PESC 2007: Open Source, Learning, and Patents

Open Source, Learning, and Patents Michael Feldstein April 23, 2007

Author’s Note: Adapting to the audience, the sequence of slides presented was changed during presentation. This presentation is in the sequence given. A recording of the presentation is available and can be reached at ___ (Audio MP3 01:00:00 xxmb).

About me

Who I am not
A lawyer
An intellectual property expert
Knowledgeable about patents outside of the U.S.
A journalist
A spokesperson for my employer

Who I am
An interested party
A lifelong educator
Involved in educational software for 11 years
A partisan
One of the early reporters of the Blackboard patent and lawsuit
Started the Wikipedia page on prior art
Translated the Blackboard patent claims into plain English

Some wake-up calls
Blackboard v Desire2Learn
Firestar Software v RedHat
Jacobsen v Katzer
Washington Research Foundation v. Matsushita et al
Alcatel-Lucent v Microsoft

Basics about patents

Patent vs Copyright
A patent is a temporary monopoly on an idea (or “invention”)
A copyright is a temporary monopoly on the expression of an idea

Reasons for patents
To provide incentive for innovation in the fields of “science and the useful arts”
To provide incentive for sharing of that innovation, to the public good

The issues

Pros and cons Source: http://en.wikipedia.org/wiki/Software_patent_debate (2 March 2007, 14:43) Benefits Costs Innovation
Creates an incentive for research and new process/product development
Encourages disclosure of inventions
Impedes combination of new ideas and inventions
Provides an opportunity for rent-seeking
Competition
Facilitates the entry of new (small) firms with a limited asset base or difficulties in obtaining finance
Creates short-term monopolies, which may become long-term in network industries, where standards are important
Transaction Costs
Creates a neatly packaged negotiable IP right
Creates patent risk uncertainty and/or search costs
Creates economic friction
Raises transaction costs for follow-on development

The software patent challenge
Tricky: Algorithms are not patentable, but devices that use them are
Controversial: Inventions are often additive
Source: http://en.wikipedia.org/wiki/Image:Software_patents2.JPG#file (30 April, 2006, 00:32)

EduPatents as special cases

The economics of Bb v D2L
Estimated litigation costs to Desire2Learn: $1.5 million - $3 million
Additional cost for inter partes challenge at USPTO
Desire2Learn’s estimated annual revenues: $10 million
Desire2Learn’s estimated annual profits: 5%, or $500,000
Conclusion: The patent litigation will cost Desire2Learn 100% of their profits for 3-6 years or longer .

And what if they lose?
They pay all litigation costs
Plus USPTO challenge costs
Plus the royalty
Plus treble damages for willful infringement (some calculate ~$800K/new customer from suit to settlement)
Plus Blackboard’s legal fees

The positions

Views about software patents
Good (and good for you)
Generally good, but patent quality is a problem
Bad, but we’ve learned to live with them
Evil, bad, and yucky

Views about EduPatents
They protect innovation
Good, but particularly vulnerable to patent quality problems
Open Source should be protected
Open Source and its support vendors should be protected
Do more harm than good

Hierarchy of EduPatent Needs This section drawn in part from Jim Farmer, “eLearning Patents: An Institutional Perspective,” SUNY Wizard conference, November 8, 2006

Safety for users
License from a firm that has a patent indemnity clause
Use Open Source software that has obtained an opinion of non-infringement or licensing agreements
Encourage patent holders to provide guarantees not to sue

Safety for Open Source contributors
Contribute to a legal entity; retain a non-exclusive right to use and distribute
Execute a contribution agreement
Maintain records (including copies of contributions)
Publish your records
Maintain hard copies if possible

Safety for software projects (especially Open Source)
Provide opinion of non-infringement or design around patents that are being asserted
Publish documentation of design processes, and contributions
Reveal all sources of code
Work with patent holders and community to establish ground rules and “treaties”
When necessary, license patents

Safety for innovators
Engage with the community regarding quality of patent applications
Think carefully about trade-offs around patent assertion
Consider non-assertion promises or royalty-free licenses for relevant communities
Consider defensive patents or publication as alternative strategies

The future

What to expect
More assertion of software patents
More liquidity in the patent market
Some patent reform, particularly around patent quality
The rise of patent indemnification and insurance as a line of business

Developments to watch
Blackboard v Desire2Learn
The Blackboard patent pledge and similar efforts
KSR v Teleflex
Microsoft v AT&T
Patent reform legislation in House and Senate
USPTO patent application peer review pilot

Questions?
Michael Feldstein
http://mfeldstein.com/
[email_address]
For EduPatent Alerts:
http://mfeldstein.com/edupatents/

PESC 2007: Open Source, Learning, and Patents

by Michael Feldstein on May 06, 2007

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PESC 2007: Open Source, Learning, and Patents — Presentation Transcript