Kim DotCom holds what may be a key software patent that could rake in huge amounts of cash but he's got bigger plans
I loathe patent trolls. A paper, "The Private and Social Costs of Patent Trolls" by James Bessen, Jennifer Ford, and Michael J. Meurer of Boston University School of Law explains, "Using stock market event studies around patent lawsuit filings, we find that NPE lawsuits are associated with half a trillion dollars of lost wealth to defendants from 1990 through 2010, mostly from technology companies. Moreover, very little of this loss represents a transfer to small inventors. Instead, it implies reduced innovation incentives and a net loss of social welfare."
I also loathe software patents which are the main tools of the patent trolls. The US Patent and Trademark Office says that to be patentable an invention must be "nonobvious" to "a person having ordinary skill in the art." As [Wikipedia notes], "In other words, '[the] nonobviousness principle asks whether the invention is an adequate distance beyond or above the state of the art.'"
Remember in 1999 when Amazon was awarded the patent (US 5960411) for "1-Click" ordering? It was challenged in 2006 and the patent was subsequently re-examined and revised to apply more narrowly to shopping cart systems, but what has always amazed me is that what was patented was a process that most definitely was obvious to a skilled practitioner. It was obvious to me and obvious to you. We're skilled practitioners and 1-Click ordering wasn't and still isn't an adequate distance beyond or above the state of the art.
But in a wonderfully ironic twist there's one patent troll with an arguably non-obvious patent who I'm rooting for. That troll is, somewhat surprisingly, Kim DotCom, the notorious Internet entrepreneur who founded Megaupload.com.
[A QUICK LOOK: At the Kim Dotcom hullaballoo]
In case you don't remember, Megaupload.com was accused of enabling and abetting copyright infringement through users uploading and downloading music and videos on a massive scale and the site was eventually shutdown by the US Department of Justice in early 2012.
Kim DotCom (his last name was legally changed from Schmitz in 2005), who now lives in splendor in New Zealand, is, to say the least, a colorful character who is metaphorically and in reality larger than life (he's 6' 7" and weighs in at 290 pounds).
Along with the closure of Megaupload.com came a raft of legal actions in the U.S. and other countries and now Mr. DotCom faces legal bills estimated at something like $50 million.
Now, here's where the irony comes in. It was recently revealed that Mr. DotCom holds a rather powerful patent in his original name. The patent (US6078908) is titled "Method for authorizing in data transmission systems." It was filed in 1998 and published in 2000. From its title the patent doesn't sound particularly powerful, but what it embodies is the concept of two factor authentication. This is huge!
Two factor authentication is used by many of the biggest online businesses. On May 22, from his Twitter account (@KimDotcom), DotCom tweeted, "Google, Facebook, Twitter, Citibank, etc. offer Two-Step-Authentication. Massive IP infringement by U.S. companies. My innovation. My patent." (DotCom has an amusing, self-deprecating humor; yesterday he also tweeted, "I'm in shape. Just the wrong one.")
DotCom estimates that two factor authentication is used over one billion times every week and, should he go after the likes of Google, Facebook, Twitter, Citibank, et al. and be awarded damages for patent infringement, he could rake in millions or possibly billions of dollars!
But rather than taking these companies to court, what Mr. DotCom wants instead is for the big boys to help him dismantle the Digital Millennium Copyright Act which has been the source of many of his problems, and contribute to his defense fund. I'd put the likelihood of this happening at pretty much zero.
In another tweet DotCom also offered to license the patent: "Want to buy the world wide license to my two-factor-authentication patent? (13 countries incl. US & China)
So, if you're an aspiring patent troll with a lot of money, Mr. DotCom might want to take your call.
You have to love this! Kim DotCom has one of the more potentially powerful patents you could think of and he's using its existence as leverage to help with his defense as well as getting huge amounts of free press out of it. Of course, there's the question of whether DotCom's patent is actually valid and, indeed, another patent, "User authentication method and apparatus" awarded to Ericsson in 1996 (which DotCom's patent cites), could be a problem.
This will be a fascinating saga to watch as it unfolds and, I suspect, many of us are rooting for Kim DotCom. He's been bullied, harassed, and shutdown by the U.S. Department of Justice, the Hong Kong authorities and Big Media. He's even been treated, quite unfairly and illegally, like a criminal by his adopted country, New Zealand (behavior that is curiously out of character with what I know of the country ... but when politics comes to play, just follow the money to find out who's behind it).
So, go Kim, go! For once patents and patent trolling looks not just fair, but noble.
Gibbs is patently in Ventura, Calif. Tell him your call on Mr. DotCom at email@example.com and follow him on Twitter and App.net (@quistuipater) and on Facebook (quistuipater).