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

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

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

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

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

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

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

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

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)

Tricky: Algorithms are not patentable, but devices that use them are

Controversial: Inventions are often additive

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 .

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

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

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

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

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

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

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

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

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

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/

Michael Feldstein

http://mfeldstein.com/

[email_address]

For EduPatent Alerts:

http://mfeldstein.com/edupatents/