Q&A: Junk-Patent Perps, Beware of BountyQuest

Charles Cella runs a site that channels rewards to folks who debunk claims

In an economy increasingly based on ideas, patents are the currency of creativity. The patent system rewards innovation by giving inventors temporary, exclusive rights to profit from their ideas. But over the past decade, the allure of that monopoly has triggered an avalanche of patent filings. Companies and individuals have planted their flags on everything from bits of software code to generic business practices.

Have patent protections spun out of control? Many are now asking that question. Charles H. Cella contends that an overextended U.S. Patent & Trademark Office (PTO) is granting patents that are far too broad or fail to mark significant advances in technology. These sorts of broad-based patents can be expensive to reverse. If a patent challenge goes to court, attorneys' fees may approach $500,000 through the discovery phase of litigation and $1 million or more if the case goes to trial. And if damages are proved, penalties can run as high as $10 million.

So Cella set out to find a way to help overturn patents that he believes should never have been issued. With a group of patent experts and entrepreneurs, Cella formed a Boston-based dot-com called BountyQuest in January, 2000. For a $2,500 fee, plus a cash prize of $10,000 or more, companies can publicize their patent challenges on the Web site.

TAKE A SHOT. The beauty of BountyQuest is that it opens up the process of patent scrutiny--once the domain of legal specialists--to everyone from hobbyists to PhD-toting inventors. Already, these opportunistic sleuths have begun pummeling patents with information from underutilized sources, such as company publications and proceedings from technical conferences. The bounty goes to the digger who uncovers "prior art"--evidence proving an invention is nothing new--that exactly matches the poster's terms and conditions.

Investors in BountyQuest include the seemingly unlikely combination of Internet publisher Tim O'Reilly, founder and president of O'Reilly & Associates, and Amazon.com (AMZN ) founder Jeffrey P. Bezos. O'Reilly is an activist for Internet standards and a staunch opponent of patents on software. Bezos, meanwhile, holds one of the most controversial of these so-called Class 705 business method patents: a "one-click" Web purchasing program.

The partners posted the first reward offers last October. Since then, 30 patent challenges have been launched--including one for Bezos' one-click patent--and six $10,000 rewards have been issued. The biggest bounty so far: $50,000 for information that could challenge Unocal Corp.'s (UCL ) patent on unleaded gasoline. Whether these discoveries eventually overturn bad patents will be decided in federal court. In the meantime, Cella is convinced that BountyQuest's quick results validate his business model and will pave the way for patent reform.

BusinessWeek Online science and technology correspondent Alan Hall exchanged e-mail with Cella about BountyQuest and the need for patent reform. Here are edited excerpts from their virtual conversation:

Q: How does BountyQuest work?

A: Companies that need information, such as prior art to invalidate a patent, contact BountyQuest and tell us what reward they are willing to pay. We post a bounty on our Web site, which specifies the information required and the amount of the reward. People around the world visit the site, submit documents that contain the required information, and some of them collect the rewards.

Q: How do you determine when a bounty is warranted?

A: A bounty is awarded when the document that is submitted by a bounty hunter exactly matches the requirements listed in the bounty posting that appears on the site. The posting company has access to all information submitted, whether it awards the bounty or not.

Q: Isn't determining the validity of a patent the job of the PTO and the courts?

A: The PTO determines whether a patent is issued, and a court has final say whether a patent is valid. However, we think some critical voices are missing from the current system, such as the other players in the marketplace covered by the patent and consumers who have to buy goods and services in that marketplace.

Q: How does BountyQuest fit into the picture?

A: We don't replace the PTO or the courts. Instead, we ensure that they have a better chance to make the right decision. Essentially, BountyQuest reaches into the desk drawers and file cabinets of knowledgeable people across the world to uncover the one piece of information necessary to settle a patent dispute.

Q: What areas do you think are rife with potentially shaky patents?

A: Internet business methods, semiconductors, computer software, financial services, advertising, and many others, including biotechnology and genomics.

Q: How did you get the idea for BountyQuest?

A: One of the co-founders, attorney Matt Vincent of Foley, Hoag & Eliot in Boston, had the idea years ago. He faced the problem of many patent attorneys--the desperate need for prior art that could free a client's business operations from the threat of an injunction or large-damages lawsuit. Matt had the idea of posting the requests for information on a computer network, with rewards that would motivate a large community of scientists, engineers, patent attorneys, and other experts to provide the results.

Q: Why is prior art so important?

A: It's the crucial foundation on which an entire defense can be built. A patent challenge can consist of anything from a simple letter costing almost nothing to a declaratory judgment lawsuit that can run into the millions in legal fees. Most patents are challenged in private settlement negotiations, where the legal costs are in the thousands and the amounts at stake are much higher.

Q: Do companies posting have to be extremely specific about what they're looking for?

A: The bounty poster crafts the posting and is typically looking for very specific information, such as information tied to a particular patent claim. However, posters may also be looking for more general information, such as presence of activity in a marketplace, or other related information. A bounty can ask for information that is not technically prior art.

Q: Jeff Bezos and Tim O'Reilly seem to be strange bedfellows. How did they come together?

A: Tim O'Reilly is against bad patents, and so are we. Jeff Bezos believes his one-click patent is valid, and he's funding BountyQuest even though we put the one-click patent to the test on Day One.

Q: What was the outcome with the challenge to the Amazon.com patent?

A: We were astonished by the breadth and quality of the prior-art evidence that we received for the One-Click posting. Tim O'Reilly offered a $10,000 reward to anyone who could provide evidence demonstrating that certain elements in the One-Click patent were invented before Bezos' patent filing date. Nobody submitted an exact match to win the bounty, but the cash reward attracted 30 submissions that are relevant to the patent. These may have a bearing on Amazon's ability to enforce its patent, including evidence that was not discovered by the PTO.

Q: Do you have plans to take BountyQuest public?

A: We plan to build a sustainable, profitable business. We have an advantage in this respect over classic dot-coms in that we offer a cash-based service in a market that already pays a lot of money for inferior tools. We might go through a public offering, but we want to be in a position to choose to do so for our own reasons.

Q: What impact do you think Bounty- Quest will have on the patent system?

A: Every patent is a double-edged sword, aiding innovation only at the expense of suppressing competition. 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.

Q: The final proof of your business model will come if and when the courts invalidate a patent based on information from a BountyQuest posting. When do you expect that to happen?

A: Soon.

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