11.27.10

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Eye on Patents: Broken System as Shown by New Evidence

Posted in America, Europe, Patents at 5:48 pm by Dr. Roy Schestowitz

Broken

Summary: Additional signs of a dysfunctional system which grants and manages patents too poorly

We lack the time to cover all the patent stories which seem to matter, so here is just a list of links.

Groupon vs. MobGob: Patent Battles Hit The Daily-Deal Business

Groupon filed a patent lawsuit against MobGob in Chicago yesterday. It’s a counter-attack against MobGob, which started the fight when it sued Groupon in California, together with a shell company called CY Technology. They accuse Groupon of infringing a patent they were issued in March called “Method of Community Purchasing Through the Internet.” This, according to the patent, is “a community purchase model where a product can be purchased a particular price only if enough buyers are willing to purchase at that price.” Or, put another way, Groupon’s entire business model.

Sham Reexamination Requests and Federal Preemption

This is an interesting case that is pending before the Federal Circuit. The focus of the appeal is whether a patentee has any cause of action for a third-party’s baseless filing of a reexamination request. The patent laws themselves offer no remedy so Lockwood turned to California State Court – alleging that the Sheppard Mullin law firm should be held liable for Malicious Prosecution, Interference, and Fraud by filing their reexamination request. Lockwood argues that “[Sheppard Mullin lawyers] chose to violate the strict duty of candor required before the USPTO by making deceptive misrepresentations about the nature of purported ‘prior art’ in two Requests for Reexamination. Respondents filed the Requests to gain a tactical advantage during infringement litigation, in furtherance of their stated aim of putting Lockwood ‘out of business,’ and without any reasonable basis in patent law.”

5 Questions With … Brightidea’s Matt Greeley (never noticed Inventors Digest before)

ID: What are some of the elements needed to grease the skids of innovation?

MG: If you want a fluid exchange of ideas, you need a stronger, more efficient intellectual property regime. It’s important to our competitiveness as a nation that we work through this. The state of software patents is a mess. It takes too long. There’s an asymmetry of getting and defending a patent. This could go the way of FedEx. I mean, the U.S. Postal Service wasn’t keeping up and the postal service was privatized. It could come to the point where there’s a privatization of the IP regime.

ID: Wow. Never heard that one before. Might make for an interesting article down the road. What’s your favorite invention?

MG: Paper or pen and paper. It’s a meta invention. It supports more inventions. How many inventions were first conceived on paper? I always look for meta inventions or ask myself, ‘What’s the more important thing I can work on?’

WHAM! — Target of False Patent Marking Suit to Argue Bounty Hunting Scheme Unconstitutional

The National Law Journal reported online yesterday that Wham-O, creator of such iconic toys as the Frisbee® and the Hula-Hoop,® has alerted the U.S. Court of Appeals for the Third Circuit that it will challenge the constitutionality of 35 U.S.C. § 292, the section of the federal patent law which empowers any person to sue any entity which marks their products with a false (i.e. expired) patent number. What is particularly interesting about the challenge is that Wham-O succeeded in getting the bounty hunter’s claim thrown out at the federal trial court on the grounds that the complaint alleged no concrete injury. In the aggressive and innovative spirit of Wham-O’s founders, rather than simply argue that the district court’s reasoning was correct, Wham-O’s lawyer is taking a “best defense is a good offense” approach. Whether the Third Circuit will rule on an argument not addressed by the lower court is uncertain.

China pushes home grown patents of questionable value

In an otherwise interesting article, the Economist ended a story on the Chinese government’s campaign to produce more innovations and resulting patents with this, “If ideas are protected, Chinese people will produce more of them” link here.

Yet the rest of the article doesn’t really support that conclusion. People are obtaining lots of patents, issued only since 1985, but whether they are innovations worthy of a patent remains open to question. It turns out there are two kinds of patent, a sort that requires a determination of novelty and is good for 20 years and the other, a finding of utility and good for only 10 years. The latter are far more numerous.

Patent Office: Part of the growth in the regulatory burden

Can you patent financial innovations? (Felix Salmon is always insightful)

It turns out that RHR is technically an invention of 2009, not 2010, if you look at its patent application. Loan Value Group hasn’t actually been awarded the patent yet—Gandel was a little bit ahead of himself there—but LVG’s Frank Pallotta told me that applying for a patent on the idea “was the first thing we did” after setting up the company, and that the patent application preceded substantially all of the time and effort that LVG put in to building RHR.

Pallotta is an expert in mortgages, not in intellectual property, but he did say that he hadn’t personally ever come across a finance company applying for a patent on its idea before.

What’s more, it’s generally accepted that financial innovations can’t be patented: it’s an argument that Sebastian Mallaby regularly rolls out, for example, to defend and explain the secrecy of hedge funds. If you can’t apply for a patent, then the only way to stop people copying you is to operate in utmost secrecy.

When the government confers monopoly rights to drug companies (Christian Zimmermann links to the story below)

Drug firms accused of exploiting loophole for profit

The BBC reports about a drug that was available cheaply, got tweaked in a minor way and now available only in a much more expensive format. While the story is not about patenting, it is very similar to it as it is about licensing a drug, in this case for use in the UK, and excluding the old, yet still perfectly effective, drug from use. This is exactly what a patent does, and there are countless examples of pharmaceutical companies doing exactly these very marginal improvements to extract major rents from sick people.

Politicians pledge to change gene patenting laws (we covered gene patents before [1, 2])

Politicians from all sides of politics say they want changes to Australia’s gene patenting laws, but it is unclear which major party will act first.

At a Cancer Council breakfast, members of the Government, the Opposition and independents spoke about the need to change the law so gene sequences cannot be patented.

Oncology Professor Ian Olver says currently one company can stop others from conducting tests on a gene that they discover, slowing down cancer research.

There’s also the story about Amazon and business method patents, not just software patents or patents on nature.

Patent trolls do not always get their way as Jagex helps show after a long a tiring lawsuit. Gamasutra was the main source of this story, cited by many others. [via]

A U.S. District Court judge has dismissed a patent infringement lawsuit brought against RuneScape developer Jagex, but not before the UK studio spent a purported seven figures defending itself.

Judge David Folsom last week dismissed online chat company Paltalk’s claims that Jagex infringed on Paltalk patents relating to online network communications, according to court documents obtained by Gamasutra.

“After reviewing source code for the RuneScape video game made available by Jagex, Paltalk and Jagex agree that the RuneScape video game does not infringe the patents-in-suit,” wrote the judge. “Accordingly, judgment of non-infringement is entered in this case.”

“If the US doesn’t fix its patent system,” wrote Groklaw’s Pamela Jones about it, “I can foresee a time when companies will choose to avoid a US presence. And companies that choose to settle bogus suits should think about what they are doing to others.” Cory Doctorow wrote about this too:

RuneScape devs refuse to cave in to patent trolls

[...]

Jagex, the UK game dev behind RuneScape, refused to be intimidated by patent trolls Paltalk, who claim a broad patent on what amounts to all online multiplayer gaming. Microsoft settled a similar bogus claim last year, giving Paltalk a war-chest and a precedent with which to continue with nuisance suits against other MMO companies, including Sony, Blizzard, Activision, and others.

This is an excellent example of how broken the system is. Spending millions of dollars to prove one’s innocence is simply unacceptable. It’s favourable to patent trolls and rich companies with deep pockets.

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