FTC Investigates Submarine Patents

Schnake writes: "An article on USAToday talks about how the FTC is investigating Sun Microsystems, Unocal, and Rambus to determine whether they illegally kept patents secret while helping set industry standards! And a quote from the ZDNet article: "It noted that all three companies had filed patent infringement lawsuits against firms they say owed them royalties. But the litigation backfired when those firms countersued, charging them with concealing their patents, and complained to the FTC.""

Comments

Patents not secret

[Ed Avis]

The whole point of the patent system is openness. You only get a patent monopoly in exchange for full disclosure. So it should be easy (in principle) to find out what patents cover something you are working on. But in practice the sheer volume of patents out there is too large.

I think that a legally binding 'patent challenge' might be the answer. You should be able to send a letter to Rambus or whoever saying 'I am developing the following... please disclose whether you have any patents or patent applications which cover this area'. The company receiving the letter then has to disclose what they have patented. If they lie or keep quiet, they lose the right to sue you later on. Obviously you couldn't do this for internal R&D, but for standards bodies (where the process is open anyway) this could be a useful tool to reduce threats from submarine patents. The only question is whether it places an unreasonable burden on the patentholding company.

Re:Patents not secret

[Asic Eng]

Is a law necessary, though? As I understand it the rules of these standards bodies require the companies participating in a standard to reveal their patents anyway. That seems to be the basis for these countersuits.

As far as volume goes - maybe there should just be a cap on patents. Something like "x patents a year can be awarded". The patent office would then be charged to award the patents with the most merit, each year. If a patent application doesn't make it in one year, it may make it in the next. If it never makes it... well then it probably shouldn't. :)

Re:Patents not secret

[Speare]

[stock rant on the subject]

Patents are not about who is right, or who is first; patents are about who will sue.

The US PTO is a money-making service for the government, and this fact is why it operates as it does.

There is a misconception that it is the central duty of the PTO to form a blockade against granting patents. The PTO can and will block applications where there's heavy similarity with prior art or existing patents, but that's really just a guideline to using the service, not the core function.

The PTO's purpose is to grant patents for a fee, and it's wholly suited to do so.

The application vetting process of the PTO is a cost center for the operation of the PTO. This is akin to saying that customer service is a cost center for the operation of AT&T. It is required, but they'll cut costs as much as they can get away with.

To fix the patent application vetting process, two things must happen:

• Congress must stop using the PTO's filing fees as a revenue source for other pet interests instead of the PTO's own budget, and
  
• The PTO needs to allow third parties to aid the vetting process by challenging potential patents before they're granted.

As of 15 March 2001, the USPTO has changed their policies to solve that second problem. They can now publish patent applications before the patent itself is awarded to the applicant. Previously, the patent was hidden while pending, and patent seekers were not required to disclose this unless they had already signed contracts, say, as part of a standards-body. Third parties may now submit "helpful" arguments against controversial applications. The USPTO can then weigh obviousness against challenges without incurring the costs of doing all the searching themselves.

Breaking patents by finding simple prior art is not enough for most cases. Patents already granted are almost never cracked, certainly not by someone using an independent third party's prior art. In the famous Heinlein/Waterbed case, the patent was denied before it was ever granted by the Patent Office. Once a patent has been granted, the Patent Office rarely will get involved in disputes; that is a matter for the courts. (And in this case, the FTC aids the investigation for a countersuit.)

[end of stock rant]

Re:Some others worth investigating perhaps ?

[troc]

That's fairly difficult as by steering things in certain directions you run the risk of revealing your ideas before they have been patented, thus increasing the prior art out there and reducing patentability.

Patents were designed to do two things. One was to foster innovation by FORCING disclosure of invention (or runing the risk of having secrets stolen) and thus adding to the sum of knowledge. The other was to protect the inventor so they could profit from their invention. This is why patenting is relatively cheap (here in europe the initial patent fees are substantially below the cost to the office of dealing with them) but the recurrent annual maintainence fees increase almost exponentially towars the last few years the patent can be valid - to dissuade the patentee from holding the patent too long, especially if it turns out to be a pointless patent they aren't making money out of.

Hohum

Troc

PS Yes I am apatent examiner ;)
PPS Here in europe you can't patent software or business methods.....

Wonder if they'll check out others

[weslocke]

For example, Unisys's patent for the LZW compression in the GIF format leaps to mind. They didn't exactly keep it a 'secret', but they did wait ten years before trying to enforce it. By that time the vast majority of the developers out there had forgotten about it.

NOT a Submarine Patent

[Compulawyer]

The term "submarine patent" applies to a patent whose application was filed and then allowed to lie dormant in processing at the PTO for an extended period of time (many years) and then is reactivated by the inventor and finally issues from the PTO. This is a problem because other inventors later come up with the same concept and may even file patent applications themselves. When the submarine patent finally issues, there are infringers already up and running with products in the marketplace. Due to changes in the Patent laws, these types of patents are no longer possible. (Do a search for Jerome Lemelson - the King of the Submarine Patent if you want to know more - his is a facinating story).

What is being alleged here is a type of fraud/unfair competition. The crux of the claim is that it is unfair for a company to propose its technology be adopted as an industry standard without discloising that it has patents or patent applications on file. If adopted as the standard, the others in the industry will automatically infringe. Options at that point: concede the market to the patent holder, redesign the product so it deviates from the standard set by the industry, or pay a royalty to the patent holder.

To the extent that patents have already issued they are public record, as noted in another post. But currently the law is in flux. The general rule is that until a patent issues, the application and all materials submitted to the PTO is confidential. (The confidentiality allows companies who cannot get patents to still protect the way they do business under trade secret law.) There is a group of applications that fall into this category. However, since the passage of the AIPA (American Inventors Protection Act) and some other tweaks to the law, there is now a publication requirement - applications are published 18 months after filing.

So - in my humble legal opinion, it is unfair for a company participating in standards-setting not to disclose that it has patent applications pending, but as for issued patents, companies should be aware of what their competitors are doing. Especially if it is a public record.