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One Year Ago: Study: Net Intellectual Property Suits on the Rise

By Rob Conlin
Apr 25, 2001 5:19 PM PT

Originally published on April 26, 2000 and brought to you today as a time capsule.

One Year Ago: Study: Net Intellectual Property Suits on the Rise

Internet-related trademark, patent and copyright litigation will increase significantly in years to come, according to a recent PricewaterhouseCoopers survey of U.S. intellectual property attorneys.

The report comes as a number of e-commerce companies, including Amazon.com, Barnesandnoble.com and Priceline.com, find themselves mired in battles over intellectual property disputes.

Conducted at the PricewaterhouseCoopers' annual Intellectual Property Leadership Forum, the survey revealed that 80 percent of the respondents said that intellectual property infringement litigation is increasing and over half believe that the key issues are business method patents or other Internet-related issues.

More than half of the respondents said they believe the Internet will diminish the ability of intellectual property owners to enforce their patent rights.

Poor Grades for PTO

The U.S. Patent and Trademark Office (PTO) came under heavy fire from the survey respondents, as some 90 percent of the intellectual property attorneys believe that the PTO is doing a poor job addressing the changing issues of patent regulation in the Internet era.

In an effort to address the issue head on, the PTO announced a "Business Methods Patent Initiative" last month to evaluate the quality of patent examination in the Net age. The initiative is also intended to enhance the "technical currency" and business know-how of patent examiners regarding e-commerce and Internet infrastructure development.

Other Views

The box checked in a blind survey does not always reflect a reasoned view on the issue. Walnut Creek, California-based patent attorney Mitch Rosenfeld believes that the Patent Office is doing a good job. Rosenfeld is a principal in 122 West, a business consulting service for Internet start-ups.

"You have to remember that it is the government. There are guidelines for computer-related inventions that were instituted in 1996 and the rules are working well when applied," Rosenfeld said. He commented that the Patent Office's biggest problem when reviewing patent applications is to determine the "prior art," that is, the level of development of technology already implemented.

For Internet start-ups, Mr. Rosenfeld's advice is "to get your patent application on file" because it can be used as collateral when seeking funding. "Indeed, the funding institutions expect that start-ups have their intellectual property rights secured."

Bezos Weighs In

The central issue in Amazon's lawsuit against rival online bookstore Barnesandnoble.com is often cited as an example of an overextended patent. Amazon claims to own patented rights on its 1-Click express ordering process, a model that simplifies the buying process for consumers.

Amazon CEO Jeff Bezos weighed in recently, saying that the PTO should cut the life span of business model patents from the current 17 years to three to five years. In Amazon's defense, however, Bezos said that the company that pours money into research to develop features like 1-Click should be protected legally.

Large Claims

Over 90 percent of the respondents to the PricewaterhouseCoopers survey said they are involved or expect to be involved in intellectual property litigation in which economic damage claims exceed US$100 million.

Nearly 90 percent of the attorneys also said that jury trials are more likely to lead to higher awards than non-jury trials, in which the judge takes on the role of determining the facts and is likely to be more conservative in awarding damages.

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