Patent holder eyes Web services players

A patent held by a little-known programmer from New Jersey may complicate the grand visions of Net services touted by titans such as IBM, Microsoft and Sun.

7 min read
A patent held by a little-known programmer from New Jersey may complicate--at least temporarily--the grand visions of Web services touted by titans such as IBM, Microsoft and Sun Microsystems.

Charlie Northrup, the chief executive of software developer Global Technologies, holds one of the earliest patents that describe how diverse computer systems can talk to servers connected to the Web and run software on multiple platforms. Sound familiar? That's just the kind of service Microsoft is pushing with its .Net strategy, a wide-ranging plan for moving business computing applications such as calendars, word processors and e-mail onto the Web.

The concept of Web services has been simmering for several years and is now starting to come to a boil. Microsoft and Sun both held conferences last week to advance their rival plans, with Microsoft Chairman Bill Gates calling on programmers to rally to the .Net scheme and Sun executives countering with details about their iPlanet products.

Northrup applied for the patent in 1994, and the United States Patent and Trademark Office in 1998 awarded him patent 5,850,518--dubbed "Access Method Independent Exchange." While it is unclear how much credit is due Northrup, his patent is referenced in portions of separate patents owned by Microsoft, IBM and Novell. Those citations give Northrup some firepower to pursue infringement claims, according to patent experts.

"I am not claiming infringement right now. The goal was to protect what I was doing so the big companies can't come along and say 'You can't do that anymore,'" said Northrup. "If I hadn't had the means to file for the (patent), clearly we wouldn't be in the game. At least we have a pawn in the chess game."

Obtaining a patent, however, is no guarantee of an eventual payoff.

A few years ago, for example, several Net companies were awarded patents for everything from search technology to computer-based postage metering. But the promised pay day failed to materialize when other companies ignored the patents or the potential for licensing revenue was much less than anticipated.

In the case of Northrup's Web services patent, Novell said citing another patent doesn't mean the company is using or licensing the technology.

"Rather, any company making a patent application is required by the patent office to cite...any similar inventions the company is aware of," a Novell spokesperson said on behalf of the company's legal department. "Essentially we are saying, 'Here's an example of a similar, existing patent, and here's how Novell's invention is different.'"

With the high expense of filing patents and continuations--follow-up claims that buttress earlier ones--the 39-year-old Northrup said he is hoping to win some funding to keep his team on the playing field. Depending on the vision or direction a potential investor has for the patents, a new backer could spell trouble for the companies rushing toward Web services.

"If a group got a hold of (the patents) that just wanted to be a shark, they could file all the additional claims and continuations and then assert the claims against various players in the industry," said Northrup. "That might not be beneficial for the industry."

The long-standing issue of software patents is now at a crossroads. Some camps are trying to strip these kinds of patents of their power, while others are trying to reinforce their role in the industry. However controversial, though, software patents are unlikely to disappear and seem to become even more entrenched.

Indeed, the World Wide Web Consortium (W3C), whose mandate is to develop industry standards for Web technologies, is embroiled in a major tug-of-war because of a new policy under consideration that could allow the use of patented technologies in its standards. Companies that hold those patents could end up charging royalties for their use.

Patents in the pocket
The payout in the game could be sizable, and Northrup isn't the only contender coming forward to claim that Microsoft is infringing on patents as the software giant moves to launch its .Net services.

A pattern of patents

Patent battles are standard fare in the technology sector. Many claims become embroiled in lengthy lawsuits and countersuits. Small companies take on bigger ones, big ones pick on companies large and small. Here is a partial list of recently launched claims and suits.

• AT&T in June filed suit against Microsoft, claiming the software giant infringed on its patent for a technology that allows high-speed transmission of telephone calls and video over the Internet.

• E-Data, a small New Jersey-based company, since 1996 has been battling software makers Intuit, Broderbund, AOL Time Warner and others, alleging that it owns a patent that controls Internet software downloads.

• Xerox sued Palm in 1997, claiming that it patented the handwriting-recognition technology that Palm uses in its handheld devices.

• Unisys last year pushed the major portals to license GIF patent, for a ubiquitous image file used on the Internet.

• Symantec notified its rivals in February that it owns a pair of patents that control its methods for updating virus software. The Symantec patents, for "Multi-tiered Incremental Software Updating" and "Backtracked Incremental Updating," allow data that is frequently updated to be efficiently patched.

• Amazon.com and Barnes&Noble.com have been tussling since 1999 over Amazon's 1-Click technology, a feature that allows returning customers to purchase items by simply pressing a single button without the need to re-enter billing and mailing information. Apple recently licensed the technology from Amazon.

• Intouch Group, a digital music company in Berkeley, Calif., last year sued Amazon, AOL Time Warner's Entertaindom, Liquid Audio and others, alleging that they infringed on its patent for downloadable and streaming music.

Earlier this month, InterTrust Technologies, a digital-rights management company, expanded a lawsuit alleging that Microsoft's .Net framework as well as features in Office XP and Windows XP infringe on InterTrust's technology patents. Microsoft denied the original claims and has returned fire, claiming that InterTrust infringed on some Microsoft patents.

Individuals and small companies have a long history of acquiring patents and then offering to license or sell them to large companies whose business strategies may lean on the patents. More often than not, it is less time-consuming and less expensive for the large players to buy out the patent holder than to litigate.

"There are people that are doing nothing more than mining their original Internet patents," said Kevin Rivette, a patent specialist and co-author of "Rembrandts in the Attic: Unlocking the Hidden Value of Patents."

During the summer, database developer Oracle acquired Strategic Processing, a company that owned a patent that many consider one of the earliest in the area of online marketplaces--a segment that Oracle is betting heavily on. The patent, dubbed "Interactive Market Management System," was awarded by the U.S. Patent and Trademark Office in 1989 and has been cited by Microsoft, IBM and Priceline's founder Jay Walker.

The patent allows different buyers and sellers, as well as financial institutions and package shipping services, to communicate over far-flung databases and systems. The patented system has a database with user information that is accessed online by the parties involved in a transaction--just the kind of service that IBM, CommerceOne, Ariba and others promote for their business-to-business marketplaces.

If a competitor had acquired this patent, Oracle could have faced a serious challenge to its e-business software push. Oracle declined to comment on how it might use the patent or what it paid for Strategic Processing.

"In my opinion, Oracle bought it because they couldn't afford to keep it out there," said Rivette. "The more citations a patent gets, the more likely it will be valuable and have implications for the players citing it. There are more of these kinds of patents sitting out there."

Advantage, early mover?
Indeed, Northrup's patent may serve as another example of an attractive early mover catching the eye of dominant players. His patent describes how to send information and specifications between systems, and Northrup said he will receive another two patents by the end of 2001 that buttress his earlier claims.

The companies that reference Northrup's patent either declined to speak about it or downplayed its importance relative to their own patents.

"It is not an IBM patent, so we cannot comment on it," said an IBM spokeswoman.

Microsoft also said it would not provide details or comments about its relationship with specific patents.

Novell's explanation for citing earlier patents--essentially calling them just a footnote--fits a common strategy, according to legal experts. When a company realizes that it may be in danger of violating someone else's patent, it will try to get its own in a carefully worded claim that seeks to skirt the existing patent.

"They can show it is substantially different, and everyone will go their merry way unless the original patent holder actually sought to enforce his alleged rights," said Jason Epstein, a patent attorney with the law firm of Baker Donelson Bearman & Caldwell in Nashville, Tenn. "At that point, you would have the lawsuit."

Northrup says that citing a patent to emphasize the differences is hardly a watertight argument, and patent experts back him up.

"You build off the shoulders of existing patents," said Rivette. "The next patent might be different, but you may need this patent to build the product created by your newer patent."

But given the toll that the patenting business can take on individuals and small companies, the juggernauts are likely to keep rolling, using the time-tested tactic of litigating until the smaller player relents as its financial support is sapped.

"I think people in the patent business are primarily there to settle, not to disrupt," said Chris Le Tocq, an analyst at Guernsey Research. "Any settlement with (Northrup) is unlikely to be so large as to disrupt the effort Microsoft is attempting to tap."