Ironically, high tech companies are looking through portfolios of antiquated tech companies in order to find patents that will position them in the forefront of the technological world.  One example is Microsoft, which recently purchased 800 AOL patents and negotiated licensing agreements on approximately 300 more.

This $1.06 billion dollar deal between Microsoft and AOL has obvious benefits for AOL, an online service that has spent the past decade attempting to reinvent its obsolete services.  The influx of cash and boost of stock prices has already paid off for AOL.  As a result of the transaction, AOL shares have risen to their highest level in the past year.  Its stock rose $7.83 (43%), to $26.25 in midday trading.  This transaction was paramount to AOL’s stockholders, including its largest shareholders, who have been asking for more return on their investment.  The loss of patents will probably not hurt AOL in the future because the company has made a clear shift in their focus towards media; they have recently acquired The Huffington Post and TechCrunch.

A Microsoft patent application.

However, at first glance the benefits for Microsoft are not as apparent.  The patents they acquired in the transaction appear to have little value. Among the patents that Microsoft bought are patents related to the antiquated browser from the 1990s, Netscape.  AOL purchased Netscape in 1999 for 4.2 billion in stock.  However, to AOL’s dismay, the browser was short-lived.  The obvious question here is then why did Microsoft want this archaic piece of technology?  Additionally, why did Microsoft want some of the other patents in the purchased bundle including Secure Socket Layers (SSL), cookies, and Javascript.

The best answer is that those technologies are at the core of the way the Web works.  While the particular product may not in itself be a goldmine, the patents purchased relate to particular functions of the web.

High tech products are particularly vulnerable to patent litigation because of their complexity.  For example, one smart phone could have hundreds of thousands of patents.  Consequently, Microsoft, like its competitors, may have attempted to accumulate as many of these patents as possible in order to prevent litigation.

However, given the current hostilities between the big tech companies, Microsoft may have had additional incentives for these patents.  Some argue that the sole purpose for Microsoft’s billion-dollar purchase was to attack Google.   Currently, Microsoft and Google are litigating over patent infringements related to Android.

Microsoft has already had run-ins with Android.  Threats of recent litigation have even resulted in getting licensing fees from many Android device makers.  Just to convey the magnitude of these litigations, it is notable to point out that last year, Microsoft was making more from its suits over patents concerning Android than from Windows Phone 7, their own product.  In fact, HTC Corp., makers of Android-compatible cell phones, paid about $5 for every devise sold that uses Android. 

Nokia has filed a patent for vibrating phone-alert magnetic tattoos. For real.

The drug in question, Gleevec (generically as imantib mesylate) was designed to treat chronic myeloid leukemia and other forms of cancer, such as gastrointestinal cancer.  A patent for the drug was denied to Novartis in 2006 under Section 3(d).  Section 3(d) is set in place to specifically prohibit the practice of “evergreening.”  Evergreening is the act of securing patent protection on minor variations of previously patented matter.  Novartis contends this is not a case of evergreening because the initial compound was never marketed or intended for market.  According to Novartis, when a drug company discovers a compound that fits some specifications in a test tube or animal study, they patent it to protect themselves from imitators.  However, that initial compound is often not suitable for use as a drug.  Therefore, modifications are made until a suitable form is found, which is then patented.

Unfortunately for Novartis and other major drug companies, India’s government had stopped granting drug patents since 1970 and only recently began to do so as part of World Trade Organization agreement on patents in 2005.  Medicines created before 1995, however, do not qualify.  India has developed quite a lucrative generic drug market, exporting $10 billion worth of medicines every year.  As such, the generic firms are a powerful lobby in the country and a leading industry which politicians want to nurture.  Further, non-profits, such as Medecins Sans Frontieres, believe poorer countries rely on India’s generic firms to produce low-cost medicines, and without them, the health of millions could suffer.  Their sentiment is understandable, considering the price of Gleevec (in the US) can cost $70,000 a year, while Indian generic versions cost about $2,500.  It’s important to note that a victory for Novartis would not shut off the production of any existing generics, but it could impede the ability of Indian manufacturers to develop generic versions of future drugs.  Furthermore, Novartis contends that there are other legal ways for generic and subsidized brand-name drugs to reach the poor.

In addition to settling the patent validity dispute, the decision will also hopefully bring clarity to the true scope of Section 3(d), which could have major implications beyond the biopharma world.  India’s patent law does not define “efficacy” or say how it should be measured.  If the decision goes in Novartis’ favor, the term would encompass modifications that might make a drug safer and easier to use, not just more effective in treating a disease.  Such clarity would provide pharmaceutical companies, which spend many years and capital in producing a drug, a better idea on how to pursue patents in the future.

What’s particularly interesting is Apple’s complaint that Samsung’s market gains will threaten all Apple products because users will get comfortable with the Samsung system and buy more Samsung products, instead of Apple products. But isn’t that what competition is all about?

Barnes & Noble Nook

The three patents Microsoft alleges Barnes & Noble has violated are processes and methods that enable the user to add annotations to “read-only” text, to highlight and select text from electronic documents, and to download documents from browsers at a faster speed. Barnes & Noble denies the validity of each of the three patents and has argued that none of the features patented serve as the basis for customer demand for the product. Additionally, Barnes & Noble has stated distinct reasons for why each patent is invalid. For the first of the three patents, that which enables the user to annotate “read-only” text, Barnes & Noble argues that Microsoft did not disclose the use of prior art from a European patent.  Barnes & Noble further argues that there was nothing novel in the process, and that Microsoft merely used well known techniques to resolve the problem with “read-only” materials.

In defense of the alleged infringement on the second patent, Barnes & Noble argues that the highlighting technique covered by the patent was neither novel nor non-obvious at the time the patent was issued and so the patent should be invalid. Barnes & Noble points out that the highlighting technique used simply implemented the preexisting use of “graphic selection handles.” The graphic selection handles come in the form of two vertical bars positioned at the beginning and end of the selection area and enable the reader to select text and increase and decrease the text size. As this technique was already in use at the time the patent was issued, Barnes & Noble argues that the patent itself did not meet the requirement of novelty and non-obviousness.

Finally, in regards to the third patent, Barnes & Noble notes that the removal of the “double-display” technology from devices today would not harm the user experience as modern speed of downloading makes the process protected by the patent practically useless in this age of internet technology. While the patent covers a process that undoubtedly had purpose in 1996 when the patent was issued, such a process is no longer necessary as the current speed of downloading makes the process obsolete.  This argument claims that the process described by the patent is no longer useful and attempts to show that the utility requirement of the patent no longer exists.

At one point in Kodak’s long history it held a near monopoly on film and produced such high margins of return that it would share these profits with its workers on “wage dividend days.” Initiated by Kodak founder George Eastman, on these days, all employees would receive bonuses based on results. One former employee compared Kodak in its heyday to Apple or Google of present. Young, highly talented employees could be found at lunch time watching a movie in the corporate campus’s on-site movie theater, or playing basketball on the company’s courts. It seemed unimaginable at the time that Kodak could ever be on the verge of bankruptcy. Some of Kodak’s most notable technological breakthroughs over the last 100 years or so include the invention of roll-film by George Eastman, the mass production of inexpensive “pocket-cameras,” the first 35 mm color film, the first megapixel sensor capable of producing picture quality prints, the first digital camera, the first organic light-emitting diode (“OLED”) display, and the first Wi-Fi enabled digital camera capable of emailing pictures from the camera itself.

The first digital camera

Despite all of these amazing technological advances Kodak has not been able to capitalize on its inventions or adjust its business model after the decline of its market share in film in the 1980’s. In the last five years, Kodak has become a patent troll. In order to raise money it began enforcing its intellectual property rights and was quite successful. Overall, Kodak made around $1.9 billion between 2008 and 2010 through litigation and licensing of its IP. That money was used to keep the company afloat while it invested in its newest endeavor—printers. Kodak has had a tough time though turning a profit in the printer business and, while sales are up, the printers are still being sold at a loss to the company and income from the IP litigation has begun to run out.

The company is still litigating a major case in front of the International Trade Commission (“ITC”) against Research in Motion (“RIM”), the maker of the BlackBerry cellphone, and Apple over technology in their smart phone cameras. Kodak believes that this case could generate close to $1 billion in licensing revenue if successful. In its complaint, Kodak noted five allegedly infringed patents with two of them relating to the previewing of captured digital images. Kodak specifically requested that the ITC exclude from entry into the U.S. any RIM or Apple mobile device that infringes on these patents. Apple responded by filing patent counter-claims in a U.S. district court and in the ITC. The Commission decided not to review an ITC administrative judge’s ruling that Kodak did not infringe on Apple’s patents, but it affirmed in part, reversed in part, and remanded in part an administrative judge’s conclusion that Apple and RIM did not violate any of Kodak’s patents either. The original court date was set for August of this past year, but due to a judge’s retirement in the case, it has been postponed to September 2012.

“In keeping with the situation”… what better time to recap the exhaustive year of developments in the IP world.  Two thousand eleven saw a great many changes.  The looming presidential election, bickering among political sides, and intense involvement from vocal lobby groups forced a surge of lawmaking; new technologies exploded onto the scene—and, of course, caused some fighting among industry powerhouses; people continued to struggle through the financial crisis, finding ways to muddle through using—or not using for Louboutin and YSL—trademark law.  This was a year of starters, of new beginnings, but also of significant losses.  Only time will tell the extent of the benefits or damage the 2011 changes will have.

Below are ten topics addressed by courts, legislators, and people generally in this eleventh year of the New Millennium that I found particularly interesting…

1. For the first time ever, Americans were encouraged to invent!  President Obama signed the American Invents Act into law on September 16, in the hopes of speeding up the patent process for entrepreneurs and small businesses.  The Act was generally met with praise by commentators, but concerns over confusion, mischief, and stymied institutional research hang overhead.

2. Two proposed anti-piracy acts—the Protect IP and Stop Online Piracy Acts—caused and continue to cause quite a stir as Congress debates the bills.  The Protect IP Act, which would effectively allow the government to halt financial transactions with rogue, infringing websites, elicited strong reactions from left-wing groups bent on protecting civil liberties.  SOPA, a related bill, would require Web hosting companies to police their sites for infringing content.  Not surprisingly, providers of hosting services strongly oppose the bill.  The Senate will vote on the bills on January 24, 2011, before which pirates and privacy hounds will surely continue to join forces to quash their passage.

3. Visions of Louboutins danced in counterfeiters’ heads as S.D.N.Y. Judge Victor Marrero refused to honor the Louboutin’s broad trademark in the color red.  Marrero stated, “[a]warding one participant in the designer shoe market a monopoly on the color red would impermissibly hinder competition among other participants” and compared Louboutin’s attempts to enjoin rival Ives Saint Lauren from utilizing the bright-colored soles to Picasso suing Monet for use of a particular shade of indigo.

4. Google was repeatedly reminded that “with great power comes great responsibility” in a string of various lawsuits filed against the search giant.  Judge Denny Chin set a trial date of July 2012 for the lengthy Google Books litigation.  Oracle sued Google over allegation of patent infringement of its Java and Android platforms.  PayPal filed suit against Google in May for stealing trade secrets.  Feeling left out, the FTC joined in by launching its “most comprehensive antitrust investigation” against the Internet kingpin.   Better luck next year Google.

5. The continued financial crisis motivated some to do-it-themselves.  For $275, individuals can successfully register their own trademarks with the USPTO.  Good news for small businesses in an economy where money is just about as tight as it can be, but not such good news for those trademark attorneys out there.  Never fear attorneys, you are still needed for the complicated stuff, because “not all registrations are created equal.”

6. Occupy Wall Street was big news in 2011.  In fact, organizers of the “movement,” as well as a number of other groups, including one Long Island couple, filed for a trademark of the slogan “Occupy Wall St.”  Because nothing says protest like a new t-shirt.

7. For websites like the Huffington Post, which essentially are online sources composed entirely of refurbished news, a flurry of concerns over the extent of fair use emerged in 2011.  How much copying is too much copying?  Isn’t it enough if you give credit where credit is due?  Does it matter how “hot” the news is?  Questions like these have yet to be answered by any legal authority—and possibly to the benefit of blog sites everywhere, (including this one)—but with the insurgence of more second-hand reporting and blog sites, coupled with the failing print news industry, the scope of fair use is likely to require a clear(er) definition in the near(est) future.

8.  2011 also had its share of losses, notably with the deaths of Steve Jobs and other technology innovators.  Local and national video stores dropped like flies upon the rapid emergence of “Internet subscription services for enjoying movies and TV shows,” like Netflix—which unfortunately has also taken a dive in recent months.  But luckily, the wheels of innovation have kept turning and spitting out new technologies everyday, like Apple’s improved face-recognition software.  Read about other top tech stories here.

9.  The end of an era approaches.  In 2011 the impending return of song rights to musicians made big news.  The 1970s amendments to the Copyright Act provided for termination rights, allowing artists to regain control of works after 35 years. Although this was a huge story in 2011, the amendments to the Copyright Act didn’t take effect until 1978 so they won’t actually affect anything until Jan. 1, 2013.  But it was still worth a mention on this list.  As the New York Times reported: “‘Everyone is adopting a wait-and-see posture. But that can only be maintained for so long, because the clock is ticking.’”

10. And finally, for you sports buffs out there, in case you have forgotten, lots of things happened before Joe Paterno was fired and the NBA started up again.  Out of fear that I will botch the terminology, check out this incredibly detailed recap of the year in sports here.

11. And finally, thanks to all for your contributions, suggestions, and readership over the past months.  We look forward to another fantastic year so keep checking in on the IPLJ in 2012.

We wish you and yours a very Happy New Year!

Coca-Cola’s super secret patented formula has been moved for the first time since 1925.

Read all about it here, here, and here.

Thank you to staffer Heather Crawford for the links!