The Prior Art

This Week in IP: Apps, Tats, and Patent Reform Hits a New Snag

By Andrew Goldberg

Apple Steps in for App Developers

Good news for app developers and iPhone users! Apple has decided to intervene on behalf of the seven iOs app developers sued for patent infringement by Texas-based patent-holding company Lodsys.

In its motion to intervene, filed late Thursday in the Eastern District of Texas, Apple argues that it should be permitted to participate in the case because it has a financial stake in its outcome.

"Apple's rights will not be adequately protected by the current defendants in the case, because Lodsys has chosen to assert these claims against Developers who are individuals or small entities with far fewer resources than Apple and who lack the technical information, ability, and incentive to adequately protect Apple's rights under its license agreement," Apple's lawyers--Eric Findlay, of Tyler, Texas, firm of Findlay Craft, and by lawyers at Simpson Thacher--write. [Download Apple's Motion to Intervene].

Along with its motion to intervene, Apple also filed a proposed answer and counterclaim, asserting that its license to Lodsys's patents also covers its independent app developers. "Because Apple is licensed to offer products and services that embody the patents in suit to its Developers, under the patent law doctrines of exhaustion and first sale, Developers are entitled to use, free from infringement of the patents in suit, those products and services to which Apple is licensed," the company's lawyers argue. [ Download Apple's Proposed Answer and Counterclaim].

For more on the Lodsys litigation, see The Prior Art's earlier post, App Backwards: Lodsys, Texas Troll, Targeted in Patent Suit.

Tattoo Removal Gets the Hollywood Treatment

How do you remove a really costly tattoo?

As the legal wrangling continues between Warner Bros. and S. Victor Whitmill, the tattoo artist who designed Mike Tyson's famous face art, over the allegedly infringing tattoo that found its way onto the face of the character played by  Ed Helms in The Hangover Part II, a resolution to the Hollywood copyright fight could ultimately turn on... special effects.

Hollywood, Esq, The Hollywood Reporter's legal blog, reports that if the parties are unable to reach a settlement by the time the movie is released on DVD, the studio has offered to digitally alter the tattoo that encircles Helms' left eye in the movie.

"Warner Bros. does not intend to make any use of the allegedly infringing tattoo after the film ends its run in theaters because Warner Bros. will digitally alter the film to substitute a different tattoo on Ed Helms’s face," lawyers from Schiff Hardin, counsel for the studio, wrote in a brief opposing an expedited trial in the case.

As The Prior Art previously reported, Whitmill sued Warner Bros. in April for copyright infringement, alleging that the tattoo in the movie is a duplication of the distinctive design he created on Mike Tyson's face. While Whitmill sought an injunction that would have kept the film out of theaters, a Missouri federal district court judge declined that request but allowed the infringement suit to proceed.

Even if the famous Tyson tattoo is ultimately replaced by a different design in the DVD version of the movie, Whitmill is sure to ask for a substantial sum in damages. The blockbuster sequel, which opened over the Memorial Day weekend, has already grossed close to $350 million at the box office.     

A New Hurdle for Patent Reform

In early March, not long after the U.S. Senate passed patent reform by a vote of 95-5,  Patent and Trademark Office Director David Kappos told The Prior Art in an interview in his suburban Virginia office that he was "off the charts optimistic" that a similar bill would come out of the House. "[House Judiciary Committee] Chairman [Lamar] Smith has already stated that a bill will be coming out this month-- the month of March," he said.

Three months later, that bill still hasn't reached the House floor. What's behind the hold up in the House?

The latest hurdle, according to Politico, appears to be Republican infighting. Just this week, two powerful Republicans--Appropriations Committee Chairman Hal Rogers and Budget Committee Chairman Paul Ryan--sent a strongly worded letter to Smith demanding changes to the patent reform bill. Their gripe? The bill would give the PTO the power to collect and spend its own fees, thereby insulating it from Congress's appropriation power.

The Republican objections, couched in terms of the deficit, threaten to scuttle a planned vote on the measure before the July 4 recess.

“Putting PTO funding on auto-pilot is a move in exactly the wrong direction, given the new Republican majority’s commitment to restrained spending, improving accountability and transparency, and reducing the nation’s unparalleled deficits and debt,” Rogers and Ryan wrote in their letter. 

Even David Addington, a former top aide to Vice President Dick Cheney and longtime advocate for the expansion of executive branch authority with regard to Congress, weighed in this week, authoring a Heritage Foundation memo on patent reform that also took issue with the provision that would make the PTO self-financing.

“Neither the junior most clerk in a federal agency nor the President of the United States may spend a dollar from the Treasury for any purpose unless Congress has by law appropriated that dollar for that purpose,” he wrote.

But most observers agree that the huge backlog hampering innovation at the PTO exists largely because the agency is underfunded, in part because Congress doesn't allow it to hold onto the money it collects in fees.

As it turns out, Kappos was right to add a caveat to his optimism about getting patent reform out of Congress. "If there’s anything I’ve learned here in my 18 months in Washington, D.C., it’s that prognosticating on Congressional cycles is a very, very risky thing to do," he said after the Senate vote.  "It’s easier to predict whether the Yankees are going to have another great season this year and win another pennant."

Polaris IP, suing Google, argues for wide-ranging discovery

On Friday, I wrote about how lawyers working for Polaris IP (Erich Spangenberg) want to use the discovery process in Polaris IP v. Google to learn more about Google's patent reform efforts. Google asked for a protective order; now Spangenberg's response is available. [PDF via Justia]

What's the relevance? Polaris lawyers want to know "Google’s views and efforts relative to the Accused Instrumentalities being able to use the patented technology of others without providing damages adequate to compensate for the infringement." The "Accused Instrumentalities" are the Google products Spangenberg believes he should be paid a royalty on: Google Search, AdWords, and AdSense.

If I hadn't recently watched a patent trial (almost) in its entirety, I think I'd have a hard time understanding what Polaris might be after. But now I can imagine the deposition clips that a skilled lawyer could get from this: "Do you really expect this jury to believe that Google respects patent rights? Isn't it true that Google doesn't want to pay when it uses other people's intellectual property? Didn't Google spend millions lobbying Congress to get the penalties for using other people's intellectual property reduced?" ... and so on.

Spangenberg lawyers want to dig into Google's patent reform efforts

Polaris IP, aka Bright Response, is an arm of Erich Spangenberg's patent-holding empire. In one of its lawsuits, filed August 2007, it targeted Google, Yahoo, AOL, and IAC/InterActiveCorp, accusing them of infringing U.S. Patent No. 6,411,947. This patent, which is on natural language processing, became somewhat infamous after it was targeted by EFF's Patent Busting Project. EFF has the prosecution history of the patent on its web site. Spangenberg companies now own the entire interest in this patent.

In this litigation, Polaris and Google are presently engaged in an interesting discovery dispute. Polaris wants to learn all about Google's lobbying efforts in favor of patent reform, by making the search giant hand over any related documents on the subject, and depose its top patent lawyer about lobbying efforts.

Last month, Google lawyers responded, saying that the company's lobbying efforts are entirely irrelevant to the Polaris lawsuit. Even if the lobbying was relevant, Google claims it has a First Amendment right to lobby the government, and that should protect it from discovery on this issue. 

It's time to think about buying an ad when...

On one level, Greg Aharonian's recent Patently-O essay criticizing a Wall Street Journal article is unsurprising. I'm not surprised that Aharonian doesn't like the media reporting on problems with the patent system. Nobody who reads his patent newsletter will be surprised to find out that the people, companies, and organizations he writes about are judged to be either "idiotic" or "moronic." I'm not surprised to hear, again, that he would prefer a system where technology companies seek his services before developing a new product. But it takes a special kind of... imagination... to suggest that the article should actually have been about how much prior art searchers (like Aharonian) should be paid. He writes:

In short, this is a case that has little to do with tr-lls, but rather is a case that should be the basis for an article on the tactics of prior art searching (how much should small companies spend on searching during patent prosecution versus how much should they spend before entering into negotiations or litigation?).

Remarkable.

I confess to being in love with the way Aharonian takes the 'o' out of troll, in the style of Orthodox Jews who revere the name of God by deleting the middle letter. That is really just too good.

 

IP at the DNC

Zoe Lofgren, D-San Jose, told a crowd that patent reform needs to be pushed ahead, starting with venue reform. National Journal via 271 Patent Blog. Meanwhile, I'm looking forward to getting a recording of today's debate over IP between legal experts in the McCain and Obama camps. The debate will cover "patent reform, piracy, counterfeiting and judicial appointments," per the Rocky Mountain News.

UPDATE: My co-reporter will have more on IP and the election in the next print edition. 

 

Another inventor defends patents without discussing his own — Hillary Clinton listens up.

Does every "independent inventor" who defends the patent system have a backup plan to play the patent-lawsuit lottery?

Scott Spinucci might. He owns SpinDVD, a New York company that makes DVD's with games, films, and advertising in them. Dennis Crouch points today to an April article in which a Pennsylvania newspaper describes Spinucci pushing his way through a crowd to ask Hillary Clinton if she'll take his side in resisting patent reform.

"Will the candidates side with big business or the little guy?" Spinucci asks. "It's as simple as that."

But a quick check of patent records shows another side to Spinucci's defense of the little guy. He has a specious and broad business method patent application in the works. It describes his "invention"—simply, the idea of stopping a DVD to click and go to an advertiser's web site. The application is complete with a flow chart of ideas that could have been penned by an above-average 14-year-old who knows what product placement means (see right).

Spinucci's broad application seems like nothing more than a description of the direction the entertainment business is clearly headed in: connecting viewers more directly with advertisers. Extending an incredibly generous benefit of the doubt, maybe Spinucci was the first guy on the planet to think of letting DVD viewers stop their DVD and use the Internet—but should his reward be a 20-year "ownership" of that idea, with a patent to block any competitor who dares do the same thing?

One can imagine the list of companies Spinucci might sue with such a patent. It might look a lot like the list of companies he works with now: Warner Brothers, Dreamworks, Sony/BMG, NBC Universal, and others, according to his website. Do these media giants know they're working with somebody who's building such a legal weapon?

Spinucci also made a YouTube video asking presidential candidates to oppose take a position on patent reform. He doesn't, of course, mention his own patent application.

UPDATE: Spinucci responded to this post and objects to my take on this. His comment and my response to it can be found in the comments section.
 

What I don't get about in re Bilski: Why do any financial companies support business method patents?

What I don't get about the in re Bilski case argued Thursday at the Federal Circuit is this—why is there any division at all within the financial sector? The lines are a lot fuzzier than, say, the patent reform battle in D.C., which was Big Tech v. Big Pharma but became Big Tech v. Big Pharma et al.

But why would Goldman Sachs, see recent Economist, or any other financial services business, support business method patents? Or American Express and Accenture, as Mike Masnick notes? Seems like they all stand to lose much more than they gain from patent licensing and litigation, with the threat of another non-practicing entity like DataTreasury. From an industry-wide perspective, the relatively recent arms race doesn't make sense. (and of course the big banking industry trade group came out critical of State Street). So why would any (profitable) financial company be opposed to rolling back the 1998 State Street decision that allowed business method patents?

Are there some banks that have amassed giant arsenals—the Microsoft(s) of the banking world? (Microsoft had less than a dozen patents before the 1998 State Street decision, and now has thousands, according to a former IPLB reporter who was inside the Microsoft war room a year ago.)

Is there a giant settlement, or license agreement, or some other indicator of corporate behavior that would indicate why a particular financial company has a pro-BM patent standpoint? Who are the winners and losers of the first 10 years of biz-meth patent war? Who were the aggressors, the victims? I haven't been in the patents game long enough to know, but I'd sure be interested to talk to some lawyers or bank employees or anyone who thinks they know the real story of the stance of any particular company that has a Bilski amicus brief (like maybe the one they work for.) Litigation, licensing, everything. Let's start collecting the data.

On today's oral arguments, there's legal-geek commentary from an eyewitness here (via 271 blog, with more Bilski argument links). My own article on Bilski (with extras here) focused on issues outside the legal arguments entirely, but I still like linking to it and it has a cool picture.

PTT update: Long day closing our June issue delayed today's fourth post in my four-part series on the lawsuits against and subpoena of lawyer-blogger (and, perhaps, reporter) Patent Troll Tracker. I need a real weekend but that one is coming early next week.

(download Bilski oral arguments on the Fed. Circuit site)

Highlights from the May issue

The May issue of IP Law & Business is out. The cover story profiles 50 top IP people  under 45, and is available online. (free reg. required)

More highlights from the May issue:

• Protecting the American Way of Suing: The patent bar speaks to E.D. Tex: enough is enough. AIPLA has filed a brief urging the U.S. Court of Appeals for the 5th Circuit to force East Texas judges to transfer more cases out of the district. It's an effort to head off more heavy-handed venue reform that could come from Congress, but there are already early signs that the local judiciary is thinking of ways to keep the patent docket heavy even if they lose this case, which involves a product liability lawsuit against Volkswagen. In Re Volkswagen AG and Volkswagen of America, Inc. 07-40058.  (see 5/21 follow-up on E.D. Texas lawyers' response to AIPLA)

• High Stakes at the 2nd Circuit: Google brings in the big guns for a keyword-advertising showdown in Manhattan. If the search giant pulls off a solid win in Rescuecom v. Google, it will be clear that selling trademarked keywords is perfectly legal, pro-consumer—and not so different than traditional advertising practices.

• Copyright revolt in Academia: How the Internet is shaking up the staid, and costly, world of academic publishing.

Note: This post updated on 5/21 to include links to newly posted stories.

Patent Troll Tracker revealed to be a Cisco IP lawyer

The long-mysterious Troll Tracker revealed himself over the weekend, as Rick Frenkel, an IP executive at Cisco Systems and former litigator at Irell & Manella.

In his Saturday post, Frenkel said he was going public after someone threatened to reveal his identity.

More coverage: best story is from my newsroom colleague at the Recorder; the Wall Street Journal followed us here; both Frenkel's admission and Patently-O have comments aplenty.

Frenkel assumed it was someone out to collect Ray Niro’s bounty on him, originally reported in IPLB and later knocked up to $15,000, but Niro tells us the bounty remains uncollected.

Today Frenkel had no comment beyond his post. Cisco says nobody at the company knew about his double identity beyond Mallun Yen, Frenkel’s boss and the company’s VP of Intellectual Property. She was profiled by ALM in 2005.

Cisco, of course, is a big player in the Coalition for Patent Fairness; general counsel Mark Chandler continues to be front and center in the push for patent reform. Almost a year before he started his blog, Frenkel shared some of his thoughts on patent and patent trolls at a technology forum.

The patent-holding companies that Frenkel has been denouncing will no doubt cry foul, pointing out that the writer who declared he was “Just a lawyer, interested in patent cases, but not in publicity” was disingenuous, at least.

Frenkel’s revelation raises more interesting questions (for one, this journalist-turned-blogger doesn’t know how one person can write so much on top of a full time job). I enjoyed both communicating with the tracker's enemies and the mystery of the blog itself; with the mystery solved, the IP beat will be a little less fun.