And Who Says Entrepreneurs Don’t Care About IP?

Last night I had the pleasure of presenting a  “Crash Course” on Intellectual Property for Entrepreneurs at the University of Colorado here in Boulder.  The presentation was well attended (especially given that it was the night of our first real snow storm for the season here in Boulder) and the Q&A following the presentation really brought out some interesting concerns – not just about the interplay between IP and technology but involving content and new media IP issues as well.  Special thanks to Brad Bernthal from the Silicon Flatirons Center for Law, Technology and Entrepreneurship at CU for inviting me to give the presentation and organizing the event.

The presentation was part of a larger series of “Crash Course” events geared toward entrepreneurs sponsored by Silicon Flatirons.  You can access a list of current and future “Crash Courses” on the Silicon Flatirons web site.  Past topics have included angel and VC fund raising, marketing for early stage tech companies, and growing a business in the current uncertain economy.  I understand the folks at Silicon Flatirons are lining up more interesting topics in the near future.

The materials from my presentation are now available online. I encourage you to check them out and to visit the Silicon Flatirons site for more information on the ongoing “Crash Course” series.

Red Hat Settles with Firestar

News out of Boston that Red Hat has settled the long-running patent infringement lawsuit filed against it by Firestar Software and a later suit filed against the company by DataTern.

Filed on June 26, 2006, the lawsuit by Massachusetts-based software vendor Firestar Software, Inc. was brought against Red Hat in connection the Hibernate 3.0 software product acquired by Red Hat through its then-recent acquisition of JBoss. In the lawsuit, Firestar alleged that JBoss and Red Hat are infringing U.S. patent number 6,101,502 (issued on August 8, 2000) through their activities relating to Hibernate. While software patent infringement lawsuits had become increasingly frequent in the world of proprietary software at the time of the lawsuit, the suit was viewed as the first of its kind relating to a widely distributed open source software product.

The specific financial and other terms of the settlement were not disclosed. However, Red Hat indicates that the settlement includes broad terms covering “all software distributed under Red Hat’s brands.”  Of particular note, the settlement also protects all “upstream predecessor versions” as well.   In addition, Red Hat indicates that the settlement protects “derivative works of, or combination products using, the covered products from any patent claim based in any respect on the covered products.” Perhaps most importantly (for shareholder of Red Hat in particular), the company indicates that the settlement is sufficient to enable RedHat (and its users) to continue to distribute its open source software products in compliance with the terms of all applicable open source licenses.

In its press release on the settlement, Red Hat indicates that the settlements leave Red Hat with one remaining patent infringement suit against it — based on a complaint filed in October 2007 by IP Innovation LLC and Technology Licensing Corp, both subsidiaries of patent troll (er, “holding company”) Acacia Media.

Cert denied on In re Seagate

A quick update on a previous post regarding In re Seagate Technology LLC. In Seagate, the Court of Appeals for the Federal Circuit CAFC expressly overturned prior precedent and raised the standard for determining whether a patent infringement is willful from one requiring an “affirmative duty to exercise due care to determine whether or not [one] is infringing” if one is merely on “actual notice of another’s patent rights” to a far higher standard requiring “objective recklessness.” In doing so, the CAFC effectively raised the bar for a finding of willful patent infringement to a substantially higher level than the previous standard of mere negligence, thus making it more difficult for a patent holder to prove a claim for willful infringement.

While the decision on willful infringement in the Seagate case was significant (some even called it “seismic“), the Seagate case itself had been appealed to the U.S. Supreme Court, leaving the door open to a potential reversal or modification of the decision. However, on February 25th, the U.S. Supreme Court denied a petition to review the Seagate case (including the decision on willful infringement). While not carrying the same weight as an actual decision by the Supreme Court, the denial affectively serves to establish the standard of “objective recklessness” as the law of the land.

Many have gone so far as to say that this decision now removes the affirmative obligation that a patent infringement defendant have obtained an opinion from competent legal counsel before initiating possibly infringing activity. Whether this actually proves to be the legacy of Seagate still remains to be seen. However, at minimum, the decision by the Supreme Court cements Seagate as yet another step in the further judicial reform of patent laws here in the U.S.

For more information on the case, see Convolve Inc. v. Seagate Technology LLC (U.S., No. 07-656, review denied 2/25/08) .

So, Just How Patentable is Software Anyway?

It appears that the Court of Appeals for the Federal Circuit (CAFC) — the court having exclusive jurisdiction over appeals in patent infringement cases here in the U.S. — is going to consider this very question in the near future. Last week the CAFC agreed to grant a relatively rare en banc review for the In Re Bilski case. The court has also scheduled the case on the fast track, with oral arguments scheduled for early May.

Briefly, Bilski deals with an appeal of a rejection by the Board of Patent Appeals and Interferences (BPAI) within the U.S. Patent Office of a patent application directed at a software-implemented business method for “managing risk at a reduced cost.” The BPAI based its rejection in large part on the fact that the claims of the application are not tied to any physical structure. In particular, the BPAI found that the application did not recite a “physical transformation, or any electrical, chemical, or mechanical act,” not even an “implicit transformation of electrical signals from one state to another.” Even though the claimed method may be “useful” in a business sense, the BPAI determined that a method that does not provide any transformation of matter, and that “has not been implemented in some specific way,” is not considered practically useful in a patentability sense. The BPAI thus ruled that the method claimed in Bilski’s application was not patentable subject matter under Section 101 of the Patent Act (dealing with what subject matter is patentable under U.S. law).

The Order in the CAFC appeal of the BPAI decision is included below and also available online. In addition to issues specific to the case, the questions to be considered by the court in the Bilski appeal go to the heart of the patentability of computer software and software-implemented business methods. In particular, question no. 5 asks the parties in the case to submit briefs to the court addressing whether it is appropriate to reconsider the State Street Bank & Trust Co. case (the case credited with first opening the door to the patentability of business methods) and the later AT&T v. Excel Communications case (which also helped shape the current rules regarding the patentability of business methods). The Order even goes so far as to open the question of whether these cases should be “overruled in any respect.”

I understand that at least one judge on the CAFC has already strongly implied that we can look for some significant discussion and refinements of the legal requirements regarding the patentability of computer software patents under Section 101 to come from Bilski. Interestingly, he and others have also recently noted on the record that the U.S. Supreme Court is likely to take up Section 101 at some point in the near future. Likely not by coincidence, the CAFC’s decision to take the Bilski appeal en banc now sets up a direct path for this to actually happen — assuming that the CAFC’s decision in the case is itself ultimately appealed to the Supreme Court.

Whether you are a friend or foe of patent reform, Bilski is definitely one to watch. While Congress remains mired in its own efforts to amend U.S. patent laws, the wheels of patent reform nonetheless continue to turn as the courts continue their activist stance toward the reconsideration (and potential reform) of patent laws here in the U.S.

___________________________________

NOTE: This order is nonprecedential.
United States Court of Appeals for the Federal Circuit
2007-1130
(Serial No. 08/833,892)
IN RE BERNARD L. BILSKI and RAND A. WARSAW

Appeal from the United States Patent and Trademark Office, Board of Patent Appeals and Interferences.
Before MICHEL, Chief Judge, NEWMAN, MAYER, LOURIE, RADER, SCHALL, BRYSON, GAJARSA, LINN, DYK, PROST, and MOORE, Circuit Judges.

PER CURIAM.
O R D E R

This case was argued before a panel of this court on October 1, 2007. Thereafter, a poll of the judges in regular active service was conducted to determine whether the appeal should be heard en banc.

Upon consideration thereof, IT IS ORDERED THAT:

The court by its own action grants a hearing en banc. The parties are requested to file supplemental briefs that should address the following questions:

(1) Whether claim 1 of the 08/833,892 patent application claims patent-eligible subject matter under 35 U.S.C. § 101?

(2) What standard should govern in determining whether a process is patent-eligible subject matter under section 101?

(3) Whether the claimed subject matter is not patent-eligible because it constitutes an abstract idea or mental process; when does a claim that
contains both mental and physical steps create patent-eligible subject matter?

(4) Whether a method or process must result in a physical transformation of an article or be tied to a machine to be patent-eligible subject matter under section 101?

(5) Whether it is appropriate to reconsider State Street Bank & Trust Co. v. Signature Financial Group, Inc., 149 F.3d 1368 (Fed. Cir. 1998), and AT&T Corp. v. Excel Communications, Inc., 172 F.3d 1352 (Fed. Cir. 1999), in this case and, if so, whether those cases should be overruled in any respect?

This appeal will be heard en banc on the basis of the original briefs and supplemental briefs addressing, inter alia, the issues set forth above. An original and thirty copies of all briefs shall be filed, and two copies served on opposing counsel. The parties shall file simultaneous supplemental briefs which are due in the court within 20 days from the date of filing of this order, i.e., on March 6, 2008. No further briefing will be entertained. Supplemental briefs shall adhere to the type-volume limitations for principal briefs set forth in Federal Rule of Appellate Procedure 32 and Federal Circuit Rule 32.

Any amicus briefs will be due 30 days thereafter. Any such briefs may be filed without leave of court but otherwise must comply with Federal Rule of Appellate Procedure 29 and Federal Circuit Rule 29. Oral argument will be held on Thursday, May 8 at 2:00 p.m. in Courtroom 201.

FOR THE COURT

February 15, 2008 /s/ Jan Horbaly
Date Jan Horbaly
Clerk
cc: David C. Hanson, Esq.
Stephen Walsh, Esq.

Notes from GOSCON

As I mentioned in an earlier post, I was fortunate enough to attend and present at the Government Open Source Conference (GOSCON) earlier this week in Portland, Oregon. As advertised, the conference was excellent. Attendees included representatives from a number of government agencies, both here in the US as well as from numerous foreign countries. Not surprisingly, there were also a good number of government contractors, vendors and service providers in attendance, as well as others interested in open source software from a government perspective. These demographics yielded not just great presentations, but also lively question and answer sessions and very abundant networking opportunities as well. I would strongly encourage anyone interested in this area to consider attending GOSCON in the future.

Of particular note among the many strong presentations at the conference was the emphasis on the increasing importance of open standards to the growth and vitality of open source software. Jim Zemlin, the Executive Director of the Linux Foundation, began the discussion on this topic with his keynote titled “Open Source and Freedom.” The presentation focused on the importance of open standards in the context of the adoption of Linux. In particular, Zemlin highlighted the efforts of the Linux Foundation to create a set of open standards for Linux. Dubbed the Linux Standard Base (LSB), the goal of these standards is to help promote and preserve interoperability between applications designed to run on the Linux operating system and each of the various versions of Linux in existence today.

Linux is often thought of as a single operating system. However, as the popularity of Linux has grown, so too have the number of distributions (or versions) of the Linux operating system in existence. For example, Linux distributions now include offerings by Red Hat, SUSE, Ubuntu, Mandriva, Debian, Gentoo, and a growing list of others. Each of these distributions principally comprises the Linux kernel (and non-kernel parts of the GNU operating system) as well as other assorted software. While each of these distribution can rightfully lay claim to being a form of “Linux,” differences do exist between each of the individual distributions. These differences, although often subtle, can result in incompatibilities between the distributions themselves and difficulties in creating applications that will operate on multiple distributions (without having to make modifications to the application to accommodate the differences in each distribution). To help avoid these issues, the LSB seeks to provide a common set of standards for Linux distributions and applications designed to run on these distributions. The standards help ensure that applications written to run on Linux will run on all Linux distributions certified as compliant with the LSB, while allowing sufficient flexibility for each Linux distribution to continue to maintain its own unique characteristics. Zemlin indicated that all major Linux distributions have moved to comply with the LSB and many major application vendors, like MySQL, RealNetworks and SAP, are certifying their applications to the LSB as well.

Gartner vice president Andrea Di Maio continued to build on this theme in his keynote titled “Open Standards and Open Source: Taking a Closer Look.” Di Maio focused on dispelling the myth that software is fully “open” simply because it is licensed under an open source license. Full “openness,” Di Maio says, is dependent not just on the presence of an open source license but also on open standards as well. In particular, Di Maio noted that pitfalls such as vendor lock-in are avoidable only if the software in question is written to an open standard. Software meeting the standard can be replaced with other software also written to that standard at a greatly reduced cost (in terms of both time and money). Likewise, software written to the standard can more seamlessly communicate and interoperate with other software written to that standard (again, at a greatly reduced cost). Merely being licensed under an open source license does provide this same guarantee. In true Gartner fashion, Di Maio provided the results of a number of Gartner studies demonstrating these points. I do not yet have access to Di Maio’s presentation, but will post a link here when they are made available online.

These presentations highlight the growing importance of open standards to open source. While we do not typically think of adopting Linux and other open source offerings as potentially leading to vendor lock-in (at least not in the same way that adopting proprietary software can lead to vendor lock-in), open source software is not immune to this problem. To underscore this point, one of the speakers noted the increasingly common situation in which users of Linux choose to migrate, not to a proprietary operating system, but to another distribution of Linux. In these Linux-to-Linux migrations, one of the growing challenges is ensuring that the applications in use on the existing Linux distribution will operate in the same way on the new distribution following the migration. As the speaker then noted, the LSB is likely to play a big role in reducing these concerns.

I agree that the efforts of the Linux Foundation around the LSB are likely to be of great importance to the future of Linux. I would add, however, that the issue is likely not limited to just Linux and the LSB. As the need for interoperability in open source software continues to grow in importance, and as open source-to-open source migrations become more common with open source offerings in addition to just Linux, there will be an increasing need for open standards associated with these other offerings as well. As a result, I would expect to see a growing focus on the area of open standards in open source and the emergence of additional open standards efforts around other open source offerings. The willingness of the Linux and open source communities to embrace these efforts likely bodes well for developers and users of open source alike, and for the longterm health of the open source community in general.