1. Does your organization currently license any of its patents to other organizations?
2. Can you categorically state, for the record, that all patents your organization current holds, or is planning on seeking, are being, or will be directly applied to a product or service that you make?

Both Mr. Simon and Ms. Lee have been outspoken critics – both in blogs and in testimony to the U.S. Congress – of patent aggregators (or, to use their terminology, “non-practicing entities”).

The reason I’m asking these questions is to discern whether they are engaging in exactly the same behaviour as the patent aggregation companies they’re railing against. If the answer to question one is yes, and question two is no then I was hoping to explore the logic of why they feel the law should change to make it as difficult as possible to express these very activities as a discrete business model.

Intel was so kind as to respond in the affirmative to the first question. However, they demurred on the second. Google, on the other hand, ignored the questions outright.

I would be my sincerest hope that both Mr. Simon and Ms. Lee could find the time to respond to these questions. Ideally they could do that on their own blogs and link back to me.

Since both Mr. Simon and Ms. Lee have been on the front foot in advocating legislative changes that will have significant ramifications to the IT industry I would hope they’d be open to engaging in a broader dialogue on the thinking behind their positions.

Both Apple and Microsoft have done quite a lot to advance the state of haptic interfaces. And, as any self-respecting modern vendor would do, both have sought patents on their innovations. In the case of Apple it’s the patents they’ve filed in relationship to the gesture recognition system currently in the iPhone and iPod touch and with Microsoft it’s the surface computing technology currently associated with Microsoft Surface and soon to be seen with Windows 7.

But I’m not particularly interested in whether a courtroom battle between Apple and Microsoft is likely. Instead, I’m wondering how this would be impacted by an extension of the Bilski particular machine test.

Back in October of last year, for those of you not in the know, the Court of Appeals for the Federal Circuit ruled In re Bilski that a business method could only be patented if it was implemented on a “particular machine” or it transformed a particular article into a different state or thing.

Now there are two open questions with the Bilski decision. First, will these same tests end up being applied to software patents? Based on recent rulings by the Board of Patent Appeals and Interferences it appears things are trending in that direction. Second, does a general purpose computer constitute a particular machine? While the court dodged that question in the Bilski ruling it appears that the US Patent & Trademark Office would prefer it the answer to that questions was no.

So here’s the question I’m struggling with – is the iPhone and/or the iPod Touch a particular machine? I certainly wouldn’t classify it as a general purpose computer so I’m assuming the answer to that question is yes. Therefore, if the Bilski particular machine test applies to software it would seem that Apple’s patents would be safe.

But would the same apply to Microsoft’s multi-touch patents? While Microsoft Surface can probably be argued to be a particular machine (it is a specific-built solution requiring custom motherboards) that would clearly not be the case in relationship to the implementation of this technology in Windows 7 or even with a Windows Mobile device.

If this turns out to be the case I think the ramifications are pretty serious.

The issue here is not whether Apple is innovating and Microsoft is not. On face value both are innovating. But Apple’s business model of tightly binding their software to their own manufactured products seems to help them overcome the emerging particular machine hurdle. Microsoft, with their business model of licensing software to OEMs, appears to be more exposed to having their patents invalidated.

Like Microsoft or not, there is no denying that their business model has been instrumental in lowering software costs and driving the prevalence of personal computing. If that business model ends up making it more difficult for Microsoft to protect their growing patent portfolio it would be very interesting to see how Microsoft responds.

I am not a big fan of the Bilski ruling. But if it’s impact ends up being more acutely felt on the business models necessary to commercialize innovation than on innovation itself it, that would seem to me yet another reason to find fault with it.

“Users, aided by improvements in computer and communications technology, increasingly can develop their own new products and services. …product and service development is concentrated among “lead users,” who are ahead on marketplace trends and whose innovations are often commercially attractive.”

I agree that this is not only a valid observation but is something that should be encouraged. As the book description also highlights Von Hippel view of “user-centered innovation” means that:

“…manufacturers should redesign their innovation processes and that they should systematically seek out innovations developed by users.”

Again, no disagreement from me.

But I wonder then; does user-centered innovation also requires some degree of user-centered IP management?

That means that the lead user innovators Von Hippel describes should be expected to combine their innovation work with a cursory prior art examination. To start, that sets an expectation that the property rights of other innovators need to be respected. Just as important, it forces lead user innovators to understand the difference between actual innovation and idiosyncratic rejigs of existing solutions.

[note - any one in an IT department that has spent months needlessly customizing a business application when a standardized process would have sufficed knows why this is important].

But here’s the problem. In addition to checking through business journals and textbooks, a prior art search should consider existing patents. And while tools like Google Patent Search and Patent Storm have made patent identification available to the masses, the gobbledygook that passes for English in a patent claim makes patent examination all but impossible to those outside the high priesthood of patent attorneys.

Let me give you an example. Here is the text for a single point used in describing Microsoft’s patent for grouping and manipulating windows. The idea seems simple enough – but check this out:

A computer-implemented method for operating upon windows as an aggregate, the computer system having a display device and a window system for displaying displayable windows on the display device, each of a plurality of the displayable windows associated with a program for implementing what is displayed in the window and having associated viewing states including an open state and a closed state, and having a current state, wherein the current state represents a viewing state, wherein each viewing state provides information for setting the appearance of the associated window and for setting an execution state of the associated program, the method comprising the steps of:

grouping a plurality of windows from amongst the plurality of displayable windows into a project group, the project group having associated information regarding which windows belong to the project group; upon receiving a request to close the project group, for each window belonging to the project group, saving the current state of the window and setting the current state of the window to the closed state, thereby setting the execution state of the associated program to a no longer executing state; and upon receiving a request to open the project group, for each window belonging to the project group, setting the current state of the window to the saved state.

Get that? Me neither. And this particular patent has 46 more mind-numbingly obtuse points to make. Nor is this patent unique in its complex language.

Let’s remember that patents are supposed to be “non-obvious” to someone skilled in the arts. As someone who’s been in the IT industry for 23 years I think I qualify as someone skilled in the arts. So why am I confronted with either a migraine headache or a whole pile of expensive six minute billing increments in order to comprehend an idea being patented?

True, patents do have an abstract. Unfortunately these go the other direction – they’re too superficial to be useful. That yawning gap between the superficial patent abstract and the dense, legal claim description leads to two outcomes. Either the legal profession has to be interjected into the innovation process way too early or patent examination is ignored. Option one is too costly and option two is too risky.

Now, I understand that patents need to framed in a way which is suitable for a legal environment. So I’m not suggesting that this complex wording should be eliminated.

What I am saying is that patents need to be framed in a way which is suitable for an innovation environment. And, as Von Hippel points out, that is increasingly happening in a wide-open, highly democratized fashion. What that means is that a simple “plain English” claim descriptions should be part of a patent filing.

On that basis, the U.S. Congress – which is currently considering the Patent Reform Act of 2009 – should kindly but firmly request that the IT industry sit down and shut up.

I have been following the software and business method patent debate for over five years and I have come to conclusion that the vast majority of the IT industry can not see past their own narrow commercial self-interest when it comes to patents.

I include in this the segment of the “open source community” (whoever they actually are) which is vehemently anti-patent. What they position as a highly principled “open access benefits society” argument for the elimination of software and business method patents can rightly be seen as a convenience for those advocating an industry realignment towards service-based business models. One can’t help but think that they just don’t want 3rd party ownership issues to interfere with their ability to make money. Noticeably absent from this perspective, though, is a broader debate on whether these arguments are valid without scrapping the patent system as a whole.

Then we have the traditional vendor community which wants to retain the right to patent software and business methods and license these for commercial benefit but want to deny those same rights to organizations and individuals that aren’t like them. Namely those nasty “non-practicing entities” that keep suing them for infringement.

That perspective was again on display in the testimony of Intel’s Chief Patent Counsel, David Simon, in his testimony to House Committee on the Judiciary. Channeling Michelle Lee, Google’s Head of Patents and Patent Strategy, Mr. Simon appears to hold the view that a “true innovator” and a “product manufacturer” are one in the same. This is an attempt to frame the argument in the context of good and bad patent holders – Intel, of course, being a good guy. I personally consider this a little to convenient to be taken seriously.

Patent reform does not need to devolve into the type of industry lobbying that is polluting the legislative process. I point specifically to the testimony of Phillip Johnson, Chief Intellectual Property Counsel for Johnson & Johnson. Clearly Johnson & Johnson has an interest in leaving the patent system largely unchanged and that is reflected in his testimony.

But at the same time Mr. Johnson makes his argument from a broader perspective of the overall role of the patent system and backs his position up with facts and statistics. He even advocates changes that I would think would not necessarily be in the direct interests of his employer – things like post-grant reviews of patents. Importantly he puts strong emphasis, first and foremost, on addressing the financial and efficacy issues facing the USPTO. While I’m not sure I agree with everything he advocates I respect the spirit of compromise infused in his testimony.

Unfortunately the overriding spirit infusing the IT industry’s contribution to the patent reform debate appears to be narrow self-interest. Not to say that there aren’t balanced voices out there – but too often they’re drowned out.

That’s a shame. As an industry we have so much more to offer. We are better positioned than most to comment on the evolving nature of innovation and how that impacts centuries-old assumptions of the patent system. We can and should be more active in helping PTOs grant higher and higher quality patents. As an industry we’ve been at the forefront of driving process efficiency – why aren’t we collectively doing a little pro bono work to help a public agency that has such an impact on the future of our industry?

It’s time for our industry to pick up its game in these types of national policy debates. If not we should rightly expect to be ignored.

I am by no means an expert on the operation of the patent & trademark office. But it seems to me the that the concept of the patent reviewer harkens back to a by-gone era of Renaissance men. These wise men of years gone by used their luxury of time to become conversant in a broad range of technological domains. That feat was manageable because a century or two ago the breadth and depth of knowledge in each topic was limited and largely assessable.

But those days are long gone. Now we live in a world of domain expertise and every year the definition of “domain” narrows and fragments as the body of associate knowledge grows. So, is it really practical to hinge a review system on the presumption that a small cadre of patent examiners can attain, and retain, an amazing spectrum of technical and legal expertise? An expertise which must be sharp enough to assure high quality review given an average 18 hours spent per patent application?

This is particularly illogical given the Peer-to-Patent Review project (developed by the New York Law School and run by both the US PTO and the UK Intellectual Property Office) and private efforts such as Article One Partners are demonstrating that broad community support strengthens the review process. It extends domain expertise and helps in surfacing prior art.

It seems to me that we’ve reached the point where federated, community-supported review processes need to be established as the norm. Patent reviewers should transition from being conduits to coordinators.The alchemy in an effective review process would no longer be hinged to the breadth and depth of an individual’s technical expertise but rather their skills in attracting and retaining a group of skilled and committed collaborators. That means that patent reviewers should be valued as much on who they know as what they know.

From my observation one of the biggest challenges facing the patent system is patent quality. And in my area of interest, information technology, poor patent quality increases litigation, results in distorting business practices and acts as a governor on innovation.

This should not be used as an excuse to change damage assessments, invention accreditation and reexamination rules. Instead it should be a wake up call to address the systemic problems we have in the review process.

While I think some of the proposals have merit the proposed legislation as a whole looks like it’s been custom designed to serve the needs of a specific set of businesses. And when some of those businesses, like Google, Cisco, and Intel are also big political donors we enter the area of political patronage that guys like Larry Lessig have been demanding gets changed.

The result is likely to be a standoff as those interests adversely affected oppose this vision of “patent reform.” It’s lobbyists at twenty paces! And when the dust settles we’ll still have a deeply flawed patent system. The only question really being debated is who incurs the most pain.

This isn’t even like swapping desk chairs on the Titanic. It’s like demanding an upgrade to a suite when the ship is starting to sink.

The patent system is failing to keep up with a the rapid changes in technology and business models and the resulting new industries emerging in a globalized economy. These problems affect everyone. I’d appreciate it if President Obama – in the interest of “changing the old way of doing business in Washington” – would tell the bickering industry groups to sit down in the same room and determine a set of issues that everyone agrees need to be addressed.

President Obama should be promising a swift veto of any patent reform legislation that doesn’t represent a cross-industry consensus.

Now that’s change I can believe in!

Last year’s landmark Bilski case saw a number of amicus curiae submitted to the CAFC most of which were largely in favour of doing something to curtail, if not eliminate, business methods as patentable material. Well, those parties got what they wanted. But I don’t think most were expecting the solution that the court ultimately came up with.

Rather than rule one way or the other on the patentability of business methods the court established a new “particular machine or transformation” test . That decision, in my opinion, has only made the whole issue an ambiguous mess. Especially since they ducked the question of whether a general purpose computer is a “particular machine” and the extent to which the Patent & Trademark Office will interpret the new test seems to be a work in progress.

Now Bilski is appealing this decision to the Supreme Court. In support of that appeal, a new set of amicus curiae have been submitted. Not only do these provide some powerful arguments against the CAFC’s decision but they provide a more balanced view of business method patents that were largely absent in the Bilski amicus curiae submissions.

As I read through these I found a number of consistent themes. The first of these is that Bilski introduces rigidity into a patent system always intended to be flexible. Consider these comments from Accenture and Pitney Bowes:

Throughout its patent law decisions, this Court has favored flexible, common-sense approaches over rigid, unbending rules….Bilski is yet another example of the Federal Circuit departing from this Court’s established, flexible approach in favor of a rigid, bright-line rule.

Furthermore, that rigidity is bound to a period where innovation largely had a physical manifestation. This issue, in my opinion, is of paramount importance to those of us in the IT industry. This is best expressed in the comments by the American Intellectual Property Law Association:

As technology thus ventures from the recognized into the unknown, innovation should be no less protectable than in previous eras of
transition….Regrettably, this test is derived from and tied to the vocabulary of technologies developed in earlier ages, and thus is backward-looking and ill-fitted to future discoveries and technologies as yet unimagined.

This “machine-era” approach also has significant consequences across a range of different industries. As Philips states:

The scope and fallout of the Bilski decision are not limited to methods of doing business….Processes claims are often seen as the only means to achieve effective patent protection for important inventions in medical, diagnostic, environmental control and information science technologies. The holding below thus inherently discriminates against industry sectors.

Or, more specifically, here are comments from biotech company Medistream:

Bilski casts a cloud of uncertainty as to whether Medistem and other biotech companies can continue to protect with patents their inventions relating to methods of diagnosing causes of diseases and methods of selecting beneficial treatment protocols … The question of whether potentially life-saving diagnostic methods or treatments should be ineligible for patent protection if they are not tied to a particular machine or apparatus, or do not transform a particular article into a different state or thing, has great importance to our citizens.

For those who thought that Bilski closed the door on business method and software patents I’d suggest that there still some way to go on the issue.

[disclaimer- much to my Mother's disappointment I am not an attorney. These are my personal views and should not be considered legal opinion]

Recently, Michelle Lee, Google’s Head of Patents and Patent Strategy, posted her thoughts on why patent reform is needed. It included these insights:

“Consider this: Of the 20 patent lawsuits filed against Google since late 2007, all but two have been filed by plaintiffs who don’t make or sell any real product or service — in other words, by non-practicing entities or ‘patent trolls.’”…All too often, Google and other companies face mounting legal costs to defend against questionable patent claims from speculators gaming the system to reap windfall profits.

But what are the principles underpinning Lee’s comments? Is it that the value of property should be hinged on its owner’s intended use? If so, then by extension, shouldn’t:

• Anyone who owns shares in a company without directly participating in its operations,
• Anyone who rents their rural property to a tenant farmer rather than cultivating it themselves,
• Anyone holding a cab license who doesn’t operate the vehicle themselves

be considered a “non-practicing entity” and therefore deserving of a legislative intervention to redress any “windfall profits” resulting from their “gaming the system?”

Let’s be clear that Lee’s views are commonly held across a broad spectrum of the IT industry. But it’s a little too convenient for my liking. Crafting this dichotomy between a good patentee (I make and sell real products and services) and a bad patentee (they don’t) is a convenient way to justify building and exploiting a patent portfolio while deriding others for doing the same thing.

If this was simply an issue of name calling – which it’s been up to now – than it really doesn’t matter. But this is being used as an argument to lobby Congress for changes to patent law. These changes specifically seek to limit damage rewards for infringement. In this case we can all expect a little more principled reasoning than is currently on offer. For example:

• To what extent is a “non-practicing entity” in the business of speculating as opposed to seeking rents? How do you logically quarantine such activities from those applied to other forms of property?
• Is there a difference when a practicing entity licenses a patent to a 3rd party and when a “non-practicing entity” does the same thing?
• How do you support your assertion that “non-practicing entities” are gaming the system? Haven’t they obtained their patents through the same process you have?

I’d welcome any insights that Google, Michelle Lee, or others can offer.

It appears the Victorian government is within its right to deny Google access to this information under under legally-established Crown copyright provisions. The burning question – definitely no pun intended – is why?

Let’s put this into perspective. As the devastating effects of the Black Saturday bushfires are sinking in some serious questions are now being asked of the Victorian government. People are demanding answers on why seemingly lax land management policies allowed fuel loads in state parks to pile up.  And as the victims explain how they had very little information on the direction, intensity and speed of the fire it has come to light that a telephone-based early warning system has been stalled for over a year due to government bickering over costs.

One might think that under these circumstances government officials would be hyper-sensitive about anything that might create further embarrassment.

Apparently this isn’t the case.

On face value one would think that the state of Victoria would welcome the use of government-generated data by a private organization for the provision of a public service.

Apparently this isn’t the case.

One might think that in order to achieve his vision of “the smart state,” Victorian Premier Brumby would consider the role of copyright laws in fostering a creative and collaborative society – as articulate by Stanford Law Professor Lawrence Lessig in Remix: Making Art and Commerce Thrive in the Hybrid Economy and Free Economy: The Nature and Future of Creativity.

Apparently this isn’t the case.

I’m not really sure what the case is – but I’d sure be interested in getting the Victorian government’s view on this.

“Microsoft’s patent application describes how it could sell software functions to users – they need not buy “the whole application” – and the users could pay by the function and how much they used the function. This would give the user the chance to only pay for what they used. So, I’ll conjecture that one might have to only pay $0.10 to use an Excel pivot table (or $0.01 to use a simple date series calculator) one time.”

First off, I am in complete agreement that there is a trend towards delivering discrete function points via a specific URL, as Google has been doing for years. But I think there are significant dangers for traditional software vendors to assume they can decompose an application into specific, pay-as-you-use functions. The problem is open source.

An oft-stated objection to open source projects is that they don’t match proprietary software in functional parity. Oracle, for example, would argue that a significant problem with mySQL is that it simply can’t do as much as Oracle 11g. They believe that this is a major reason why organizations pay the premium for their product. The same argument has also been applied to Windows over Linux, Office over OpenOffice, Exchange over Zimbra, Siebel over SugarCRM, SAP over Compiere, etc. etc. etc.

I’m not about to validate this view – there’s a lot more nuance to functional fit then the sheer number of features in a product. But if these vendors think that they can re-purpose their products as function-specific cloud services then they need to realize that they’re destroying a fundamental defence they have against open source competition. Should Microsoft want to deliver an Excel Pivot table feature for $0.10 they can rest assured there will be an equivalent open source cloud service for $0.00. By granularizing the features they reduce the programming effort needed to create competitive open source alternatives.

Tom also points out:

Someone could establish themselves as “the distribution point” for software (think iTunes for the universe, not just iPhones and iPods and other Apple gear).

And this is the crux of the challenge for traditional software providers. Excel, Word, Office, Oracle 11g, SAP 2007 – all of these are simply packaging constructs. They are the distribution points for an arbitrarily defined set of functional capabilities.

That’s why traditional software vendors are caught between a rock and a hard place. They have no choice but to embrace the cloud. But they can’t do it in a way that undermines the very packaging constructs that function as lucrative distribution points. However they leverage the cloud they have no choice but to maintain their functional herding instinct. If they let individual features start wandering off as unique services they will get happily picked off by hungry competitors whose business models and cash flows have been built in the cloud.