BUSINESS METHOD PATENTS MAY HARM E-COMMERCE, FTC IS TOLD
Business method patents will hinder “post-industrial” economy including e-commerce and Internet-based industries, several speakers said at FTC hearing April 11. Hearing, which addressed business method and software patents, was continuation of joint FTC-Justice Dept. examination of competition and intellectual property law and policy for the knowledge-based economy.
Business method patents that already have affected Internet include Amazon.com’s “one-click purchase patent” and more recent claim by British Telecom that it owned patent on “hyperlinking,” fundamental tool used to navigate Web. While there’s support to protect e-commerce from those types of patents, “the Internet often is combined with telecom, which is a time-honored patentable area. It’s hard to draw a line,” said Jeffery Kuester, partner in patent law firm Thomas, Hayden, Horstemeyer & Risley.
E-commerce has been driven by “widespread use of nonproprietary technologies including IP and HTML,” said Brian Kahin, dir., Center for Information Policy, at U. of Md. He said Internet had thrived without protections of patents. Kuester worried that patents restricting use of business methods on Internet “would put a restraint on e-commerce, which has suffered quite a bit in recent years with investor dollars tighter.” Jeffery Kushan, partner, Powell, Goldstein, Fraizer & Murphy, said: “The Internet community has defined [nonproprietary] standards, but capital investment came into the industry through the hope of unjustified enrichment.” Since dot.com bubble burst, investors have been much less likely to invest, he said. Kushan argued that if Internet company owned patent on process key to its business, “odds of success in the market will go up.” To investors, having patent “is better than not having exclusive rights.”
Panel discussion centered on definition of business method patent -- which Patent and Trademark Office (PTO) doesn’t recognize as separate category -- or whether definition even existed. “The extreme ends of the definition question are pretty clear, but harder to define in the middle, especially with patents for the software industry,” Kuester said. He described one extreme, hypothetical patent for what receptionist would say in answering phone and order of subsequent responses -- clearly business method that shouldn’t be patentable, he said: “At the other extreme is the patent for something like an automobile engine, a piece of technology clearly suited for a patent.” Rick Nydegger, vp, American Intellectual Property Law Assn., turned Kuester’s first example around by imagining “voice recognition technology that recognizes a caller.” As in earlier example, receptionist starts procedure by asking “who’s calling,” but software program recognizes caller and automatically can set priority for incoming calls based on caller’s identity. “This starts to feel much more like technology and something that should be protected,” he said.
“The idea we could sit around this table and come up with something patentable illustrates the problem with business method patents. If we could think it up, it should not be patentable,” said Robert Young, CEO of operating system vendor Red Hat. Patent protections should be restricted “to something that required several years of research. It should be nonobvious,” he said. John Thomas, assoc. prof. of law, George Washington U., said, “The economy was founded on a privilege to compete.” Broad business practice patents “bring patentability to all walks of life. This is something that should be done with restraint.” He warned that those types of patents could “submit entire new industries to regulation.” Young pointed out that PTO issued about 175,000 patents annually, compared with 65,000 just 2 decades ago. “With an average cost of $25,000 in filing and lawyer fees, issuing patents has become a $4.4 billion industry.” Patent law needs to be much more conservative, he said: “It needs a value to society to be patentable.”