This Web Site Is a Patent Pressure Cooker
The bounty hunters of the old West tracked down criminals who were often extremely resistant to being brought back alive. But these days, prospective Paladins can pursue lucrative rewards in ferreting out patent pirates and patent data, without risking a bullet in the back.
That's the idea behind a new Web site, BountyQuest.com. Those wishing to knock off a patent -- or defend their claim to one -- anonymously ante up $2,500 for a one-month posting as well as $10,000 for a potential reward. "If a company is faced with being shut down or paying tens of millions of dollars in damages, there are no holds barred in their attempts to invalidate the patent," says Blair Hughes, an intellectual-property attorney with McDonnell Boehnen Hulbert Berghoff in Chicago.
BROAD OR INVALID?
The bounty hunter's mission is to ferret out a published description of the technology in question that predates the patent application -- "prior art," as patent attorneys call it. If it's found, the poster of the reward may have a shot at getting a court to agree the patent is too broad -- or invalid altogether.
With the vast searching power of the Internet, digging up prior art has never been easier. Anyone -- students, academics, engineers, scientists, or just the curious -- can do it. The prize data may be published anywhere in the world in any sort of publication, including technical and trade journals; local, company, or campus papers; or proceedings from technical conferences and presentations.
BountyQuest is the brainchild of former patent attorney Charles H. Cella, who established the Boston startup in January, 2000, with a group of patent experts and entrepreneurs. Investors include the seemingly unlikely combination of Internet publisher Tim O'Reilly and Amazon.com founder Jeffrey P. Bezos, who kicked in $1 million last July, becoming the company's largest investor. O'Reilly, whose Global Network Navigator site was the first truly commercial site on the Web, is an activist for Internet standards and a staunch opponent of patents on software. Bezos holds one of the most controversial of the Class 705 business-method patents -- for a "one-click" purchasing program on its Web site.
Since last October, 19 patent challenges have been posted, drawing 161 prior-art submissions. (Included in the 19 were Bezos' patent and a pending application for the technology underpinning BountyQuest. Both have withstood the test.) At the end of January, BountyQuest announced it would be awarding its first four purses. The winners provided evidence that could be used to challenge a method for online music sampling, held by Intouch Group; a Walker Digital patent that allows ski-lift or concert and sporting-event tickets to be altered electronically; a technique for database copying held by Oracle; and Cisco Systems' technology for single-chip network routers.
The next stop: federal court. But whatever the outcome, Cella is convinced the rapid results and the initial 20% success rate -- he was expecting 5% -- validate his business model. He also believes BountyQuest is a potent force for much-needed patent reform. "BountyQuest has changed the standard for professionals who examine patents," Cella asserts.
Few question that the U.S. Patent & Trademark Office is struggling to keep up with the flood of new patent filings, including discoveries flowing from the decoding of the human genome to innovations in telecommunications, the Internet, and computers. In 1999, the PTO received more than 270,000 applications and issued more than 150,000 patents. In 2000, a total of 180,000 patents were approved -- among them 900 Class 705 patents. Cella and others claim the venerable PTO also is more and more frequently granting patents that haven't been properly researched and lack validity.
"TIME, RESOURCES, AND PAY."
"Based on recent statistics, a patent examiner has about 20 hours to handle the average application," says Kenneth H. Ohriner, an attorney at Lyon & Lyon in Los Angeles. In that time, examiners must read the application and its claims, search for prior art, and write examination reports. Another problem is prior art for new technology simply doesn't exist in the articles, books, and databases of previous patents the PTO searches for prior art. By contrast, the bounty hunters search the Web for conference papers, proceedings, and the general press. "Clearly, the patent office should raise its fees and provide examiners with more time, resources, and pay," Ohriner insists.
With the patent office overtaxed, about 40% of the 2,000 U.S. patents litigated each year get invalidated in court, Cella says. Other disputes are resolved with out-of-court settlements. Either approach can be costly. Jon A. Birmingham, a patent lawyer at Fitch, Even, Tabin & Flannery in Chicago, says damages in infringement cases typically run in the range of $1 million to $10 million. In addition, attorney's fees can approach $500,000 through the discovery phase of litigation and $1 million or more if the case goes to trial. And all that money ends up buried in the cost of products and services.
By comparison, shelling out $2,500 for posting -- risking a $10,000 bounty -- is small change. "The payment of a bounty for previously unknown prior art can easily be justified," Birmingham says.
Although the quest for prior art is as old as the patent system itself, attorneys see BountyQuest as a positive innovation, especially vis-à-vis fast-moving technologies whose patent validity could make or break a company. In the past, attorneys relied on well-established firms to conduct methodical searches. "[Posting on BountyQuest] is the technological equivalent of placing a picture of a lost child on a milk carton," says James T. Carmichael, a former ethics coordinator for PTO solicitors office who's now a partner in Lyon & Lyon's Washington (D.C.) practice.
"Anything that motivates people to search for prior art that was missed by the patent office strengthens the patent system," observes Robert R. Sachs of Fenwick West in Palo Alto, Calif. "All it would take to find a dynamite piece of prior art would be for the one right person to look at the BountyQuest site and realize that he worked on a product like the invention in the patent and go dig up the documentation from their own records."
In fact, that's exactly what happened with the Intouch patent that took a purse in BountyQuest's first round. The company is suing Amazon.com, Liquid Audio, Listen.com, Entertaindom, and Muze for infringing on a patent that allows users to download and preview samples of digital music, video, or other media. But Perry Leopold, a musician and co-creator of the MIDI digital-audio standard, submitted a conference paper on downloadable digital audio that he presented in 1987. "I was flabbergasted when I found out that somebody else had actually patented it," Leopold says.
Whether BountyQuest is truly an agent for reform or merely an assault on the credibility of the PTO, few would argue the patent process needs revamping. "We still have to improve searching and examination in PTO so that inappropriate patents do not issue," says Barry Bretschneider, a partner with Morrison & Foerster in Washington, D.C.
ROLLING OUT PLANS.
For its part, PTO is trying to close what some patent experts are calling the "prior-art gap." In March, 2000, the agency rolled out a plan to improve the examination process for electronic-commerce and business-method technologies, and is taking steps to improve scrutiny in biotechnology. And the office is set to launch another level of review on its own Web site that will allow anyone with prior art relevant to Class 705 applications to submit it before a patent is issued.
Patent experts point out that BountyQuest also has its downsides. For example, if a search fails to turn up prior art, the patentee will try to use that as evidence of the validity of a patent. And the company that posted the bounty can't tell how extensive a search it received. Then there's the danger that hunters who discover key information through a BountyQuest search will simply offer to destroy the data for a higher price than they would get from BountyQuest.
Gregory Gregory Aharonian, who runs a Web site called Internet Patent News Service that collects and merchandises prior-art information on software patents, is harsher in his assessment. "It's a cute site, they will make a few bucks, but it will have no impact on the quality of issued patents," he says.
And even though BountyQuest could be a bonanza for intrepid Web detectives, will it be profitable for its backers? Bezos insists he's "investing in BountyQuest because it's in everyone's interest to get all relevant prior art out into the open." But Bretschneider of Morrison & Foerster says, "Bezos must think there's some real money in this, or he wouldn't be involved. I'm not as enthusiastic." In addition to making money from the posting, BountyQuest also takes a commission from the purse money.
Cella won't disclose financial projections, other than to say he expects $10,000 to be the minimum amount for purses. But he clearly believes what he's doing is about more than money. Says Cella: "By weeding out bad patents, we help consumers, and by weeding out enough of them, we may help restore faith in the ones that remain." Release the cyberhounds.
By Alan Hall in New York
Edited by Patricia O'Connell