Beware the patent collectors

The chances of a user being sued for intellectual property infringement related to software usage are slim, industry observers say. But that might change, as some companies hoard patents for the express purpose of using them to extract money from sellers and users of software.

Up to now, not many users have faced such threats. When asked for an example of a user actually getting sued over intellectual property rights, Microsoft spokesmen go back four years. In 2000, Allan Konrad, a computer scientist, sued three dozen corporations, including General Motors, Ford, Boeing, Daimler Chrysler, United Air Lines and Eastman Kodak. Konrad held three patents and ownership to the mechanism of Web-based delivery of information. He went after corporations serving Web information from back-end databases.

"Microsoft worked to get IBM, Sun and AOL, whose products were also implicated, to step in collectively on behalf of our customers. We hired one law firm to defend them, paid the cost of that. The outcome was very positive; the infringement claims were thrown out," says David Kaefer, director of business development at Microsoft.

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The chances of a user being sued for intellectual property infringement related to software usage are slim, industry observers say. But that might change, as some companies hoard patents for the express purpose of using them to extract money from sellers and users of software.

Up to now, not many users have faced such threats. When asked for an example of a user actually getting sued over intellectual property rights, Microsoft spokesmen go back four years. In 2000, Allan Konrad, a computer scientist, sued three dozen corporations, including General Motors, Ford, Boeing, Daimler Chrysler, United Air Lines and Eastman Kodak. Konrad held three patents and ownership to the mechanism of Web-based delivery of information. He went after corporations serving Web information from back-end databases.

"Microsoft worked to get IBM, Sun and AOL, whose products were also implicated, to step in collectively on behalf of our customers. We hired one law firm to defend them, paid the cost of that. The outcome was very positive; the infringement claims were thrown out," says David Kaefer, director of business development at Microsoft.

Dan Ravicher, executive director of the Public Patent Foundation, expects an increase in patent litigation because there are now more patent holders such as Konrad. A new industry of companies collecting patents with the sole purpose of suing others for money has formed in the past years, Ravicher says.

"We are seeing a dramatic increase in the amount of patent litigation by [intellectual property] holding companies," Ravicher says. "Today and in the past it was unlikely to get sued, but every day that passes there is a new [intellectual property] holding company forming with its whole point being to go around suing people."

Ravicher, who is also outside patent counsel to a company called Open Source Risk Management that plans to sell indemnification coverage for open source software, is lobbying for changes to U.S. patent law. "The patent system today is not advancing technology, it is inhibiting technology. It does not treat people fairly, it is completely out of whack, it needs to be fixed," he says.

Wallace Garneau, IT manager at a manufacturing company in Lowell, Mich., shares Ravicher's concerns. "I am concerned with indemnification, but really I am more concerned with the direction indemnification is taking. I believe firmly that when I use a product in a manner consistent with the license, it should not be possible to hold me liable for copyright infringements by the people who made that product," Garneau says. "How is a consumer supposed to buy products if they have to worry about being sued for copyright infringements that may be alleged against the manufacturer?" he asks.

Read more about software in Network World's Software section.