[A2k] Patti Waldmeir in the Financial Times: Get it now from Ebay, hostage to the patent trolls

[Thiru Balasubramaniam]

<SNIP>

Is US patent law stifling innovation? Are low-quality patents
compromising American competitiveness? What is the right balance of
power between those who own intellectual property and those who want to
produce goods in the digital marketplace without constantly being sued
for trespassing on someone else=92s ideas?

=93This case has profound implications for technological innovation,=94 say=
s
Ted Olson, former US solicitor-general, in a brief filed on behalf of
Intel, Microsoft, Oracle and other high-tech companies, one of a raft of
high-profile submissions by industry groups to lobby the court with
their different visions of the new economy.

=93The patent system is the foundation for the United States=92 global
leadership position in technological development,=94 says Mr Olson, but he
argues that over-broad patent rights are reducing incentives to invest
in manufacturing, research and development. He says it is time to
=93restore the balance=94 between the rights of patent holders and the
broader social good of encouraging innovation.

Every technological leap forward brings its own legal crisis: now the
Supreme Court is being asked to figure out how ancient patent laws
should be reinterpreted to cope with the digital economy. High-tech
companies say things are different now: each of their products may be
based on thousands of pieces of technology and it is simply impossible
to know whether any bit might have independently been imagined by
someone else.

<SNIP>

=93The injunction is a critical part of the balance of power between
competition and innovation,=94 says Stephen Maebius, a patent expert at
Foley & Lardner, the law firm. =93Even a slight alteration in the power of
the injunction could dramatically alter that balance of power,=94 he adds,
noting that the Supreme Court must choose in the case between two
segments of American industry =96 high-tech companies that want to weaken
the injunction power and pharmaceutical producers that say they need
injunctions to defend their huge investment in drug development.


-----------


Get it now from Ebay, hostage to the patent trolls
By Patti Waldmeir
Published: March 15 2006 20:28 | Last updated: March 15 2006 20:28
Every now and then, a lawsuit comes along that speaks volumes about the
political, economic and social choices of the culture that spawned it.
The legal battle over the ubiquitous BlackBerry was like that: a case
that captured, in one courtroom, the storm of forces buffeting the US
innovation economy.Yet, with that suit settled this month and BlackBerry
users blissfully thumbing their way back to connectivity, the tempest
has not abated. In less than two weeks the same types of character that
peopled the BlackBerry saga =96 the technology titans and =93patent trolls=
=94
of the digital age =96 will assemble for another battle over the rules of
innovation. They will appear before the US Supreme Court for what could
prove a landmark fight over the ownership of ideas, in a world where
ideas increasingly determine prosperity.

The case involves Ebay, the online auction giant =96 in particular, the
patent for the fixed-price =93buy it now=94 transactions that form the
faint-hearted version of the site=92s frenetic bidding wars. It poses many
of the same dilemmas as the lawsuit that nearly darkened all those
hand-held screens.

Is US patent law stifling innovation? Are low-quality patents
compromising American competitiveness? What is the right balance of
power between those who own intellectual property and those who want to
produce goods in the digital marketplace without constantly being sued
for trespassing on someone else=92s ideas?

=93This case has profound implications for technological innovation,=94 say=
s
Ted Olson, former US solicitor-general, in a brief filed on behalf of
Intel, Microsoft, Oracle and other high-tech companies, one of a raft of
high-profile submissions by industry groups to lobby the court with
their different visions of the new economy.

=93The patent system is the foundation for the United States=92 global
leadership position in technological development,=94 says Mr Olson, but he
argues that over-broad patent rights are reducing incentives to invest
in manufacturing, research and development. He says it is time to
=93restore the balance=94 between the rights of patent holders and the
broader social good of encouraging innovation.

Every technological leap forward brings its own legal crisis: now the
Supreme Court is being asked to figure out how ancient patent laws
should be reinterpreted to cope with the digital economy. High-tech
companies say things are different now: each of their products may be
based on thousands of pieces of technology and it is simply impossible
to know whether any bit might have independently been imagined by
someone else.

Anyone who gets a patent on that bit of the invention =96 not difficult in
a world of overworked and under-resourced patent examiners =96 can hold
the whole product hostage, to extract a settlement far more valuable
than the worth of the original idea, they say.

The key to all this power is that federal courts will almost always
grant an injunction in cases where infringement has already been proved
=96 stopping people who make things from continuing to do so, even if the
patent they have breached is only a tiny fraction of the total. That is
the issue before the Supreme Court on March 29 in Ebay v MercExchange:
should courts have discretion to consider the big picture or just grant,
in almost every instance, an injunction that can shut down popular
products such as the BlackBerry? Does the availability of injunctions
give patent owners a weapon to hold legitimate companies hostage for,
sometimes unwittingly, infringing their patents?

Ebay lost a lawsuit brought by MercExchange, a company based in the
Washington suburbs, which claimed that electronic fixed-price sales had
previously been patented by Thomas Woolston, its founder. The issue
before the Supreme Court is not whether Ebay infringed Mr Woolston=92s
patent but whether that infringement obliges a court to stop Ebay from
conducting =93buy it now=94 deals until the company has designed around the
offended patent. The district court judge denied an injunction, largely
because Mr Woolston=92s company does not make anything: he drew a
distinction between companies that exist only to sue and those that
produce nifty gadgets. The federal appeals court for patents reversed
that decision, ruling that injunctions should be issued in all but
=93exceptional circumstances=94.

Companies that use patents as a =93litigation opportunity=94 have got a bad
name recently, especially after the BlackBerry case, where a patent
troll =96 a company that owns patents and sues to defend them but does not
make anything related to the patent =96 threatened a pillar of the digital
economy.

But one such company has filed a brief in the Ebay case, arguing for the
social utility of trolls. Patents create a property right that can
function properly only if such rights are tradeable, says Rembrandt IP
Management, a company that self-confessedly =93invests in patents but does
not practise them=94. Such operators act as intermediaries between those
who create and those who commercialise their creations, adds the
company, which describes its role as a =93market-maker=94 to innovation.

=93The injunction is a critical part of the balance of power between
competition and innovation,=94 says Stephen Maebius, a patent expert at
Foley & Lardner, the law firm. =93Even a slight alteration in the power of
the injunction could dramatically alter that balance of power,=94 he adds,
noting that the Supreme Court must choose in the case between two
segments of American industry =96 high-tech companies that want to weaken
the injunction power and pharmaceutical producers that say they need
injunctions to defend their huge investment in drug development.

The justices seem likely to steer a middle path, reminding the lower
courts that such injunctions should be granted only where doing so would
balance the hardships to both parties and the public interest. That
alone would not solve the larger American crisis of confidence about
patents but it would help restore the balance of power between those who
make and those who sue.