Trade Secrets and Copyrights and Patents! Oh My!

Intellectual Property. It is the latest hot thing to base a business on, or use as a strategic weapon against competitors. Mention IP and the big money people’s eyes start to twinkle. IP rights are non-tangible assets dealing with monopoly over knowledge. Mummm… Monopoly.

The IP laws are an attempt to find balance between the rights of the IP owners, and the need for progress of the sciences and arts. They try to give inventors, authors and programmers the opportunity to make a return on their investment.

Then the knowledge becomes public domain — usable by anyone. No restrictions. No costs. That’s why there are so many small productions and reproductions of Shakespeare and Beethoven.

Some of the earliest examples of IP law were Letters Patent, granted by the English royalty to inventors in the 15th century. Copyright law appeared later, first with publishers claiming complete ownership over reproduction forever. In 1710 the British Parliament enacted the Statute of Anne, which limited the terms of a copyrighted work.

The United States incorporated the English statute, and the common law of the time, into their Constitution, making copyright law the province of federal law makers. At nearly the same time, in 1790, the first patent was granted in the US.

Similar laws have been adopted by many other countries around the world, with adjustments occasionally made to tweak them to be more appropriate for the times. One such adjustment was the US decision to allow the patenting of software algorithms and business methods.

Things haven’t been the same since.

Flash — we’re back in 1986. British Telecom (BT) is granted US patent number 4873662. It vaguely describes a method a piece of computer software mitigates navigation by a user through pages of data; it was describing a Teledon type system which was never marketed successfully. BT did no additional development with the technology.

Skipping back to modern day, we see the work of Tim Berners-Lee, Marc Andreeson and the entire Internet community in creating an unprecedented advance of human communications. Just about anyone who wants to can be connected to a global network of knowledge.

So what does BT do? Claiming their patent covers the entire concept of the linking in WWW, they send notices to 17 U.S. Internet Service Providers (ISPs) informing them they’re in violation, and ask them to begin negotiating licensing fees for the right to use WWW technologies. Technologies they had nothing to do with developing.

On December 5th, 2000, BT file suit against Prodigy, a smaller player who’s likely to have limited resources to fight the case, thus increasing BT’s chance of a favorable precedent. BT has found a way around the annoying management issues of actually producing anything of value — be a parasite on those who do.

Unfortunately, the BT case is only one example from a huge list of inappropriate patents being granted, and then being used to stifle competition. Take a look at Rambus Inc., a late-comer to the computer memory manufacturing industry — they have patents which give it rights to royalties on fundamental memory technologies long used by every computer memory and processor manufacturer in the world.

Then there’s eBay, which recently patented, along with other obvious concepts, the idea of “one-click shopping”. Built upon HTTP Cookies, a protocol extension introduced by Netscape and released into the public domain, designed to allow easier context maintenance (keeping track of you) across browser page clicks and sessions. eBay promptly sued its competitor for infringement. They won the first round, but recently lost on appeal.

While Canada and most European countries don’t currently allow such patents, through the World Intellectual Property Organization (WIPO) the US is applying pressure to have its standards apply everywhere. Other proposed changes to international law could result in US companies being able to enforce their US IP rights to non-US consumers.

If there has ever been a need for the world to stand up to the US, this might very well be it. The current system is allowing patents on obvious ideas which contribute nothing once they expire.

Software patents, in particular, are just a bad idea. There are only so many ways to do some things, and giving a 20 year monopoly (the common term currently offered) in an industry with a “reinvention” rate measured in months is nothing short of stunned.

With the lawyers, and sometimes the courts, are where most patent and copyright disputes end up. This adds considerable risk to high-tech companies, particularly small ones.

It is common for large companies to have legions of patent lawyers filing applications for everything they possibly can. The idea is to generate enough of an arsenal to be able to negotiate a favorable arrangement if sued for infringement themselves. The patent inventory can also be used to attack other companies.

The small companies, of course, cannot ever hope to afford this. Relying instead on copyright to protect their IP, they must simply hope no one decides to interpret a patent broadly enough to endanger them.

Will these problems be addressed? Likely very slowly and expensively through the courts. International pressure could also be applied, but that will rely on smart politicians willing to understand the issues and take a stand.

I’m betting on the courts. Pack a lunch.

Published in the Victoria Business Examiner.