READER NOTICE: The 271 patent blog will be undergoing some technical maintenance over the next few days, and no posting will be done until next week. Apologies to all for the inconvenience . . .

OUT OF THE FIRE AND BACK TO THE FRYING PAN - FORGENT PREPARES FOR MARCH 9 MARKMAN: Since all the RIM/NTP hubbub died down last week, Forgent will likely climb back into the limelight with its pending case against 30+ blue-chip defendants in the Northern District of California, San Jose Division (action no. M:05-CV-01654). Since filing the complaint, over a dozen companies have settled with Forgent on claims 1-11 and 38 of their '672 patent.

The original Markman hearing was scheduled for Feb. 13, but was postponed do to a criminal case that took precedence in the court, due to the capital offense.

The Markman will be a significant event in the case, as Judge Fogel will interpret the meaning of the claim terms and rely on that interpretation for the remainder of the litigation. Typically, parties will immediately file motions for summary judgments after the Markman ruling, and many cases settle shortly thereafter, depending on how the Markman hearing went. Currently there are 11-or-so claim terms that are in dispute before the judge and are they are generally focused on the technology for forming runlength codes and "statistically coded signals" for encoding and decoding.

The Markman will also set the course of action for Forgent and the remaining life of the '672 patent (which expires in October) - according to the company, 1,100 potential defendants have already been identified by Forgent and plans are underway for further lawsuits.

The hearing is also taking into consideration the reexamination request that was recently granted by the USPTO. The request was made by PubPat, a non-profit patent watchdog group that is not affiliated with the case. Two strange facts are worth noting regarding the reexam: (1) despite being in force for almost 20 years, this is the first reexamination request ever filed on the '672 patent, and (2) an earlier Forgent patent, not cited during the prosecution of the '672 patent, is being asserted as prior art. It will be astounding if the USPTO invalidates the '672 patent based on this alone. But considering the hard-line stance the USPTO took against NTP, it seems anything is possible.

Also, it is likely that the Forgent defendants will be filing additional reexamination requests after the Markman hearing (particularly towards the end of discovery). This has shown to be a valuable second prong of attack for defendants (Microsoft, RIM, EBay) litigating against patents perceived to be harmful to a particular industry. Free from presumptions of validity and claim contruction rules, the PTO has shown some eagerness in using its administrative powers to take high-profile holding companies down a notch or two when validity is questioned.

BUSINESS METHODS CHARGE THROUGH TV BROADCASTING: With the exception of the United States, most countries have either restricted or banned business methods from patent protection. For the most part, these countries are quite smug in their respective decisions to nix this "trivial" art form, and remain convinced that they are doing the right thing by excluding business patents. Typically, the rationale begins and ends at the "one-click patent," and assumes that all other other business methods (a) are already being practiced, or (b) are rudimentary variations of the one-click.

Big mistake. So far, business method patents are in the infancy stages, and many of the institutional corporations have just recently established patenting groups for implementing strategies on inventing and developing business and marketing practices outside of traditional "e-commerce" realm that everyone is familiar with.

Recently, I came accross an article describing the concept of "Digital Brand Integration" (DBI) being championed by New York-based Marathon Ventures LLP. Through the use of DBI, products and brand names are blended into objects displayed on television shows to provide commercial revenue, as opposed to running traditional ads during commercial breaks. Since the advent of TiVO and "pay-per-view" cable and satellite programming, the commercial industry has been looking at ways to run ads without having users skip or bypass the ads themselves.

Instead of physically placing objects into a shot (e.g., the Coca-Cola cups sported by all three "Americal Idol" judges, the SUV's driven by CSI detectives), businesses are looking at alternate means for integrating product placements into television shows. According to Nielsen Media Research, network placements in prime time last year numbered 108,261, up more than 30 percent from 2004.

The key component in the DBI system is a process for cataloging each frame of video in a given TV episode to build a list of precise scenes and positions offering advertisers the best natural fit for their products. The idea is for digitally inserted images to be visible but not overly conspicuous to the point of "turning off" viewers. DBI also improves the speed and ease with which brand and product images can be inserted in post-production. Brand images can thus be altered or replaced when the show goes into reruns and off-network syndication.

While the technology underlying DBI has been around for a while, this specific applications of DBI has shown some promise. Marathon Ventures has already signed an unprecedented deal with CBS and is in the process of negotiating with FOX. Marathon has claimed to have filed patents on the technology, but none of them have been published by the USPTO yet.

ANXIETY LEVELS RISE AS PATENT AUCTION LOOMS: On April 5, Chicago-based patent consulting firm Ocean Tomo LLC plans to hold a semi-annual patent auction at the Ritz Cartlon in San Francisco. The firm will put on the auction block approximately 400 patents pertaining to semiconductors, RFID, wireless communications, automotive technology, food, energy and the Internet. The patents will be grouped in 68 blocks ranging in estimated value from $100,000 to more than $5 million.

The patents will be grouped into lots when they relate to a common area. Some lots will include additional material such as prototypes of products, inventor notebooks, and, in one case, 80 hours with the inventor to aid in transferring expertise. At the end of each auction, Ocean Tomo will get 25% of the sale price.

The offerings include patents for Motorola bar code technologies and biochip technology, patents for a Clorox bleach activator and a Ford four-wheel steering system. Also included will be patents from Kimberly-Clark on a new shrink-wrap that the company has decided not to commercialize, as well as 20 patents issued to BellSouth in areas that are no longer part of its core business, such as search-engine technology. The complete list (310 pages) of patents may be purchased from Ocean Tomo here.

Of course, in one of Ocean Tomo's previous auctions, the infamous 39 patents from CommerceOne were sold for $15.5 million. These patents were perceived to be so broad that they had a potentail to cause major havoc in the Internet industry if they fell into the "wrong hands" (read: a patent holding company). Eventually it was learned that Novell purchased the patents under the pseudonym "JGR Acquisitions" to prevent such companies from getting their hands on the patents.

While no such patents have been identified (yet) among the patents to be auctioned, concerns are growing whether a similar scenario can play out. A number of high profile holding companies are expected to attend the upcoming auction, and it is anyone's guess who will be buying what.

Regardless of what you may think about some of the bidders, Ocean Tomo is staking out some revolutionary territory in the areas of patent valuation and patent commerce. Instead of relying on labor-intensive licensing and litigation tactics, the bidding system created by Ocean Tomo will likely create an active trading market (the company even referred it to being the "EBay of IP") for moving IP assets into the stream of commerce.

Read more information from CNet article here.

Another informative article by BusinessWeek.

PROSECUTION HISTORY OVERTURNS COURT'S CLAIM CONSTRUCTION:

Aspex Eyewear v. Miracle Optics, Inc. (Fed. Cir. March 2, 2006 - 04-1138)

In a non-precedential opinion, the Federal Circuit overturned the Central District of Claifornia's claim construction of reissue patent RE37,545. The issue is the case was whether the claimed eyeglass arms extending from an auxiliary frame extended past a rear edge of a primary frame. Defendant Miracle Optics argued that such an extension was disclaimed by Aspex during prosecution, thus negating any infringment.

The claims did not have a limitation stating that the auxiliary frame arms could not extend past a rear edge of the primary frame and the specification was silent as well. Turning to the prosecution history, the lower court decided that the withdrawal of an added figure (Figure 8)during the reissue proceedings was tantamount to "accepting" that the limitation was not present.

The Federal Circuit disagreed:

Summarizing, because 1) the applicant’s position that the original specification supported Figure 8; 2) the examiner’s only objection to Figure 8 was that it was based on new matter; 3) the examiner subsequently viewed the subject matter of Figure 8 to be not "new"; and 4) the examiner allowed claims that are broad enough to encompass Figure 8, we cannot conclude that the applicant disclaimed the subject matter of Figure 8. Accordingly, the district court erred in its construction of claims 12, 16, and 24 by imposing a limitation on the claims that the arms extending back from the auxiliary spectacle frame cannot extend past the rear edge of the projection containing the magnetic members of the primary frame.

Vacated and remanded.

SUPREME COURT OVERTURNS PRESUMPTION OF MARKET POWER FOR PATENTS:

Illinois Tool Works v. Independent Ink, 04-1329

The U.S. Supreme Court limited the scope of antitrust suits against patent holders by providing them with more leeway in bundling products for sale to customers. In the case of Illinois Tool Works Inc., the Court overturned a lawsuit seeking to bar the company from forcing purchasers of its patented industrial printheads to buy its ink as well. The unanimous decision stated that lower courts should not presume that patents given to a company necessarily confer "market power,'' which under federal antitrust law would limit a company's ability to bundle products. The case was vacated and remanded to the lower court to give Independent Ink a chance, without the benefit of a presumption, to show that Illinois Tool Works has market power in the printhead field:

Because a patent does not necessarily confer market power upon the patentee, in all cases involving a tying arrangement, the plaintiff must prove that the defendant has market power in the tying product.

Over the years, this Court’s strong disapproval of tying arrangements has substantially diminished, as the Court has moved from relying on assumptions to requiring a showing of market power in the tying product. The assumption in earlier decisions that such “arrangements serve hardly any purpose beyond the suppression of competition," . . . Nothing in [the caselaw] suggested a rebuttable presumption of market power applicable to tying arrangements involving a patent on the tying good.

The presumption that a patent confers market power arose outside the antitrust context as part of the patent misuse doctrine, and migrated to antitrust law . . . [W]hen Congress codified the patent laws for the first time, it initiated the untwining of the patent misuse doctrine and antitrust jurisprudence. At the same time that this Court’s antitrust jurisprudence continued to rely on the assumption that tying arrangements generally serve no legitimate business purpose, Congress began chipping away at that assumption in the patent misuse context from whence it came . . . Congress amended the Patent Code to eliminate it in the patent misuse context.

[A]fter considering the congressional judgment reflected in the amendment, this Court concludes that tying arrangements involving patented products should be evaluated under the standards of cases like Fortner II and Jefferson Parish rather than the per se rule in Morton Salt and Loew’s. Any conclusion that an arrangement is unlawful must be supported by proof of power in the relevant market rather than by a mere presumption thereof.

[B]ecause respondent reasonably relied on this Court’s prior opinions in moving for summary judgment without offering evidence of the relevant market or proving petitioners’ power within that market, respondent should be given a fair opportunity to develop and introduce evidence on that issue, as well as other relevant issues, when the case returns to the District Court.

The decision continues the trend toward a more market-based approach in U.S. antitrust law, effectively overturning a pair of decades-old precedents. This decision is considered a victory for businesses that rely heavily on patents, including technology companies and drug makers.

BALTHASER'S PATENT, THE HYPE, AND THE BACKLASH: Last week, a company called Balthaser announced in press releases that the company was finally awarded U.S. patent 7,000,180, titled "Methods, systems, and processes for the design and creation of rich-media applications via the Internet." The patent is a continuation-in-part of a prior application which was based off of a number of provisional filings dating back to June of 2000.

After almost 6 years of waiting for the patent, Balthaser decided to hype the patent to the press, and threw in some veiled threats to industry players such as Microsoft, Adobe, Google, and Yahoo! for good measure:

the patent covers all rich-media technology implementations, including Flash, Flex, Java, Ajax and XAML, and all device footprints which access rich-media Internet applications, including desktops, mobile devices, set-top boxes and video game consoles. Balthaser will be able to provide licenses for almost any rich-media Internet application across a broad range of devices and networks . . . We're ready to defend it vigorously if we have to . . . The broader claim is one that basically says that if you got a rich Internet application, it is covered by this patent.

As a matter of course, programmers and commentators went bananas (see the fun at Slashdot here). Some even started speculating that Balthaser could become the next NTP. At a minimum, it was feared that the patent would bring whole Web 2.0 resurgence to a screeching halt.

But after reading the patent (164 pages), it appears that Balthaser overstated its case. The patent has 83 claims. Claim 1 reads as follows:

1. A method for users to create and maintain a rich-media application on said host website via the Internet comprising:

creating a user account; accessing a user account; and viewing available options for creating rich-media applications,

wherein said accessing a user account comprises one or more of the following:

accessing account information; creating a new rich-media application; modifying an existing rich-media application; and accessing statistics from an existing rich-media application;

wherein accessing a user account comprises modifying an existing rich-media application and wherein said modifying an existing rich-media application comprises one or more of the following:

accessing account information; accessing rich-media application information; accessing rich-media application specification information; saving said rich-media application; closing said rich-media application; deleting said rich-media application; publishing said rich-media application; previewing said rich-media application; accessing components used in the construction of said rich-media application; accessing component-editing graphical user interfaces; and accessing a scene of said
rich-media application; and

wherein said modifying an existing rich-media application comprises publishing said rich-media application and wherein said publishing said rich-media application comprises downloading said rich-media application from said host computer to the user's remote computer system.

The other claims are pretty much similar to claim 1, and basically cover Internet/GUI Groupware where users use online tools to design "rich-media" applications from
components. The patent does not cover Rich Internet Applications in general, but instead covers rich media hosting websites and content websites where the rich content is added, modified or deleted by individual users within their user accounts.

The publication SYS-CON took this patent to some prominent industry specialists, and they also concluded that the patent was more bark than bite, although it was still possible to ensnare some specific applications like Flash-based websites.

The biggest shortcoming of the patent however, is the skimpy prior art search conducted at the USPTO - since the original application was filed, the first substantive office action didn't actually occur until March 2005. After amendments were filed in response to a September 2005 Final Rejection, the application was allowed, citing only 4 patents as prior art, and no non-patent prior art.

In fact, this prompted a number of rich Internet application people to host a web site dedicated to collecting prior art on the patent.

Oddly enough, while Balthaser was proclaiming the importance of the patent, the USPTO has no record of any continuations being filed off of the '180 patent. Also, the '180 patent appears to be the only patent issued to the company.

Will Balthaser be suing anyone? It doesn't seem that they would, at least in the near future. With the tremendous backlash that is currently ongoing, this could be a lesson to other companies to take care in choosing the language they use when promoting newly-issued patents.