The lodsys case

Lodsys filed a complaint last week against a number of online retailers. Lodsys is a so-called “non-practicing entity” – a patent holding company that doesn’t build products. They previously filed lawsuits against Apple developers among others. I am not a lawyer but I wanted to try to understand the case so read some of the documents. This is my best understanding of the situation.

Here is an example of Lodsys’ accusations, in this case against bestbuy.com:

The reference to ’908 is referring to patent 5,999,908, which was filed in 1997. It is an invention that appears to allow users to give feedback to websites:

Here is one example diagram from the patent about how the invention could be embodied:

Here is the specific claim (claim 37) that bestbuy.com and other retailers are allegedly infringing:

As far as I can tell, the first clause says that it the claim is referring to a computer product, which in the case of bestbuy.com seems to be their website, where the user and server can send information back and forth. The second clause seems to say that this system includes computer code. The third clause seems to say this system includes a database. The fourth clause seems to say there is a information transmitted between the user, web server and database.

http://www.repeatablesale.com/ Scott Barnett

Chris – it seems as if you didn’t finish the post – were you going to comment on your thoughts on those clauses, such as “this is a ridiculous patent, it’s way too broad/general and could cover practically any interactive website today”?

http://www.cdixon.org chris dixon

I thought I’d leave it to readers to decide. I am just trying to highlight the key issues here.

http://www.repeatablesale.com/ Scott Barnett

you never struck me as somebody who hides his point of view on things – and this is so ridiculously stupid it deserves to be characterized as such. Fred Wilson blogged about this the other day too – I’m torn because there are software inventions that do deserve patent protection, but I’m guessing it’s less than 10% of what actually gets patented. Some judge(s) better start throwing this nonsense out soon…

http://www.aaronklein.com/ Aaron Klein

This post has violated my patent for a method or process of describing stupidity.

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absolutely agree with you! thanks!

Matt Edwards

Sounds like a B.S. lawsuit to me. My specialty isn’t IP, but I know enough to know that there’s a big fat difference between

http://www.cdixon.org chris dixon

Here is more info on the case: http://news.cnet.com/8301-30685_3-20070645-264/lodsys-patent-attack-now-targets-best-buy-adidas/

http://reecepacheco.com reecepacheco

so ridiculous.

i’m really curious how these “non-practicing entities” justify their worth to the world.

f*ckin’ looters.
Anonymous

It’s ridiculous but I think most of these companies have done their own fair share of patent trolling. Can’t say I feel sorry for Apple, who is currently suing HTC for using an “Object Oriented Operating System” (android) in their phones.

http://www.cdixon.org chris dixon

Small Apple app developers are the ones being sued: http://fosspatents.blogspot.com/2011/05/lodsys-sues-7-app-developers-in-eastern.html

Anonymous

Yeah that sucks. And NPE trolling is far worse than companies who actually build or spend money researching. Still I wish the big tech companies (Google, Apple, MS, and Amazon for starters) would just commit to not filing for or leveraging existing trivial patents, and also commit to not paying licensing fees to trolls for them, which just legitimizes the whole thing.

Tomasz Sieroń

Americans.
http://filmicgames.com John Hable

What seems to make these kinds of patents especially scary is the natural unpredictability of judges and juries. As crazy as these claims seem to us, if you catch the right judge or the right jury, Lodsys could actually win in court. If Lodsys files 100 lawsuits against different companies over different patents, they have a very good shot that one of them will net a big return. Of course, most of the big companies will decide that it’s not worth the potential risk of losing and pay up.
Anonymous

I’m not really sure about it either way. I mean I looked at the area codes of some of the contact info, and low and behold. Texas! I don’t know alot about America but these patent cowboys have to be admired to one degree or another for taking on the major corps. Jmo…
Pingback: Mark Geller » Can the patent system be fixed?
http://florianfeder.org Florian Feder

Of course this sounds ridiculous (even to my lawyer ears). And it reminds me of your recent moderation of Fred Wilson’s and David Lee’s talk, where a lot of patent bashing was going on as well.

Now, it often pays to take a step back and look at the bigger picture. Are patents themselves really bad? What function do they have? Turns out that actually the main argument for patents is to HELP entrepreneurs. Only if their inventions are protected against copying do entrepreneurs have a chance to get a return on their investment of time and money. Without patents, there would be less, not more, innovation. That is why congress decided to have patent laws in the first place. It didn’t do it to help “non-practising entities” or to screw entrepreneurs.

But, as always, people try to abuse the system for a personal gain. All congress can do is try to make the law as clear as possible, so it doesn’t permit abuse. But that is not always as easy as it sounds.

So the last resort the state has is to rely on its courts to interpret the laws so they do what they were supposed to do and don’t do what they were never supposed to do (like in the case of Lodsys). Courts can be misused as ell. But it is hard to find better courts anywhere than in the U.S., and on the whole, sanity prevails. And the Lodsys case has not been yet decided, has it?

Really what you are criticizing, Chris, is abuse of the system. That doesn’t mean that the system itself is bad. Free speech laws, for example, are a good thing, even though they are often abused as well. Unemployment insurance is a good thing, but it is often abused. The list is long. It is very easy to use abuse as an argument against a system as a whole. But it is a very bad argument.

http://filmicgames.com John Hable

The system is terrible. Lodsys is using the system exactly as it is meant to be used. This is how the system is supposed to work. Lodsys isn’t abusing anything. They’re trying to cash in a winning lottery ticket.

The point of the patents isn’t to help entrepreneurs. Rather, it is to encourage innovation. It makes sense for certain technologies like drug research. If you make a new pill, you have to spend millions of dollars (100s of millions?) to research, develop, and test your drug. FDA approval is not cheap. And patents give you a limited monopoly after you’ve spent all that money. If there were no drug patents, no one would develop expensive drugs, and we’d be in trouble. Patents for drugs make sense because they encourage innovation.

For software, it’s different. Take Amazon with one-click. Will anyone really try to argue that if there were no patents, then Amazon would never have made one-click, and the world would not have gained this invention? Or would the iPhone not exist if Apple couldn’t patent multi-touch? That Apple would have said “We have this great idea for a phone, but we’re not going to bother making it because we can’t use patents to protect it”. Or if that dude in 1992 hadn’t patented the idea of in-app purchases that no one would have ever had the idea to purchase software inside an app (you know, the one that Lodsys is using to sue the app developers)?

Everyone has the same ideas. And the person who executes on those ideas the best should be the winner. Software patents are primarily a way to “call” ideas that everyone else has and tax them later. It’s like how 8 year-olds “call” the front seat. In software, everyone infringes on everyone’s patents because it’s impossible not to. IMO the system is clearly broken. We’d be much better if we just invalidated software, semiconductor, and business patents.

http://twitter.com/micahtc Micah Collins

Seeing “semiconductors” in your argument troubles me. Not sure why you’d exclude them from the patent system when your argument seems to be based on patents only making sense for classes of innovation which demand large-investments that would otherwise prove prohibitive without a protected go-to-market runway. Plenty of innovations in semiconductor process design, physical design, integration techniques would take years and many dollars to perfect. I am also sure that one can identify cases in software products, or certain business processes where the same is true.

You’d perhaps want to also consider how easy it is to characterize & replicate a given innovation once it is available on the market…. but it can’t possibly be as simple as “patents are only good for ideas that are expensive to develop and cheap to copy.” I smell a two-by-two matrix… run.

http://filmicgames.com John Hable

Hi Micah. By semiconductor patents, I’m referring to patents along the lines of “Implement this algorithm using transistors”. There are a lot of patents like this. And I’m guessing a lot of them were involved in the gigantic Apple settlement. I’m referring to chip design, not the actual process of manufacturing chips.

One specific case is that shadows generally look better on the PS3 than the Xbox 360 because NVIDIA had a patent on PCF filtering and ATI didn’t. Btw, NVIDIA didn’t actually invent it…they had a license from SGI before they went bankrupt. There are thousands of patents like that. Remember, a mathematical formula is not legally patent-able. But a patent that is essentially a mathematical algorithm used in a silicon chip is patentable. So is a mathematical formula in software. In my opinion, that’s crazy and needs to stop.

A much larger patent is going to be MPEG LA’s patent on H264 video. Their business plan is to make a format (H264), let everyone use it for free for a while, let it become the standard, and then sue everyone for infringing on their patent. That one could have massive implications for the industry, depending on how greedy they want to be. Remember GIF files? Those went away because after they became a standard, Unisys realized that you couldn’t implement a GIF reader without infringing on their patent, and they started charging developers. That’s why PNG was made…to get around patent restrictions on GIF. The same thing has also happened with sub-sections of the JPEG format. We could have smaller JPEG files, but everyone was scared that JPEG files compressed with arithmetic encoding infringed on a patent, so to this day we use huffman coding which makes the files larger. I could go on and on.

Btw, when you said: “patents are only good for ideas that are expensive to develop and cheap to copy”, I actually agree with you. But in my opinion 95% of software, semiconductor design, and business patents are cheap to develop so they harm innovation far more than they enhance it. For innovation as whole we’d be much better of by just eliminating them.

http://termpaperwriter.org/ research paper

Thank you for sharing this article. I love it.
Anonymous

When does this patent expire if filed in 1997? In a year?