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[FYI] Internet IP litigation on the up


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04 May 2000  

Internet IP litigation on the up  

E-commerce and business method patent, trademark and copyright 
disputes will be the future of intellectual property (IP) litigation, 
according to a survey of US IP lawyers. But the US Patent and 
Trademark Office (PTO) has been slow to address the concerns of the 
new economy, according to the lawyers.  

Over half of the lawyers said that the Internet will diminish the 
ability of IP owners to effectively enforce their e-business process 
patent rights and 80% of lawyers believe that filings for the 
infringement of business method patents are increasing. In terms of 
economic damages, 91% of lawyers are involved in or expect to be 
involved in IP litigation over $100 million. Lawyers expressed 
concern at the US PTO, with 88% saying it does not adequately address 
prior art issues during its review of business method patents. The 
survey was carried out by PricewaterhouseCoopers, the global 
professional services firm.  

Jonathan Band, IP partner at US firm Morrison & Foerster, says: 
"There will be a lot of litigation in the short run, because the [US] 
PTO is issuing a lot of Internet patents, which are broad and some 
are of questionable validity. So much money is at stake and therefore 
people are pursuing royalties and litigating against those who are 
not paying royalties. There is already a lot of litigation, but I 
think there will be more."  

With the speed of the evolution of the Internet, businesses do not 
want to be delayed by litigation proceedings. Band says: "It forces 
early settlements, or people may have business arrangements, so they 
do not face injunctions. Instead they deposit a royalty with the 
court and if it is found that they are infringing rights, they make 
the payment to the plaintiff. They want to avoid the injunction."  

Peter Gowdey, IP partner at US firm Pillsbury Madison & Sutro, says: 
"Patents are public once issued or published. That being so, the fact 
that the Internet will be making use of any such patent rights will 
only make the potential damage base larger. The big issue with the 
Internet is how do you control who is having access to what, who is 
making derivative works of copyrighted material and how do you limit 
or otherwise control access to licensed rights? Maybe you do not and 
you have to consider how you contract with users and how you charge 
for the licensed rights at the front end."  

Gowdey adds: "There will be a lot of shaking out and IP litigation, 
such as business method patents, linking and deep-linking agreements. 
We are already seeing those cases. People are trying to look into it 
very carefully. People are being trained to think about the pitfalls 
to alleviate some of those. There will be a lot of use of mediation 
and arbitration, instead of federal courts."  

The PTO has responded to growing concern by announcing the addition 
of a second tier of review for e-commerce-based business method 
patents. Band says the PTO is trying to limit the number and improve 
the quality of Internet patents issued: "There a lot of proposals on 
refinement and elaborations. These include getting public comment on 
patents before they are issued and the need to prohibit patents 
generally, or at least the ones that are nothing more than existing 
business methods."  

Band thinks that at some point patent issues will take care of 
themselves with fewer issued. He suggests having a database of prior 
art, a similar view to one held by Gowdey. Gowdey says that a central 
database containing all software patents published will make a usable 
and sortable function, increasing the searchability of existing 
patents worldwide.  

Yesterday Lawmoney covered the case involving MP3.com, the music 
service provider, which was found liable for copyright infringement . 
There have been many initiatives to protect IP rights, such as those 
launched by the European Commission and Andersen Legal , the global 
legal services network associated with Andersen Worldwide.  

Andrew Crooke

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