A Call to Patents


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A Call to Patents: A look at the current state of patents held by social media and technological companies.

The intellectual property of social media businesses has seen a rise in the acquisition of patents. For such a fast growing industry, will this “arming” of corporate enterprises and the verdict of one monstrous case determine what could be a legal onslaught within the technological industry?

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A Call to Patents

  1. 1. The intellectual property of social media businesses has seen a rise in the acquisition of patents. For such a fast growing industry, will this “arming” of corporate enterprises and the verdict of one monstrous case determine what could be a legal onslaught within the technological industry?A Call toPatents:A look at the current state ofpatents held by social media andtechnological companies.Ross HornishMKTG 7546 – Dr. BreyThe University of Memphis [Pick the date]
  2. 2. OverviewHistory of Patents The word patent comes from the Latin word “litteraepatentes” which means open letter.1 Patenthistory can be traced all the way back to ancient Greece around 500 B.C. in the city of Sybaris (what is nowsouthern Italy).2 The first patent of invention in modern history was put into effect in 1449 to John ofUtynam (England) for his process of glass-blowing, and was given a 20-year protection from infringement.1Within the United States, patents were looked at as so essential that they were written into our constitution.Article I, Section 8 states, “Congress shall have power . . . To promote the progress of science and useful arts,by securing for limited times to authors and inventors the exclusive right to their respective writings anddiscoveries.”3 Patents within the United States have been crucial to protect an inventor’s intellectual property. Atthe same time, history shows us that some countries that did not hold patents could flourish technologicallyand economically faster than closely residing countries.4 Flourishing technology goes hand in hand withuninhibited technological progress, quite the opposite of what the patent’s intention are – “That is becausethe purpose of patents is twofold: to protect the inventor and to speed technological progress.”4Online Presence Believe it or not, a man named Jonathan Abrams can ruin Mark Zuckerberg and Facebook. JonathanAbrams applied for a patent on June 16th of 2003 which was approved June 27th of 2006 for a concept for, “Amethod and apparatus for calculating, displaying and acting upon relationships in a social network.” (USPatent - 7,069,308)5In addition to Friendster (Abrams’ company at the time), Amazon.com holds patents for,“A networked computer system [that] provides various services for assisting users in locating, andestablishing contact relationships with, other users."6 To this point in our online environment, manytechnology companies have attained patents, but have generally not gone after corresponding companies.This has led to the greatest technological and social advancement in an eight year period than history has everseen. The emerging trend of companies “arming” themselves by buying up patents has increased at anamazing pace within the last two years. This “patent-grab” is another example of the acquisition of property,of the intellectual kind, that hasn’t been seen since the Great Western Frontier. Ross Hornish – MKTG 7546 Just like any good story, Patent-crazy is not without its nemesis. There are certain law-firms and/orlawyers who buy up intellectual property that could be considered “transparent” or of general use, set upshell-companies, then turn and sue the big companies for infringement. Rather than spend the $5 million itcan take to defend patent rights, bigger companies such as Microsoft and Google have settled out of court.7This is considered “trolling”, and it is slowing down the progress that we have so quickly attained within the 1
  3. 3. last eight years. In 2007, John Desmarais filed suit against Microsoft to win in the amount of $1.5billion….let me repeat, billion dollars.7Cases Looking at the current landscape for patents, we look at cases of patent law and practices in itscurrent state, possible ground-breaking litigation, and what may come about in the upcoming years.Yahoo vs. Facebook On March 12th 2012, Yahoo filed suit against social media giant Facebook for ten patents thatinclude the software and methods of advertising on the internet (Facebook’s main revenue stream).8 This wasnews to the Facebook team as they stated they heard of this news through the media. Facebook looked toYahoo as a partner and friend in the open online space. Facebook, in turn, counter sued Yahoo in what istypical legal fashion. This has since led to a media hailstorm or controversy over whether Yahoo is doing the right thingbusiness-wise.Yahoo, from a business perspective, legally has the right to go after another entity if they feeltheir intellectual property has been compromised without their consent or licensing. The facts are that Yahoohired their new CEO Scott Thompson in January 2012 and have recently announced their downsizing of2000 employees.9 Ex-Officer Eric Hippeau stated, “Pathetic and heartbreaking last stand for Yahoo.”10 Manypeople just see this as a way for cash strapped Yahoo to “cash-in”, and see if Facebook will settle out ofcourt. The timing of this lawsuit is interesting as it comes on the eve of Facebook announcing their IPO.Yahoo was most likely betting that Facebook may flinch to have a smooth IPO and release to the market.Facebook didn’t blink. In a patent war, what matters almost as much as how valid your argument is, is the “ammunition” oramount of patents that a company holds. Yahoo currently holds 3,300 patents, Facebook owns what lookslike a meager 160 patents. Facebook has applied for 500 patents and have supposedly took a page out ofGoogle’s book and purchased 750 patents from IBM (as Google purchased 216 patents from IBM in January2012).8 Ross Hornish – MKTG 7546 As stated earlier in this document, technological progress has what seems to be its biggest gain whilerestrictions such as patents are limited. The free-flow of ideas helps individuals and companies to build off ofwhat someone else conceptualized at an amazing rate. Companies such as Apple and Microsoft holdthousands of patents between them, but in concept do not really go after other companies over every singleconcept (more to come about this later in the paper). What this suit leads to is the idea of the “slipperyslope”, and the backlash that could come about if Yahoo does win. Would this slow the industry down to 2
  4. 4. where steel and manufacturing was at when they were at the pinnacle of their influence. What crushed bothindustries was the fast rise of technology with innovation and then the leveling off of ideas through patentlitigation. Practices and ideas from outside industries were able to penetrate and render some practices asobsolete. While the Yahoo vs. Facebook case is at the forefront of the patent argument, it is important for usto look at some other practices.Twitter, Microsoft, and Pintrest While every technology company is running around grabbing up more intellectual property thanEurope did land in the 15th century, there is one company that stands to defy that model – Twitter. No othersocial networking site has gained more followers and had more activity (1 billion Queries per day) thanTwitter. The number of patents Twitter has attained as of 2010 - 0. The number of patents Twitter appliedfor from 2010-2012 when there was a mad rush for patents – 1. While other companies have been goingpatent-crazy, Twitter has kept it light and keeps improving. As Erik Sherman for CBS news stated, “Its like arace: look back and you lose speed and, eventually, the contest.” Not to say that they are not without trolls going after their stake in the social media market. VSTechnologies, another shell company set up by a lawyer, took Twitter into court for infringing on the patentsthat were acquired by said company. In a big win for Twitter, the jury came to the verdict that the processesthat were in question in the suit were not “new ideas”, but were established already by sites such as GeoCities and Who’s Who. 10 This is a big win for social communities as it may serve as precedence for othersocial media lawsuits to follow. Microsoft, on top of its few thousand patents, just acquired 800 patents from AOL for just over $1billion. This seems to be the emerging trend of technological giants. Microsoft seems to be stockpilingpatents as they have really not brought litigation against other companies; other than their suit againstSalesforce.com for the infringement of like practices.11In a twist of irony, the one patent that Twitter hasacquired the company that has the patent applicationfor the refreshing capability of “pull-to-refresh” – thebasis for many Apple applications.12 What we may be seeing are major social media companies and largecorporations pointing their canons at each other. The question is whether this will end as the Cold War did,with nothing fired and a lot of money spent, or like the O.K. Corral? The one thing I do know is that the Ross Hornish – MKTG 7546startups are the ones that are going to be hurt the most by the patent-grab. Pintrest, the now third largest social networking site, is already coming under attack for itspossiblecopyright infringement of pictures and images.Jonathan Klein, CEO of Getty Images, has stated that atPintrest’s current state, they are fine with “pinning” copyrighted images for purpose of site traffic, they arefine. However, if they were to profit off of these images, there would be a lawsuit filed for the monies owed 3
  5. 5. Getty Images as well as their network of photographers.13 This brings into question the hurdles that greatstartups will have to face from this point forth.Interview I interviewed Lauren Seiter of Harris Beach PLLC Law firm in Syracuse, NY. She is a member ofthe New York Bar Association and works within the Business and Commercial Litigation Practice Groupwithin Harris Beach PLLC. While Lauren is familiar with social media, she handles commercial litigation andis acquainted with intellectual property. Lauren first stated that Patent law is all about who was first on the scene, who applied for the patentfirst, and who established practices first. The other thing about patent law is that it doesn’t have to be atangible asset. You can patent a process. She recalled reading a 25 page patent on how to make a pizza andeverything that went into it. For example, US Patent 6080436 is for a “bread refreshing method” otherwiseknown as the process of making toast.14 Generally, an industry such as manufacturing, you have certain patents on items, and if you were tomake that exact item without the license for it, you would be held accountable and most likely subpoenaed. I asked her if she thought that the patent snatching will have an effect on the little start up. “Yes,”she stated, “anytime there is a large entity with the financial sustainability to stay in court as well as the powerof subpoena with regards to not only the patent, but the amount of patents, it is very hard for a small firm towin that battle.” The amount of patents in litigation can put a big dent in the other company’s argument.This is the reason why large corporations areattaining as many patents as are available. The next question I had was about “trolling” and whether that was a common thing. She stated thatit does happen in other industries and it is a way for a business or person to put a large company in anawkward position. I then asked her with her experience with the law if she would ever try to get a patent,make a dummy corporation, and represent herself in the case. A simple “No,” was what I received. The last part of my questions had to deal with the specific case of Yahoo vs. Facebook. I wanted to Ross Hornish – MKTG 7546know who she thought would win. She stated that all patent law is handled on a Federal level. So the VSTechnologies vs. Twitter could have set an actual precedence for how patents are looked at regarding socialmedia. With regard to patent law, Facebook would have to distance themselves to say why their processes,even to the smallest amount, are different from how Yahoo does it and how it was stated in the patentapplication. 4
  6. 6. Conclusion In conclusion, I believe that these companies are smart enough to know that technology andinnovation has been slowing down in a market that came to conceptualization only 8 years ago. I feel as thatthese companies know that while they are expanding, it is not exponentially. Now they have to protect their(intellectual) property. Still, it is sad to see such an exciting industry going against what made it so popularamong people. Twitter may just blow past the competitors because of their light holdings. Facebook and Yahoo willmost likely settle out of court as Yahoo’s financial woes and Facebook’s very public IPO make it an ugly casefor both sides. Newcomers like Pintrest will have a much harder path to trek than that of their predecessors;and others are getting swallowed up by the heavy players (can you say Instagram?). One thing is clear; thebattle lines have been drawn. I believe Twitter will innovate much faster than that of their competitorsbecause of the progress they have allowed themselves to make. The truth is, all it takes is one decision withno protection of patents to shut down the #2 most popular social media site. It is sad that one failingcompany has to go against the industry norms of what made it one of (if not) the fastest growing industry ofall time, and reduced it to lengthy patent litigation. While I agree with Twitter’s way of doing things, I alsostrongly agree with protecting ones assets.To redo a quote from one of my favorite movies to apply to thecurrent patent situation and current companies views, “It’s better to have a patent and not need it, then needa patent and not have it.” Ross Hornish – MKTG 7546 5
  7. 7. IntervieweeMs. Seiter is an associate of the firm. She practices in the Business and Commercial Litigation Practice Groupand focuses on general corporate, commercial, and civil litigation in federal and state courts. Ms. Seiterrepresents clients on matters related to construction law, contracts, personal injury defense, product liability,premises liability, and general liability defense. She is also involved in a variety of collections law matters andbankruptcy and financial restructuring cases.Professional & Community ActivitiesMs. Seiter is a member of the New York State Bar Association, the Women’s Bar Association of the State ofNew York, the New York State Academy of Trial Lawyers, and the Onondaga County and Oswego CountyBar Associations. She also serves on the board of directors for the Onondaga County Assigned CounselProgram and volunteers with the "Talk to a Lawyer" program in Onondaga County. Ross Hornish – MKTG 7546 6
  8. 8. References1 “The History of Patents” Thomson Reuters.com University of Memphis 8 April 2012http://ip- science.thomsonreuters.com/support/patents/patinf/patentfaqs/history/2 Stobbs, Gregory A.Software Patents, Aspen Publishers 2000 pg. 3 University of Memphis 8 April 20123 “Patent Law in the United States” BitLaw.com University of Memphis 8 April 2012http://www.bitlaw.com/patent/4 Riordan, Teresa “Patents; An economist strolls through history and turns patent theory upside down” NyTimes.com 29 September 2003http://www.nytimes.com/2003/09/29/business/patents-an- economist-strolls-through-history-and-turns-patent-theory-upside-down.html5 Abrams, Jonathan US Patent 7,069,308 27 June 2006 http://patft.uspto.gov/netacgi/nph- Parser?Sect1=PTO1&Sect2=HITOFF&d=PALL&p=1&u=/netahtml/PTO/srchnum.htm&r=1&f =G&l=50&s1=7069308.PN.&OS=PN/7069308&RS=PN/70693086Brodkin, Jon “Facebook, stop what youre doing: Amazon has patent for social network” Networkworld.com 17 June 2010 http://www.networkworld.com/news/2010/061710-amazon- social-network-patent.html7 Roberts, Jeffrey John “Billion-Dollar Patent Lawyer Hunting Facebook, Twitter” PaidContent.org 26 October 2011 http://paidcontent.org/2011/10/26/419-billion-dollar-patent-lawyer-hunting- facebook-twitter/8 Pachal, Peter “Facebook Bought 750 Patents From IBM” Mashable.org 22 March 2012 http://mashable.com/2012/03/22/facebook-buys-iibm-patents-report/9 Guynn, Jessica “Yahoo announces 2,000 layoffs as new CEO seeks turnaround” LaTimes.com http://articles.latimes.com/2012/apr/05/business/la-fi-yahoo-layoffs-2012040510 Sherman, Erik “Twitters Patent Strategy: Dont Bother” CbsNews.com 13 October 2010 http://www.cbsnews.com/8301-505124_162-43446091/twitters-patent-strategy-dont-bother/11 Lemon, Summer “Salesforce.com CEO says Microsoft is a patent troll” NetworkWorld.com 25 May 2010 http://www.networkworld.com/news/2010/052510-salesforcecom-ceo-says-microsoft-is.html12Brichter, Loren US Patent Application 20,100,199,180 5 August 2010http://appft.uspto.gov/netacgi/nphParser?Sect1=PTO2&Sect2=HITOFF&u=%2Fnetahtml% 2FPTO%2Fsearchadv.html&r=1&f=G&l=50&d=PG01&p=1&S1=20100199180.PGNR.&OS=dn /20100199180&RS=DN/2010019918013Taylor, Colleen “For Pinterest, Revenue Will Turn Copyright Questions Into Real Problems” TechCrunch.com http://techcrunch.com/2012/03/22/for-pinterest-revenue-will-turn-copyright- questions-into-problems/14Blumber, Alex and Sydell, Laura “When Patents Attack” Npr.com 22 July 2011 Ross Hornish – MKTG 7546 http://www.npr.org/blogs/money/2011/07/26/138576167/when-patents-attack 7