Patents Injunctions and Patent Trolls – eBay v. MercExchange

Numerous reports and commentaries have appeared concerning the US Supreme Court decision on the patent injunction case involving eBay and MercExchange (slip opinion, eBay v. MercExchange ___ U.S. ___, No. 05-130 (2006)).

Why the Supreme Court sided with eBay (Out-Law.com) points to the holding in the case which is that injunctive relief is only to be granted by a court in a patent infringement case if the plaintiff can prove these elements of a four-part test:

1. That it has suffered an irreparable injury;
2. That remedies available at law are inadequate to compensate for that injury;
3. That considering the balance of hardships between the plaintiff and defendant, a remedy in equity is warranted; and
4. That the public interest would not be disserved by a permanent injunction
.”

In Supreme Court Vacates eBay Injunction (Patently-O) we find written:

The opinion notes that from ‘at least the early 19th century, courts have granted injunctive relief upon a finding of infringement in the vast majority of patent cases.’ According to the Chief Justice, this long tradition of injunctive relief should be awarded great weight.”

That particular opinion of the new Chief Justice (concurring with Scalia and Ginsberg) drops him about 50 points in our rankings (on a scale of 100) because it shows that he is totally out of tune with modern developments in patent infringement suits, and that is not a good sign for a Chief Justice who may be around a while yet, and who is not as old as the majority of the Supreme Court Justices, so that he should really know better.

More realistic and up-to-date with the state of things in the patent troll industry is the Kennedy opinion (with Stevens, Souter and Breyer concurring), which states:

In cases now arising trial courts should bear in mind that in many instances the nature of the patent being enforced and the economic function of the patent holder present considerations quite unlike earlier cases. An industry has developed in which firms use patents not as a basis for producing and selling goods but, instead, primarily for obtaining licensing fees. . . . For these firms, an injunction, and the potentially serious sanctions arising from its violation, can be employed as a bargaining tool to charge exorbitant fees to companies that seek to buy licenses to practice the patent. When the patented invention is but a small component of the product the companies seek to produce and the threat of an injunction is employed simply for undue leverage in negotiations, legal damages may well be sufficient to compensate for the infringement and an injunction may not serve the public interest. In addition injunctive relief may have different consequences for the burgeoning number of patents over business methods, which were not of much economic and legal significance in earlier times. The potential vagueness and suspect validity of some of these patents may affect the calculus under the four-factor test.”

Supreme Court backs eBay on injunction issue (SiliconValley.com) quotes Berkeley Law Prof Robert Merges who hits the nail right on the head:

What’s happening today, particularly in the electronics industries, is a widespread misuse of the patent system,” said Robert Merges, a University of California, Berkeley, law professor who filed a friend-of-the-court brief in the case on behalf of Web portal Yahoo Inc.People have been looking for tools to deal with it, and I think we just got a big one.”

This decision may help to slow down the ever-increasing tide of patent troll suits, although we are sceptical since it is only a “technical” victory for eBay, whereas the threat of injunction has still not been removed, and the entire Supreme Court holding is still a far cry from what is necessary to correct the current flawed patent law system, which requires a point-blank rejection of software and business method patents altogether.

The European legal community has understood this issue (see here and here and here).
The American legal community has not understood this issue.

We see this lack of understanding in Thomas’ majority opinion, as reported by ZDNet in Supreme Court rules in favor of eBay:

When eBay lost its patent infringement suit, the district court denied MercExchange an injunction, in part because the company appeared willing to license its patents and did not practice its patents in commercial products.
The Supreme Court shot down that reasoning, saying such “broad classifications” don’t mesh with the law. “Some patent holders, such as university researchers or self-made inventors, might reasonably prefer to license their patents, rather than undertake efforts to secure the financing necessary to bring their works to market themselves,” and they should be given equal opportunity to obtain injunctions, Thomas wrote.
Even so, judges should consider the broader implications of issuing injunctions to such patent holders because “an industry has developed in which firms use patents not as a basis for producing and selling goods but, instead, primarily for obtaining licensing fees,” Justice Anthony Kennedy wrote in a concurring opinion signed by Justices John Paul Stevens, David Souter and Stephen Breyer. In such cases, “legal damages may well be sufficient to compensate for the infringement and an injunction may not serve the public interest,” they wrote
. “

When merely ideas are patentable and actual products are not required, then the alleged discovery or invention is merely a mental thought, and in our opinion not subject to patent protection under the US Constitution.

The Supreme Court Justices definitely do not understand the issue that there is a difference between a “patent” for a discovery or invention, as foreseen in the US Constitution, and an “idea” written on paper and submitted to the USPTO, broadly claiming rights to the actual discoveries or inventions later produced by others.

Sorrowfully, we expect to continue to see a continued explosion in the number of patents filed with the USPTO – until both the USPTO and the economy in general are simply snowed under and helplessly clogged by the mass of software and business method patents and patent applications as well as the subsequent and inevitable patent infringement cases, which are bound to skyrocket in number to conform to the number of patents granted.

In fiscal year 2003: “the USPTO received approximately 355,000 patent applications and issued approximately 160,000 patents“.

This means, by the way, that a patent troll has a nearly 50% chance of getting a patent application approved. And once that patent is in hand, the patent infringement proceedings can begin.

When the system starts to grind to an inexorable halt, which is inevitable under the current patent law, something will happen to correct the system – and we expect that something to be future Congressional legislation which bars or greatly limits business method and software patents.

The Disaster of Patenting Software and Business Methods

Over the last 50 years, the US Congress, the US Courts and the USPTO have greatly expanded the scope of patent protection, especially for software and business methods. We regard this expansion to be unconstitutional on its face and disastrous as a matter of its practical consequences on the economic and legal world.

Ailbe Flynn with an introduction by Heather Watts (of Deeth Williams Wall LLP) have a short history of how the current disastrous state of affairs in US patent law came to be at “Patentability of Software Inventions and Business Methods: The Canadian Perspective on the State Street Decision“.

As written by Richard H. Stern:

“The problem of determining whether a method of doing business should be patent-eligible or copyright-protection-eligible has become of increasing concern after the Federal Circuit’s remarkable decision in State Street Bank & Trust Co. v. Signature Financial Group, Inc., and the Supreme Court’s denial of further review [149 F.3d 1368 (Fed. Cir. 1998), reversing 927 F. Supp. 502 (D. Mass. 1995), cert. denied, U.S. Law Week (Jan. 11, 1999)]. The decision introduces substantial tension into patent law by opening up a whole new region of potentially patentable innovations of a kind previously considered unpatentable in principle or patentable only by substantial indirection and elaborate apparatus-seeking gymnastics.”

Professor Julia Alpert Gladstone, Esq. of Bryant College discusses briefly the legal and practical issues involved in “Why Business Method Patents are the Epitome of Misdirection: Strong Intellectual Property Rights do not Encourage Innovation in Information Technology“, La Revue: The Edhec journal of law, New Technology and Best Legal Practices.

Prior to the modern legal absurdities propagated by the US Congress, the US courts, and the USPTO, business methods were not patentable (see the dicta in Hotel Security Checking v. Lorraine, 167 F.460 (2nd Cir. 1908).

Patentability depended more or less on the brilliant standard expressed by US Supreme Court Justice Joseph P. Bradley in Atlantic Works. v. Brady, 107 U.S. 192 (1883):

The process of development in manufactures creates a constant demand for new appliances, which the skill of ordinary head-workmen and engineers is generally adequate to devise, and which, indeed, are the natural and proper outgrowth of such development. Each step forward prepares the way for the next, and each is usually taken by spontaneous trials and attempts in a hundred different places. To grant a single party a monopoly of every slight advance made, except where the exercise of invention somewhat above ordinary mechanical or engineering skill is distinctly shown, is unjust in principle and injurious in its consequences.

The design of the patent laws is to reward those who make some substantial discovery or invention, which adds to our knowledge and makes a step in advance in the useful arts. Such inventors are worthy of all favor. It was never the object of those 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 art. It embarrasses the honest pursuit of business with fears and apprehensions of concealed liens and unknown liabilities to lawsuits and vexatious accountings for profits made in good faith.”

That superb wisdom has fallen on deaf ears at the US Supreme Court in our modern era, greatly assisted by equally incompetent lawmaking by the US Congress, relying upon incompetent advisors. As Gladstone writes:

The current legislation is the result of amendments made in 1952 which extends patentable “useful arts” to include “any new and useful process, machine, manufacture or composition of matter”. The statute is somewhat redundant in clarifying the term “process” by stating that it means “process art or method.” The Supreme Court has elaborated the definition of process broadly over the years. It is noteworthy that the patent law amendments of 1952, which moved the standard away from a scientific or industrial orientation to expand the scope of patent protection to “anything under the sun”, was drafted by a congressional” commission lead by Giles S. Rich; he is the same man that served as the judge on the CAFC in the State Street case.”

It was in fact this same incompetent and by then judicially activist Judge Rich that made the incomparably stupid holding in the State Street case, overturning 90 years of successful patent law application and turning US patent law into a legal mockery. Jared Earl Grusd in Internet Business Methods: What Role Does and Should Patent Law Play?, Virginia Journal of Law and Technology, has commented the developments from the Hotel Security case to the State Street case as follows:

In issuing its standard for patentability, the USPTO chose to interpret Hotel Security in an excessively broad manner. Though the case was not decided on subject matter grounds, the USPTO began to bar all claims directed at business methods without deciding the merits of the individual claims. This practice was eventually codified in the USPTO’s Manual of Patent Examining Procedure (MPEP) §706.03…. As a result of this provision, few business method patent applications were filed during the years between Hotel Security (decided in 1908) and 1996….

[I]nventors, patent lawyers, the USPTO, and the courts operated for almost 90 years under the assumption that the subject matter question concerning business methods had been resolved in Hotel Security….

although for almost 90 years there was a presumption that business methods were not proper patent subject matter unless embodied in some tangible form, courts have not formally endorsed such a presumption.

State Street marked the most recent and important effort to clarify the proper status of business methods under the Patent Act. In that case, the Federal Circuit overturned the district court’s holding that business methods are abstract ideas barred from statutory subject matter. The Federal Circuit held that business methods are proper subject matter under 35 U.S.C. §101. In doing so, the court did not indicate a desire to lower the standard for the patentability of business methods, but rather a desire to clarify the current confused state of the law. As such, the court saw its task as descriptive, not as normative or policy-oriented.”

And now, we have the fruits of that ignorant lawmaking and flawed judicial decisionmaking: absurd money judgments for method patents, skyrocketing numbers of patent applications, swiftly increasing patent trolling and the economy-sapping establishment of patent conglomerates … i.e. all of the foreseeable evils referred to more than 100 years ago by US Supreme Court Justice Joseph P. Bradley.

The Internet and the WWW as Patent-Free viz. Royalty-Free Zones by Law

According to our interpretation of the Constitution of the United States, the Internet and the World Wide Web should be patent-free viz. royalty-free zones by law.

Our conclusion has to do with the fact that the basic communications structure and technology of the Internet and the World Wide Web were originally invented to serve the free and unfettered exchange of information, unburdened by patents.

In fact, the Internet was not only originally part of a federally-funded research program, but commercial use of the Internet was prohibited until the 1990’s. See generally the Internet Histories at ISOC and the Wikipedia History of the Internet.

The “medium” that we call the Internet was first so called in the 1980’s and officially defined in 1995 by the Federal Networking Council:

On October 24, 1995, the FNC unanimously passed a resolution defining the term Internet. This definition was developed in consultation with members of the internet and intellectual property rights communities. RESOLUTION: The Federal Networking Council (FNC) agrees that the following language reflects our definition of the term “Internet”. “Internet” refers to the global information system that — (i) is logically linked together by a globally unique address space based on the Internet Protocol (IP) or its subsequent extensions/follow-ons; (ii) is able to support communications using the Transmission Control Protocol/Internet Protocol (TCP/IP) suite or its subsequent extensions/follow-ons, and/or other IP-compatible protocols; and (iii) provides, uses or makes accessible, either publicly or privately, high level services layered on the communications and related infrastructure described herein.”

The Internet technically is a structure of interconnected computer networks, whereas the World Wide Web (WWW), invented by CERN and Tim Berners-Lee, is a global hypertext system of linked documents using the http protocol and operating (through networks) by means of Internet-connected devices such as computers, PDAs, and cell phones, etc.

The Internet is not patented, because it started as a government project. The World Wide Web is not patented, because in April, 1993, the directors of CERN – who could have patented the invention of the basic WWW technology – announced publicly for the sake of free and open information exchange that WWW technology would be freely usable by anyone, with no patent fees payable to CERN.

Free Was the Key, Says Web Founder.

….Tim Berners-Lee, who received a €1 million ($1.2 million) cash prize for creating the World Wide Web, says he would never have succeeded if he had charged money for his inventions. ‘If I had tried to demand fees … there would be no World Wide Web,’ Berners-Lee, 49, said Tuesday at a ceremony for winning the first Millennium Technology Prize. ‘There would be lots of small webs.

Similarly, Vint Cerf, one of the founding inventors of the Internet responsible for the TCP/IP Protocol, in the year 2000 formulated the basic patent issues involving the Internet as follows:

I want to mention something about patenting and the Internet and its origins. One of the things that is peculiar and interesting about the Internet history is that the TCP-IP protocols were never patented. In fact, they were made available as widely as possible to the public as soon as possible….

The openness of those protocols and their availability was key to their adoption and widespread use. I think if Bob [Kahn] and I had not done that – if we had tried to, in some way, constrain and restrict access to those protocols, some other protocol suite would probably be the one we’d be using today and there would be some other thing called the Internet, or maybe called something else doing the same thing, with a different set of protocols. So, that openness was pretty important. The fact that it wasn’t patented, I think, was very important.

It’s also the case that the Internet Engineering Task Force, which was one of the standards-making activities that takes place under the auspices of the Internet Society, is also relatively resistant to the use of patented technology in the construction of Internet standards…. the principal goal of the Internet Engineering Task Force is to make its standards as widely available and as easily practiced as possible. And that generally dictates that they not be encumbered in any fashion…. it has happened in the past that the IETF working groups have tried to steer their way around existing patents in order to avoid any encumbrance at all.

The last thing I’d like to observe – and this is something that perhaps we can get into in the early stages of our discussion that Todd might be able to respond to – is that any number of software patents have been granted during the last five to 10 years and a number of them appear to be patents for what is well-known, widely known technology that every undergraduate knows. Now, I’m being unfairly extreme, but I want to make the point that the patent examiners in the office are not necessarily always well-versed in the history of some of the new technologies, particularly software, because software patents were a very recent entree into the arena of things that have been patented. So, it’s an issue as we come to grips with patents and the Internet, because the Internet is really nothing without software and everything it does is based on somebody’s programs that animate the Network. So, I consider that to be a serious matter of concern, if patents are all wrapped up in software and if we don’t have widespread ability to make use of software in order to evolve the Internet.”

The subsequent result of those considerations for the W3C, which produces standards for the World Wide Web, has been the WC3 Royalty-Free Patent Policy, which “governs the handling of patents in the process of producing Web standards. The goal of this policy is to assure that Recommendations produced under this policy can be implemented on a Royalty-Free (RF) basis.”

The engineers have thus understood that the Internet and the WWW must be patent-free viz. royalty-free zones in order for these mediums to work the way they were intended to work from their “free” inception. Why then is the legal community lagging behind in understanding this elementary fact and in granting the Internet and the WWW this patent-free and royalty-free status by law, thus removing the possibility that patents encumber this medium?

If thousands of Internet and WWW inventors produced the basic foundations of the Internet and WWW system without encumbering patents, then what possible reason is there in the law to grant patents to lesser “inventions” by morally reprehensible institutions who now try to profit from that essentially public domain system by encumbering that system with patented technology used in connection with that free system, for which the patenting institutions pay nothing and without which their own technology is totally worthless.

USPTO Seeks to Modernize

In recent postings we have been pretty hard on the United States Patent and Trademark Office (USPTO) as well as on the US legal community and judiciary under the logic represented by the old tale about the U.K.-educated Greek farmer on a country road hitting his unmoving mule over the head with a large club. A passing English tourist could not resist injecting the comment that “Sir, you are not going get that mule to move by doing that!”, to which the Greek farmer had retorted in perfect Oxford English, “Madam, I know that. I am just trying to get his attention”.

We see at the USPTO website online that the USPTO is in fact trying to enter the 21st century. However, proposed new rule changes and more and more patent examiners is not the epitome of the desired solution. Unchecked, every institution tries to increase the scope of its powers and the realm of its influence, and in this regard the USPTO does not differ from other institutions. Increasing the staffing of the USPTO is not the solution. The proposed new rule changes merely shuffle around current practices and will be of little practical assistance if the underlying law and judicial decisionmaking is faulty.

To improve the current intolerable over-inflated patent situation in the USA, what needs to be done is for Congress and the courts to diminish the scope of patent protection to accord with the U.S. Constitution and thus, indirectly, to curb the USPTO’s powers and importance, thus ultimately reducing the number of patents filed each year. This can only be done by limiting patent protection to actual products and by eliminating patent protection for software, hardware configurations, ideas, methods and systems of doing something, for which, in our opinion, the U.S. Constitution does not provide a basis for patent protection.

In addition, we would make the Internet a patent-free zone by law, for the reasons given in our next posting.

Ancient World History Must be Rewritten – Santorini Exploded ca. 1627 BC

Law can not be extracted from the spirit of the times nor from current events.
If you care about current events, then you should know about some important just published Science magazine articles directly impacting the History of Western Civilization.

If you plug “Ancient World Blog” into Google, the first hit out of 25 million hits is our Ancient World Blog, the most recent posting of which deals with a subject that everyone should know about – the necessity to rewrite our world’s ancient history to fit the actual evidence.

New research published in Science magazine shows unequivocally that current mainstream chronology of the Ancient World is simply wrong, negatively impacting current events in thousands of nefarious ways.

Now what if Moses were actually born in ca. 1707 B.C. and what if Exodus actually occurred in 1627 B.C. ? What would that mean for our view of religion and history and events in the Middle East? Things would look … different.

Is USPTO Patenting Ideas Rather than Discoveries or Inventions? – Yes

TechnoLawyer at its IP Memes today has the following text which clearly reveals current patent application practice and confirms also thereby that the USPTO patents ideas rather than discoveries or inventions in an actual physical product (see our posting on patents and the U.S. Constitution):

So what exactly is a Patent Troll? We’ve asked the question a few times on our various blogs but have yet to see a litmus test definition that lets you give a thumbs-up or down on an individual patent owner. We’re beginning to think we’ll end up with a obscenity-style “you know ’em when you see ’em” sort of definition. Several general attempts to define the term have been made. One “consensus” requirement has emerged — the patent owner must make no use of the invention. Can you imagine the list of “trolls” that would emerge if that were the only requirement? Perhaps ironically, Google, the current king of the online world, would be on the list. Consider this recent quote from a Google spokesman regarding a patent recently granted to the company for a voice-activated search technology: “We file patent applications on a variety of ideas that our employees may come up with. Some of those ideas later mature into real products or services; some don’t.” You heard it here first … based on the best definitions out there, even Google is a patent troll….” [emphasis added]

As one CEO of another company is quoted in Red Herring as saying, regarding voice activated search on cell phones (for which one patent, e.g., was just granted to Google based on a patent application filed five years ago):

The technology and the content have finally caught up with the idea.

In other words, it was not an invention or a discovery that was actually patented, but only an idea, waiting for others to develop the technology and content to make that idea work. And that is what is currently being rewarded in patent troll suits such as those brought by NTP, Visto and EOLAS.

Such ideas were never intended to be patentable under the U.S Constitution.

The Smithy Code – UK Justice Grabs a Piece of the Holy Grail – UK Lawyer and his Law Firm Break the Code

The Smithy Code – UK Justice Grabs a Piece of the Holy Grail

Gee, we posted about the DVC before over at our Literary Pundit some time ago. DVC is sort of a JK Rowling for grownups – dictional fiction as factional transaction – pandoric pablum for plebeians.

Not to be outdone by the adversaries in the copyright infringement case brought by HBHG against DVC, the judge in the case, UK High Court (Chancery Division) Mr Justice Peter Smith embedded his own code into the text of his decision, a holding which found in favor of DVC.

The first part of the Code is a snap to crack and consists of isolated letters written in italic script, where such are never found in normally published judicial decisions. Here are the words with coded italicized letters in the order that they appear in Smith’s “Approved Judgment”:

Claimants – found in paragraph 1
claimant – found in paragraph 2
is – found in paragraph 3
that – found in paragraph 3
his – found in paragraph 3
reality – found in paragraph 3
[the italicized words thus far read “smithy”]
cynicism – found in paragraph 4
for – found in paragraph 5
preceded – found in paragraph 6
Templar – found in paragraph 7
[so far so good, the italicized letters read “code”, in sum “smithy code”]
[but now, it gets difficult]
Jersey – found in paragraph 8
able – found in paragraph 8
research – found in paragraph 9
this – found in paragraph 11 – part 3 – Writing and Publication of HBHG
techniques – found in paragraph 11
extinguished – found in paragraph 13
technical – found in paragraph 14
story – found in paragraph 15 – part 4 – The Mystery
was – found in paragraph 16
the – found in paragraph 18 – part 5 – Analysis of HBHG
something – found in paragraph 19
groups – found in paragraph 20
used – found in paragraph 21
was – found in paragraph 23
documents – found in paragraph 25
being – found in paragraph 25
eradicated – found in paragraph 25
elsewhere – found in paragraph 26
Templars – found in paragraph 27
Claimants – found in paragraph 29
sequence – found in paragraph 29(2)
with – found in paragraph 30
of – found in paragraph 31
key – found in paragraph 34
Plantard – found in paragraph 35
introduced – found in paragraph 37
manuscripts – found in paragraph 38
ultimately – found in paragraph 40
questions – found in paragraph 42
emblazoned – found in paragraph 43
prevalent – found in paragraph 43

The italicized letters thus read:
SMITHYCODE JAEIEXTOSTGPSACGREAMQWFKADPMQZV

The full code has been cracked in the interim by lawyer Dan Tench with the help of his law firm. See Peter Graff’s article,
Da Vinci judge’s secret code revealed

The Smithy code reads: “Jackie Fisher, who are you? Dreadnought”.