unilateral action by the USPTO sets some precedence for the USPTO to attack its own patents when various political forces are applied.
To improve the examination process, more resources must be directed at building up the Patent Office's prior art database, especially in fast-changing areas of technology such as software and multimedia. Of course, the relevant state of the art for a particular area of technology at any given moment is often a moving target, and a great deal of the most interesting research in the faster-changing areas remains a trade secret, and thus, unavailable for prior art searching by examiners or the public. There have been some worthwhile efforts, notably by the Software Patents Institute in Ann Arbor, Michigan to set up a database for software prior art, but a lot of work is still needed.
Another area for improvement is the technical expertise of the examiners. There should be better ongoing technical training for the entire USPTO staff. As it stands, the USPTO invites technical experts from private industry to deliver free lectures to its examiners. But that isn't nearly enough.
Another problem encountered in patent law is the determination of a proper standard for patentability. Under U.S. patent law, an inventor, particularly for a new software program or technique, may file a patent application to claim apparatus or methods which are "unobvious". There has been some controversy as to this legal standard for inventiveness (i.e., what is not obvious to someone of ordinary skill in that technology at the time of filing the application). Some have in fact claimed that software technology is inappropriate for patent protection, and perhaps copyright law is more applicable. Currently, both patent and copyright protection may apply to software technology, assuming that the respective requirements of unobviousness and originality are met.
There are good reasons, however, to choose a patent over a copyright. For many startup software companies, copyright protection provides an economical, but functionally-limited means for protecting program code, electronic files, and screen displays from industry piracy. In recent years, U.S. copyright law has been judicially interpreted, such as in the Lotus v. Borland case, to cover not only the literal text of computer programs, but also the non-literal or so-called "look and feel" elements associated with visual screen displays and graphical interfaces. However, copyright law ordinarily cannot protect the underlying ideas, data processing techniques or algorithms which are integral to software functionality, and consequently software companies are now relying more and more on patents for broader scope of protection.
And then there are the all-important problems of time and cost. It currently takes about two to four years to obtain a patent in the software arts. This delay is due to a significant backlog of applications, as well as the increased technical complexities associated with software technology. Once again, a bigger budget for the USPTO with more and better-trained employees would help.
Costs are also rising with respect to official filing and patent attorney fees. To help individual inventors, the USPTO provides a schedule of significantly-discounted filing fees. But patent attorneys still typically charge $10K - $20K to draft and file a new patent application -- not including subsequent prosecution activities. That kind of money adds up to a significant investment for startups.
And even if you spend many years and many dollars protecting what you think is an exclusive right to make, use and sell certain technology, you could lose in court, and lose big.
One of the most talked-about recent cases, Apple v. Microsoft, in which Apple sued Microsoft and Hewlett Packard for copyright infringement of Apple's unique graphical user interface, has almost certainly served as a tough learning experience for Apple in two respects.
Firstly, it has demonstrated the critical importance of drafting contract language very carefully, particularly with respect to development and ownership rights of technology partners. Secondly, it has demonstrated the substantial limitations in the functional scope of protection offered by copyright law, particularly with respect to user interfaces for software.
Then again, some companies, like STAC Electronics in STAC Electronics v. Microsoft, wherein start-up STAC Electronics successfully sued gargantuan Microsoft for infringing in its MS-DOS 6.0 release STAC Electronics' patented data compression algorithm, can win big.
Although little new substantive patent law seems to have come out of this highly-watched case, its main impact on the software industry will be a heightened awareness on the part of company boards and upper management as to the potential risks associated with software patents.
For example, it is possible for a software company to infringe a competitor's patent "innocently" (i.e., without having known about the existence of the subject patent), and still be subject to a court order which enjoins the infringing company from further making, using or selling certain products. Even worse, had the software company knowingly or willfully infringed the patent, then the software company may be found liable for multiple damages.
Certainly we can expect more software companies, large and small, to file for patent protection. Note, for example, that larger software companies, such as Oracle and Synopsys which currently own few or no patents, may now take a more serious look at building their own patent portfolios, if only for defensive purposes. Furthermore, with this anticipated increase in patent filings, there will certainly be even more pressure on the USPTO to improve its ability to handle more applications and more complex technologies. For entrepreneurs, emerging start-up companies, and investors therein, the current doctrines of intellectual property may not serve as perfect legal tools for protecting proprietary technology rights, but such doctrines, when properly understood, acquired and enforced, can serve as powerful barriers to competition in a tough marketplace.
This paper is not intended to provide legal advice or opinion. Such advice may only be given when related to specific fact.