Patent Law
Case Study: Amazon.com vs. Barnesandnoble.com
Amazon.com a major online bookseller had created a business method of one-click checkout. They applied for and were granted a business method patent by the United States Patent Office in 1999. Business methods were decided patent able by a 1998 court ruling that granted business methods the ability to be patented. Amazon sued its main competitor barnesandnoble.com for patent infringement almost as soon as the patent was granted. In short, amazon won the case thus forcing Barnes and Noble to add an extra step in its ordering process and make it a "less convenient" way to shop. All this just before the major online shopping season of December 1999.
This case highlights the growing importance that business method and even software patents have in today's technological world.
The Basics of Patent Law and Protection
Patent law is meant to encourage inventiveness and innovation in the U.S. By allowing an inventor to patent his invention he provides himself with governmental and legal protection his hard earned work. This encourages disclosure of the invention and fosters technological innovation. The inventor has certain obligations under the patent contract as well. He or she must disclose the method and best know procedures for making and using the invention so that a person in the same field would be able to reproduce the invention and use it. This is important so that while the patent holder enjoys the benefits of protection, the public can eventually benefit from and use the innovation.
Unlike other intellectual property rights such as copyright and trademarks, patents have to be filed and approved by the PTO before any rights are enforceable. There is also designated time periods in which the intended patent holder must register his innovation or invention otherwise he loses the protection that would be granted under a patent. In addition patents only provide twenty years of protection after the patent is granted where as copyright provides lifetime + 70 years protection and trademarks have no time limit.
Requirements for patentability
The invention must be useful, novel (new), and non obvious. If so, the inventor is entitled to patent protection, and the government is obliged to give it. Patent protection excludes all others except the patent holder from making, using, selling or offering to sell the patented invention. However if another invention which has patent is used in the actual physical creation of the new invention, the patent owner may have to obtain certain rights from the first patent holder.
The Advantages of Patent Protection
Some of the more obvious advantages of patent protection is that the patent owner hold exclusive right to the invention and that others must pay either a license fee or obtain some other type of right to produce or manufacture the patented item. Additionally a company may invent something that is not necessarily useful to the companies overall goals at the time, then they would have to decide whether the lengthy and sometimes expensive patent application process is in their best interest.
Patent Ownership
Unlike copyright law where works made for hire entitle the company who hired an employee to copyright ownership, under patent law the inventor or coininventor will own and retain all rights to a said patented invention or innovation. Accordingly it is always the right thing for a company to set out a written agreement that makes it clear that the employee or contractor is obliged to transfer ownership of the patent to the company and to cooperate with the company in the process of transfer.It is best to do this right away when hiring an employee or contractor to do work for your company.
Patent Application Process
Hire a patent attorney and do a "prior art" search. This involves checking the patent office patents for similar inventions, and checking online databases and libraries. Once this has been completed and no prior art found the patent attorney gives an "opinion of patentability". This serves to aid the inventor in whether a patent application is justified and helps determine how broadly the patent claim should be drawn up.
In the U.S. a patent application must be filed within one year of any of the following events, or patent protection may be barred:
- the description of the invention in a publication
- The public use of an invention
- the patenting of the invention by another
- an offer to sell the invention, regardless of whether the sale was made
If the inventor and the patent attorney then decide to go on with the process they draw up an application which contains two parts
- a detailed specification, describing how to make and use the invention
- One or more patent claims which define the scope of the invention
More often than not the initial patent application will be rejected. Similar to the process for trademark registration the PTO will send out an "office action" to the patent attorney outlining the reasons for rejection and inviting response. Then the application is reworked, reviewed and amended by the inventor and patent attorney and resubmitted. This process is repeated until eventually the patent is accepted.
Issuance of a patent
Once a patent is issued it becomes enforceable and public. The owner can use the patent to sue infringers for royalties or to make them stop using the patented product. The burden is then on the infringer to prove why the patent should not have been granted. Finally in order to keep a patent active periodic maintenance fees are charged on an escalating scale at four eight and twelve years after issuance.
Patents for Software and Internet Business Methods
Though the scope of Business method patents and Software patents are controversial these properties are patentable under current patent law.
Software copyright protection limitations
Generally the "source code" or human readable "object code" of software is protected under the copyright laws in the U.S. explicitly in 1980 the copyright laws were amended to include original software works. As a result of the varying interpretation of copyright laws for software patent protection has become an increasingly better choice as it has become more recognizable by the courts.
initially a very broad definition of copyright for software was adopted, protecting every thing defined as " that is not necessary to the computer program's purpose or function, including its 'structure sequence and organization'." This lead to courts deciding cases on individual merits and opinions and eventually led to a more precise three part definition of copyright protection.
'The three part test consists of:
- abstraction: the program is divided into various levels of abstraction
- Filtration: examining structural components at each level of abstraction to determine whether the particular inclusion at that level was an idea or dictated by efficiency, whether their inclusion was required by factors external to the program such as required data input or output protocol, or whether the structural components were taken from the public domain
- Comparison: comparing each component at each level of abstraction
If a structural component at each level of abstraction satisfies any of the three criteria then it is not protectable by copyright law. and it is not considered in the final step. The final step involves comparing the expression left after the filtration step at each level of abstraction to determine if there is substantial similarity between the two. If there is and it can be proven that the developer had access to the original software then infringement can be found
The limitations of these tests would allow a developer with no prior knowledge of the original software to develop an extremely similar version that would have its own copyright protection.
Patents for Software
Patent protection for software offers stronger protection, though at a more costly and time consuming process. By writing software a developer automatically attains copyright protection, but by filing and receiving a patent a would be infringer would be less likely to try and copy or circumvent the copyright protection. Patents allow a developer to protect each aspect of his software as an individual invention or innovation.
Business Method Patents
Companies, especially high technology internet based companies have learned in recent years the benefits of getting business method patents. As discussed in the amazon.com vs barnesandnoble.com case a business method patent can provide very strong protection of an often intangible yet invaluable company asset. As long as the initial standards are met (useful, new, and not obvious) then the method is entitled to protection.
Exploiting and Enforcing Patents
Just owning a patent is not valuable in itself. The rights a patent gives the owner is where the strength in patent ownership lies. Either by licensing or enforcing a patent the owner has.
Licensing
A patent owner may grant a third party permission to make, use or sell its patented invention in exchange for some benefit, usually monetary payment. This is a contract with licensee that both parties have certain obligations, including agreeing not to sue and defining specific royalties or monies to be paid to the patent holder for use of its invention. The license may be exclusive (only one licensee) or nonexclusive (more than one licensee). They may have geographical limitations or field of use limitations (grating license for use in a particular field even though the invention may be useful in other fields)
Enforcement
Patent enforcement, often used as a last resort occurs when a patent holder files an infringement suit against a third party, or licensee for using, making or selling the patented invention without the patent holders permission. These suits can result in some pretty steep damages. Notably
June 2001 Bowes Vs. Hewlett Packard: Bowes alleged that Hewlett Packard had infringed on its patent for a technology relating to printing character more clearly on computer printers. HP settled and agreed to pay Pitney Bowes over $400,000,000 and agreed to cross license certain of its patents to Bowes royalty free.
Enforcing a patent through the federal courts can prove very costly and time consuming. Patent enforcement often only goes as far as the holder has the means and will to take it. Though the process is time consuming for particularly profitable and unique invention patents are the right thing to do.
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