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Patently Absurd

There's a problem with "business model" patents like Priceline's rights to all reverse auctions or Amazon's rights to one-click ordering. These patents weren't authorized by Congress but were created by a judge in 1998. While technology patents spur innovation because enhancements can be patented, business-method patents stop it because you can't get around them.

I’ve never been a fan of “business model” patents. These are patents like Priceline’s rights to all reverse auctions or Amazon’s rights to one-click ordering.

These patents weren’t authorized by Congress but were created by a judge in the 1998 case of State Street Bank & Trust Co. v. Signature Financial Group, Inc.

I’ve written on this before, but the problem is that while technology patents spur innovation because enhancements can be patented, business-method patents stop it because you can’t get around them. The patent holder becomes a tolltaker, raising costs for everyone while providing no value to anyone.

Well, here we go again. Ed Pool of DE Technologies LLC in Union Hall, Virginia, claims he’s about to get a patent that basically covers all international commerce, when computers are used to grease the wheels. Pool told MSNBC he’s going to demand a .3 percent royalty on all international trade, when computers are involved. Forrester Research estimates that could total $2.4 billion just for 2004.

Mr. Pool has a lawyer; he’s sending out letters; and even if he never collects a dime from anyone, he’s going to have a huge negative impact on the development of international e-commerce over the next few years.

Folks will have to pay lawyers to defend themselves. Small players will be squeezed out. Why? What has Pool really “created”? He took something everyone does – trade across borders – and computerized it. This “innovation” goes beyond the obvious. Hey, I’m going for a patent on working from home next. Maybe I’ll patent getting out of bed or watching TV while drinking a beer. If you do it, I get paid (unless you’re drinking that weak light beer – I hate that stuff).

There’s a serious point here, and it relates to all intellectual property. Patent and copyright exist to give people some rights and control over their work. But these rights are not absolute. They were created by Congress and can be adjusted by Congress.

In fact, Congress is the institution that must be heard from. I don’t think I’m making a really controversial point when I assert that both patents and copyright have become a mess in the last few years. We’ve lost the balance between innovation and commerce. Rights holders are putting up tollbooths throughout the online world and threatening everyone with lawyers or worse unless they get paid what they want, when they want, and how they want.

This is what legislatures are for, to weigh the rights of everyone and come up with a new balance that’s fair to everyone. Courtrooms can judge only the boundaries of the law, and the executive can enforce only the law. It’s the legislature we must hear from.

I don’t think this will become a political issue in the current election (although it would be a great question to ask at your local candidate forum). I think whoever is elected has a tough job ahead of him. I just think it’s high time for him to work on it, before the “Information Superhighway” becomes nothing more than a network of toll roads.

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