While much of what I write appears here, I also contribute to other venues as well.  The following op/ed piece first appeared in last week's print  edition of MHT (formerly Mass High Tech), the New England regional technology paper to which I periodically contribute a piece.  Starting next month, I'll be doing a regularly column for them, focusing on the New England technology scene.

How often have you heard it said that "patents foster innovation?" That phrase rings true in pharmaceuticals, where investment requirements are enormous and failure common. But does it also apply in areas such as software? Does it really take the promise of a legal monopoly to motivate a typical founder or CTO to innovate? And what about the advantages patents give big companies over emerging ones, simply because the former can credibly threaten expensive patent litigation while the latter cannot?

I'll talk about the negative impacts of software patents another time. But today I'd like to make the case that patents are irrelevant to software innovation, based on my 25 years of representing hundreds of startups, the largest number of which have been either pure software companies or other ventures whose value lay in the software at the heart of their businesses. That history tells me that if patents were to disappear tomorrow, the process of innovation wouldn't skip a beat.

Today's decision is but the latest event in an almost 10 year history of investigations, trials, appeals, and new allegations that initially focused only on Microsoft's activities involving server software, but eventually grew to involve allegations of abuses in the office software marketplace as well. All of these accusations involved contentions that Microsoft was limiting the ability of its competitors to create products that would interoperate with its own, thus further entrenching itself. With time, open source advocates and trade associations filed lodged complaints as well, as Linux gained market share and greater vendor interest, and OpenDocument Format (ODF) compliant products, such as OpenOffice, gained greater credibility.

In the decision announced today, the Court found that Microsoft had abused its dominant market through two types of conduct, and ordered Microsoft to remedy the situation as follows:

The ruling was handed down by the U.S. Circuit Court of Appeals for the 3rd Circuit, in one of the multiple, ongoing suits between Qualcomm Incorporated and Broadcom Corporation, involving the vast and lucrative market for next generation wireless telephones and related services. The litigation history to date is complex, so for current purposes I'll focus only on the central contention and related holdings that are of interest to the standards process, rather than on how the ruling fits into the past and future fortunes of the parties to the litigation.

A Federal Court sitting in San Diego, California has upheld a jury's unanimous verdict that QUALCOMM Incorporated abused the standards process by failing to make timely patent disclosures during a standard setting process.  The litigation arose when Qualcomm filed suit against Broadcom Corporation, an implementer of the standard.  The decision follows on the heels of a unanimous verdict by the Federal Trade Commission against memory technology company Rambus, inc. under similar factual circumstances.

Cases involving standards abuse are infrequent, but Qualcomm and Broadcom are currently involved in as many separate pieces of standards-related litigation as the entire industry usually indulges in over a period of years. In one suit (in which I helped draft and file a friend of the court brief on behalf of several standards organizations), Broadcom alleges that Qualcomm refused to honor its pledge to license its "essential claims" under a standard on "reasonable and nondiscriminatory terms." Other suits are continuing in multiple courts in several countries, including an antitrust suit that Broadcom lost –but perhaps not permanently – before the FTC issued it's verdict in Rambus. Ironically, the flurry of legal action is helping develop judicial guidelines for standards development and licensing on a more rapid basis than usual.

The current case was brought by Qualcomm in October 2005, and involved two patents that it later alleged would be infringed by implementing H.264, a video compression standard developed by the Joint Video Team (JVT), an effort supported by two global standard setting bodies, ITU-T, acting through its Video Coding Experts Group (VCEG)and the ISO/IEC, acting through its Moving Picture Experts Group (MPEG). The jury concluded that implementing the H/264standard would not result in infringement, but also indicated that it believed that Qualcomm had acted improperly before the United States Patent Office in obtaining the patents in question.

But the new Order will not be good news for Rambus licensees, which will be deprived of the near-term use of funds that the FTC had already held to be excessive, and illegally obtained. Those funds would be returned to them – with interest, but minus the fees of the escrow agent – if Rambus loses its appeal at some yet to be determined point in the future.

Monday morning's voicemail included a courtesy call from FTC Complaint Counsel Geoffrey Oliver, letting me know that the Federal Trade Commission had just issued its ruling in the penalty phase of its prosecution of memory technology company Rambus, Inc. (the reason for the call is that I had previously filed pro bono amicus curiae – or "friend of the court" – briefs with the Commission during both the trial and the penalty phases).  The full Board of Commissioners had earlier found, on appeal from a holding in favor of Rambus by an FTC Administrative Law Judge in 2004, that Rambus had illegally created a monopoly in certain technology by abusing the JEDEC standard setting process in the early 1990s.

That opinion was handed down last summer, together with the announcement by the Commissioners that they would hold further hearings with FTC Complaint Counsel and Rambus, and would welcome industry input, before determining what penalties would be appropriate to levy against Rambus on account of its conduct.  Several industry groups filed amicus briefs as well, urging the Commissioners to impose stiff penalties.  My own brief urged the FTC to include a punitive element, in order to emphasize that abuse of the standard setting process would result in dire results.  Most obviously, such an element would be to bar Rambus from charging any royalties at all from those that wished to implement the standard at issue.

Updated 12:45 PM EDT:  The original version of this blog entry was based on an article in the New York Times, and then updated when the related IBM press release became generally available.  For the Back Story on that rewrite, see this entry

The New York Times reported this morning that IBM would announce a new patent policy later today, and described in general what the terms of that policy might be.  IBM clearly hopes that this move will increase pressure on other companies to accelerate efforts to improve the quality of software patents, which is an issue of interest and concern to a broad audience, and particularly those that participate in the development of, or that use, open source software. 

The press release that issued later in the day states that the new policy applies to IBM's operations worldwide, and is based on four "tenets:"

• Patent applicants are responsible for the quality and clarity of their patent applications.
• Patent applications should be available for public examination.
• Patent ownership should be transparent and easily discernable.
• Pure business methods without technical merit should not be
  patentable.   

The Times article states that IBM is seeking to lead the market towards patent reform, despite the lagging efforts of Congress to improve the quality of software patents, which are widely regarded as being too easy to get, and too expensive and difficult to challenge.                                     

In what seems to me to be a petty display of childishness, Google has refused to post at its own Websites in Belgium the news of a recent defeat it suffered in a Belgian courtroom.  In contrast to the thousands of other news items that are automatically Hoovered on to its News page on a daily basis, Google claimed that the news had been so widely reported that reporting it at its Belgian news site was unnecessary and "disproportionate." 

The New York Times, which has been reporting regularly on the subject, reported yesterday in two related stories (the second one is here) that the judge in the suit rejected Google's contention. 

The dispute itself relates to whether the thumbnail images, headlines and news summaries that Google reproduces at its Google News site violate the copyright of the news content owners to which it links.  I blogged on this issue a few days ago, in the context of a recently announced settlement between Google and the Associated Press, under which the AP will allow Google to continue to display its content, although at a new area of its site, and subject to an agreement between Google and AP the terms of which have not been disclosed.

The Belgian dispute is more serious, because Google has already agreed to honor the rest of the Belgian court's order, and is no longer digesting news from three French-language Belgian newspapers at its two Belgian news sites.  And in a similar law suit brought by Agence France-Press in the Washington D.C. District Court, AFP is seeking $17.5 million in damages for copyright damages; Google contends instead that its news snippets fall under the fair use doctrine. 

How much use is "fair use" when it comes to Web-based content?

That's a question that I expected would receive more attention in the blogosphere when Google announced last month that it had reached a deal with the Associated Press that would permit it to continue to link to AP stories at the Google Website — for a price. Every story I recall reading focused fairly narrowly on the specific deal, or at most on the economics of the relationships between major aggregators and major content producers. But in fact, the rights at issue relate to every Website in the world that provides more than a simple link to copyrighted content hosted on another Website.

As a first proposition, any part of a creative work (whether literary, musical or otherwise) that is large enough to be an identifiable part of that work (as compared to a few words or notes that could randomly appear in many works) becomes protected by copyright at the moment of creation. Unless copyright ownership is voluntarily surrendered (i.e., the work is placed in the public domain) in a work, or it is placed under a ">Creative Commons license that voluntarily limits that protection, no part of that work may be reproduced without the consent of the copyright owner.

Updated 9/19/06:  Ah, my good friends the Rambus daytraders have discovered the fact that I have filed another Amicus Brief and (better yet) that I now have a blog where they can leave public comments.  Those who are not members of this community will find their comments below amusing, as they may RMBS and (Another) Dark Side of the Internet, which will help to place them in context

Today is the deadline for filing amicus curiae (friend of the court) briefs and other forms of input with the Federal Trade Commission, as it considers what the punishment of Rambus, Inc. should be for having engaged in "an anticompetitive 'hold up' of the computer memory industry [that]... contributed significantly to Rambus’s acquisition of monopoly power in the four relevant markets."  The FTC made that announcement on August 2, and also announced that it would accept briefs from interested industry participants and others, as well as from Rambus and the FTC prosecuting team.

I've submitted three amicus curiae briefs over the past several years (with the Federal Circuit, Supreme Court, and FTC), on a pro bono basis, in relation to this investigation as well as in connection with the litigation between Rambus and Infineon, on behalf of a large group of standard setting organizations that collectively represent many thousands of corporate, government, university and non-profit members, and was encouraged to provide input in response to this invitation by the FTC as well. 

Below are the "Issue Urged" and "Summary of Argument" from the brief, which will give you an idea of why the Rambus litigation is so important, and why it's equally important that the remedies that the FTC levies send a clear message that, when it comes to abusing the standard setting process, "crime does not pay."  If you'd like to read the whole brief, you can find it in PDF form here.

ISSUE URGED

The remedy levied by the Commission against Rambus must send a clear message to that company, as well as to all that participate in the standard setting process, that the consequences of such bad-faith conduct, if discovered, will significantly exceed the potential gains of engaging in such practices. To fail to include a significant punitive element in the remedies assessed by the Commission would dangerously undermine the standard setting process, to the detriment of society and the national interest.