Patently Bezos

The Amazon CEO's plan for patent reform is not all new, but it's not all bad, either.

When Amazon CEO Jeff Bezos laid out his proposals for reforming the patent system last week, patent experts reacted with the same lack of enthusiasm the bookseller's competitors showed when it won a patent on its customer-referral program. After all, Bezos' plan, like some of his company's e-commerce patents, did not sound all that novel to people familiar with the subject.

"This is really nothing new," says Randy Lipsitz, partner at Kramer, Levin, Naftalis and Frankel. "He's not the first person to have spoken out against the patent system." In fact, he's not even the first to introduce the main ideas of his proposal: to create a special set of laws to govern software and business-method patents, to shorten the life span of such patents and to create a database of prior art to help educate the Patent Office about existing innovations. (He may, however, be one of the few to suggest patent reform while trying to quell the public outcry against his own company's patents -- Amazon's patents on 1-click purchasing method and affiliate program for customer referrals have been roundly criticized for being obvious "inventions" that shouldn't have received patents.)

In a 1994 Columbia Law Review article titled "A Manifesto Concerning the Legal Protection of Computer Programs," Pamela Samuelson, an intellectual-property expert and law professor at University of California at Berkeley, called for a new kind of legal structure to protect software developers' rights -- something more protective than copyright law, but less so than traditional patents. Essentially, Samuelson argued that the strong, wide protection of patents threatened to hinder technical advances in the field. Given that software is typically built in pieces, with different developers contributing new programs or elements that work on top of existing software, patents on the underlying software could deter newcomers from building on it; to do so they generally have to pay a licensing fee or risk a lawsuit. According to Samuelson, such strong software patents are contrary to the Constitution, which empowered Congress "to promote the progress of science and useful arts, by securing for limited times to authors and inventors the exclusive right to their respective writings and discoveries."

Samuelson also tackled the time-limit issue that Bezos brought up in his proposal: While the "Manifesto" did not propose specific software patent time limits, in testimony before Congress, Samuelson says she and her co-authors suggested that a fair life span for software rights protection would be "in the neighborhood of three years."

The law provides for 17 years of protection, because it is trying to ensure that the inventors of costly inventions, such as pharmaceutical drugs, can recoup their investment before their patent runs out. But software is not nearly as complicated or expensive to produce, and there's a theory commonly espoused by patent attorneys that the software world moves about five times faster than the industrial one that the patent system was designed to protect; as a result, software-related patents, including those covering business methods, deserve only one-fifth the protection. Besides, software is likely to be long outdated by the time 17 years have passed.

"Internet technology is advancing so rapidly that a three-to-five-year term would -- its proponents would argue -- have the same practical effect as the current 20-year-from-filing term," says Timothy Shea, a Boston patent attorney. In the proposal Bezos posted to the Amazon site, he also argues that "fewer people will bother to apply for three to five year patents," if only because the return on investment -- patents can cost anywhere from $25,000 to $100,000 -- doesn't justify the cost.

But the Patent Office isn't buying such arguments. "Limits on patent life spans exist in the form of re-registration," says Brigid Quinn, a spokewoman for the Patent Office. "After four, seven and 11 years, patent-holders are required to pay a maintenance fee. If they don't want 17 years of protection, they simply don't have to pay the fee."

And if Bezos thought his newfound desire for patent reform was original, well Jeff, it's been around. "Since the 1950s the courts and the Patent Office have been grappling with whether or not software could be patented," Samuelson says. Patents typically cover mechanical inventions and processes, but in theory they don't cover ideas; the question is whether software is a process or an idea. So far Congress, which is the only body that can change the law, hasn't weighed in on the subject. "In the political environment of the United States, it's always been an uphill battle."

The main U.S. lobbying forces that might spur Congress to action -- corporations -- have not been keen to remove protections that benefit them. "There's too much of a vested interest," says Gregory Aharonian, publisher of a newsletter called the Internet Patent News. "Companies like things the way they are."

Now the question is whether the political punch packed by Bezos, a new economy billionaire and Time magazine's person of the year, is enough to create a change. If he's serious about patent reform, he'll probably need the support of e-commerce peers like Priceline CEO Jay Walker, who has patented his site's reverse-auction business process and filed for more than 250 Internet business patents, as well as folks in the financial services sector -- who started patenting business processes even before the commercial Net existed.

Lawrence Lessig, director of Harvard's Berkman Center for Internet and Society and the former "special master" in the Microsoft antitrust case, sounds hopeful. Bezos' plan "signals an important difference about this generation of e-commerce [business people] vs. those of IBM or AT&T," says Lessig. In other words, while traditional technology companies that have spent well on R&D have a lot invested in patents, the more nimble software-based companies might have more motivation to change the system.

For Bezos the motivation came directly from the Net. In January when Amazon sued rival (and Salon.com bookselling partner) BarnesandNoble.com for infringing on its "1-click" patent -- a purchasing system that uses cookies to identify repeat customers and let them use previously entered credit card numbers and addresses for new purchases -- Netizens called for a boycott of Amazon. Then in February, Amazon won a patent for its affiliate program, which hundreds of other retailers use to encourage partner sites to refer customers in exchange for a percentage on any sales made.

Apparently, it was all the Net could take. Within days, Tim O'Reilly, CEO of O'Reilly and Associates, a publisher of computer books and software, posted a letter denouncing Amazon's patents. Less than a week later, 10,000 people had added their own screeds to O'Reilly's site. Bezos relented, a little; he didn't offer to give up the patents, but he did set forth on his ideas for reform.

Bezos may gain some points with the Net crowd for listening, but its not just the help of tech types that Bezos would need to start the congressional reform gears in motion; Wall Streeters actually have been patenting e-commerce business methods since well before the term e-commerce was invented. Since the 1980s financial services firms have won patents covering everything from Merrill Lynch's "two-way wireless system for financial industry transactions" (patent number 5,915,245), to Charles Schwab's electronic bill system, which lets a financial institution pay its customers household bills electronically rather than with checks (5,978,780).

"If the guys in the button-down shirts say the system doesn't work for us, it would be hard for Congress not to listen," Samuelson says. "They have the clout; they don't look like a bunch of ragtag Internet hippies trying to get out from under the strictures of the patent system, which is exactly how the anti-patent crowd has been portrayed."

It's far too early to say whose support Bezos can garner, but even if he doesn't organize a million-man march on Washington, there's hope for the "ragtag Internet hippy." Patent experts say Bezos' best chance of effecting change may come from his suggestion to create a database of prior art. Such a database, which he has offered to fund with his own money, would not have to involve the Patent Office or Congress -- it could be up and running as fast as an Internet entrepreneur could get it going. Essentially, it would help solve what many consider to be the patent office's biggest problem: examiners' inability to find prior art that might keep them from issuing a patent that should have been rejected.

Of course, Bezos wasn't the first to dream up this plan. Lots of patent attorneys and historians have suggested that such a database would solve a lot of problems. Aharonian, who makes a living disproving the validity of patents for corporate customers, has already started his own arsenal -- storing examples of existing innovations that can be used to contest bad patents. "On average, issued software patents are missing three or four prior art examples that should have been cited," says Aharonian, who says he would need $5 million to $6 million to complete the database he has already started. By making such data available to the Patent Office, perhaps fewer bad patents would be issued.

Already the Patent Office is behind it; Quinn says it's "a need we have often noted."

But that doesn't mean the Patent Office is eager for any other sweeping software patent reforms. As Quinn puts it: "We believe the existing patent law works as well for new technology as it has for old."

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