Tuesday, October 31, 2006

Patent Enforcement May Irk Competitors, But It Can Also Anger Potential Customers As Well

Since Blackboard sued online learning company Desire2Learn over US Patent 6,988,138 ("Internet Based Education Support System and Methods"), there was a great outcry from companies that perceived themselves as being similarly situated as Desire2Learn. Since many of Blackboard's competitors are developing companies, they understandably feel threatened over potential patent litigation that can easily swamp their businesses with expensive legal fees.

Accordingly, many in the online learning community banded together to start a PR campaign against BlackBoard and the '138 patent, publishing numerous articles disparaging the patent and BlackBoard's decision to enforce it. One site, called "BlackBoard is Suing Me" has been created to track BlackBoard's enforcement effort, and a wiki has been set up to collect potentially invalidating prior art. Efforts are also being coordinated with the EFF to raise "awareness" over education-related patents. In the meantime, BlackBoard has been defending its patent, and even set up a FAQ site that explains their patented technology.

Recently, leaders of higher education’s main technology association Educause have injected themselves into the controversy by writing a strongly-worded letter urging Blackboard to relinquish the '138 patent and drop its patent infringement lawsuit against Desire2Learn. In their letter, which was claimed to be written on behalf of the entire “higher education IT community,” Educause used unusually dramatic language to describe how college technology officials view Blackboard’s patent and its lawsuit against Desire2Learn:

One of our concerns is that you may not fully appreciate the depth of the consternation this action has caused for key members of our community . . . We have seen this intensity of anger only a few times before. In those cases, the corporations involved were unaware of what was happening outside their official channels. Please do not underestimate this consternation which we believe will impact Blackboard in both the short- and the long-term.
Read the letter here (bottom of the page). Also read Educause's letter to members regarding future efforts at patent reform in light of BlackBoard's patent.

Also, Fannie Mae, who is the largest purchaser of real estate mortgages in the United States, has gotten into a bit of hot water over the issuance of U.S. Patent 7,089,503 ("Mortgage loan customization system and process"). While Fannie Mae has not sued anyone on this patent, Bank Industry Groups are taking no chances and similarly requested that Fannie Mae "renounce any rights to enforce the Patent and place it into the public domain." The request was endorsed by seven industry groups including the American Bankers Association, the Consumer Mortgage Coalition, and the Mortgage Bankers Association.

The interesting thing is that Fannie Mae cannot originate loans, but can only buy them on the secondary mortgage market. Trade groups are concerned that Fannie Mae's patent will prevent other companies from developing similar technology and block innovation in the housing finance market.

Also, since Fannie Mae is a government sponsored enterprise, three trade groups decided to voice their concerns about the patent to the Office of Federal Housing Enterprise Oversight and the U.S. Department of Housing and Urban Development, who are the top regulators of Fannie Mae and rival Freddie Mac. While details of the meeting are not readily accessible, it can be presumed that the government was solicited to help in the effort to quash the '503 patent.

This raises a potentially interesting issue for patentees and their perceived image within an industry or consumer group. If patent portfolios are developed to cover actual products, does the risk of potentially alienating peers or consumers in the market outweigh the risk of losing potential licensing revenue covered by issued patents? And if industry groups "shame" companies to the point where they lose market share of active products, will this tactic force patent holders to become even more aggressive in their enforcement of patents to make up for lost revenue?

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