The chilling wind of patent laws

Story: The chilling wind of patent law

I've ranted about the patent shambles before, but it's now the turn of the big boys to suffer from the problem. I covered the Microsoft/Eolas dispute in the last issue, but now rival Apple is suffering from patent disputes too. Apple, it appears is involved in two separate patent disputes. The first is over a patent held by Pat-rights over Apple's DRM, which the Hong-Kong based company claims violates its US patent number 6,665,797. Pat-rights wants a cool twelve and a half percent of Apples iTunes profits... The second claim is from Chicago based Advanced Audio Devices, who were granted US patent number 6,587,403 on a music jukebox system. Advanced have now filed a suite in a Federal court.

I think these suites are only the start of a trend which is going to cause a lot of disruption.

Let me explain.

It used to be that patents were a game played only by the big boys, they were expensive to get, maintain and defend. The big companies built up portfolios of patents, which they used as a defence against other big company patent claims. Usually patents were traded - we'll grant you a license to use our patents if you grant us a license to use yours. Only in very rare cases did money actually change hands.

Normally start up companies don't have the money to indulge in patents. However, in recent yeas, especially during the dot com boom, the fledgling online companies had cash to spare to apply for patents, which the US Patents Office handed out like confetti. The dot com boomers never used the patents, because they were too busy burning up the vulture capitalist's money.

However, all good things come to an end, and we had the dot com bust.

This caused the closure of the bulk of the dot com companies. Many of them just closed their doors and vanished. They didn't even go in to liquidation in the usual way. They just ceased to exist leaving collocation data centres full of orphaned servers which actually belonged to leasing companies. But not all the companies just vanished, some of them were sold or wound up properly by their creditors. And many of those had a fistful of patents, which, being the only assets the now defunct company possessed, were sold for a song to a new breed of company - the intellectual property company.

Now, intellectual property companies are very different from traditional patent holders in two ways. First of all they are well funded for litigation, indeed that is their main raison d'etre, and secondly they do not have any other activity that requires them to cross license patents.

In other words, they are only interested in hard cash.

It's going to be interesting to see what the outcome of this is going to be, because these patent holders, unlike previous ones, are going to hit even the big companies right on their bottom line. Soon, I suspect, it will be more than just Open Source advocates demanding reform of the whole system.

More on the different disputes as they come to court.

http://go.theregister.com/news/2005/03/10/apple_ipod_patent_lawsuits/


from Winding Down
by Alan Lenton
March 13, 2005