Saturday, January 10

I Doubt They Will Settle in Linden Dollars

It is interesting when core parts of our online experience -- things that you always took for granted -- all of the sudden become a legal mosh pit of patent lawsuits and cease/desist press releases. It usually stems from a company realizing they own a patent similar to a technology now ubiquitous with the Internet. Something that the WWW could not live without.

It is basically extortion, since technology companies and individual users could not eliminate it without derailing the fabric of the WWW. They would have no choice but to pay a licensing fee or exorbitant settlement cost.

For instance, originally the only image file supported by web browsers was GIF. Or technically "Compuserve GIF" since it was developed for that early pre-AOL online service. As the WWW grew, all web pages used this format for their images. Unisys decided they owned the original GIF format and sued everyone to ensure that they got credit for it (to the tune of $10 for every graphic software package sold that supported GIF from 1994 - 2003).

The same thing happened over the MP3 format (Alcatel-Lucent won $1.5 billion against Microsoft, which was later overturned). Microsoft again was sued (and lost $521M) over the fact Internet Explorer supported plug-ins -- Flash, Shockwave, Quicktime, Java Applets, Active X, etc. -- which are necessary to do anything beyond reading web text and watching looped animations.

Google got hit with a lawsuit over ranking paid search results based on bid price by Yahoo/Overture (the backbone of search engine marketing). It was settled when Yahoo granted Google a perpetual license for 2.7M Google shares.

And in the most bizarre -- and most potentially crippling -- British Telecom actually claimed in 2002 that they owned a patent on web hyperlinks. Even though they filed it in 1976, 15 years before the WWW was born. It would have required any ISP hosting pages with hyperlinks (um... all of them) to pay a license fee. Fortunately it was thrown out by the courts.

[Additional lawsuits submitted by readers include online shopping carts and browser frames. Thanks Manuil and Gavin!]

The trend continues with the recent lawsuit announcement by Worlds.com (small virtual worlds company) against NCSoft, over the use of virtual world avatars. It hints that this is just the beginning:

Stephen Roth, attorney at the law firm representing Worlds.com., could not discuss which other companies Worlds.com might draw into the lawsuit, but said the patent covers "many ways of managing avatars in the virtual world," and there are "certainly other companies that could come within the scope of our patent claims." Roth said Worlds.com has yet to request a dollar amount for damages. The amount set will depend on "reasonable royalties" related to NCSoft's sales for online gaming and monthly service fees.

NCSoft is also a little guy in this space and a good test case for Worlds.com. If they win, then the real royalties come from the Big Guys such as online gaming companies World of Warcraft and Everquest. It could also impact virtual world companies such as Habbo, Second Life, and There.com.

Even more lucrative (since they actually generate revenue) are kid-focused virtual world/gaming sites such as Club Penguin and Webkinz. Not to mention the marketing-driven virtual worlds from Disney (1, 2, 3), Barbie, MTV, and even Coke. And don't forget Nintendo's extremely popular Wii Miis.

Virtual worlds are widely viewed as the future of the Internet. Avatars are the GIFs of virtual worlds. It will be fascinating to see how this one plays out.

2 comments:

Manuil Tonev said...

Very nice summary Stephan! There is one more case that I would add to the list:

Divine Inc, through purchasing Open Market, acquired a patent on the shopping cart and attempted to collect on it:

http://news.zdnet.com/2100-9595_22-125862.html

Thankfully it did not materialize, because the world would have been a different place otherwise!

Cheers!

Mony

Gavin lew said...

Steve,

Before Apple recently announced some patents that produced a number of editorials with the title: "Stupidest patent. Ever.", the original piece was from User Centric's very own, Bob Schumacher who was granted a patent on the Internet ;)

I thought you would enjoy it! Hope all is well.

Gavin Lew



Google
Results 1 - 10 of about 335 for "stupidest patent, ever". (0.08 seconds)
Search Results
Stupidest. Patent. Ever.

By Mike Gunderloy
Monday, January 20, 2003

I have no idea what the US Patent & Trademark Office's examiners are up to these days. Were it not for slander laws and a respect for our four-legged cousins, I'd speculate that it involved farm animals. There must be some explanation as to how they can continually grant patents on common user interface widgets. Case in point: US Patent 5,933,841, "Structured Document Browser."

In the lovely language of patents, here's the first claim:

1. In a computer, a browser for viewing documents having embedded codes that identify parts of documents according to at least one predefined document structure, said browser comprising:

a user interface comprising a display window that displays a document to a user;

a plurality of input devices;

a first plurality of display regions that are responsive to said input devices, said display regions of said first plurality being continuously displayed as part of the user interface automatically and configured to correspond to respective parts of the predefined document structure regardless of what part of the document is in the display window; and

a controller operative to cause a selected part of the document to be displayed in the display window when a user uses one of said input devices to enable one of said display regions that corresponds to the selected part.

Just in case you're not fully up on reading patent language, that means that if your Web site uses frames, and there's a navigation frame on one side, with links that load content into the main frame -- you're violating their silly patent, and they can come after you for licensing fees. And yes, they are coming after people: see the legal documents that MuseumTour.com has posted.

This is so staggeringly stupid that it's difficult to know where to start, other than with the obvious observation that the USPTO has no business granting this sort of junk patent.