Microsoft Co-Founder Launches Patent War

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Microsoft Co-Founder Launches Patent War

Post  hqlinux on Sat Aug 28, 2010 9:46 am

From the Wall Street Journal:

You knew this was coming one day...



They're the everyday fixtures of the Internet experience: pop-up stock quotes on a website, suggestions for related reading near a news article, videos along the side of your screen.

Now, Microsoft Corp. co-founder Paul Allen says he owns the technology behind all these ideas, and he's demanding that some of the world's top Web companies pay up to use them.

A firm run by Microsoft co-founder Paul Allen is suing Apple, Google and 9 other companies alleging they are violating patents Mr. Allen financed more than a decade ago. Dionne Searcey and Julia Angwin look at the suit and the technology involved.

The 57-year-old software guru on Friday sued much of Silicon Valley, claiming Internet giants such as Google Inc., Facebook Inc. and eBay Inc. have built their businesses around what he says is his technology.

Mr. Allen's suit, filed in federal court in Seattle, asserts those three companies and eight others are using technology developed a decade ago at the billionaire's now-defunct Silicon Valley laboratory. Mr. Allen, a pioneer of computer software, didn't develop any of the technology himself but owns the patents.

His targets vowed to fight. "This lawsuit against some of America's most innovative companies reflects an unfortunate trend of people trying to compete in the courtroom instead of the marketplace," a Google spokesman said. Other companies named in the suit said they planned to defend themselves or weren't available to comment.

Patent litigation in general is on the rise, in what is becoming a lucrative endeavor. Ocean Tomo, a Chicago-based merchant bank that tracks the intellectual-property market, values the licensing market at as much as $500 billion.

Mr. Allen's lawsuit comes amid high-profile successes of firms such as NTP Inc., which enforce patents without making products and have been called "patent trolls" by critics. Courts have tried to rein in patent litigation, with mixed results, and Congress has yet to act on legislation that would do the same.

For Mr. Allen, the lawsuit marks new terrain. The four patents named in the suit were developed at Interval Research Corp., a Palo Alto, Calif., lab and technology incubator Mr. Allen financed with about $100 million during the Internet bubble, but which closed down about a decade ago.

Mr. Allen wasn't available for comment, according to a spokesman, who said Mr. Allen's lab created the technology that he wants to mark as his own. "We recognize that innovation has a value, and patents are the way to protect that," said the spokesman, David Postman.

Mr. Postman said the timing of the suit wasn't related to Mr. Allen's health or personal finances. Mr. Allen recently pledged to give away the majority of his fortune. He was diagnosed last year with non-Hodgkin's lymphoma, but has completed treatments and has no outstanding issues.

"It sounds like the classic patent-troll case," said Mark Lemley, a Stanford Law School professor who specializes in intellectual property and has represented Google and Netflix Inc. in other cases. He said suits filed by holders of years-old patents over technology that's in widespread use can be difficult for a plaintiff to win.

Mr. Allen's lawyers said a team has been reviewing his patent portfolio for years, seeing what's relevant to the current marketplace and parsing the technicalities necessary to complete the lengthy patent process. During that time, some patents were sold or licensed.

Ron Laurie, a former intellectual property lawyer who now advises companies on patent licensing strategy, said Mr. Allen and his companies have generally avoided aggressive litigation. "He's not been thought of as being in the troll community at all," said Mr. Laurie, who in past years advised another concern tied to Mr. Allen.

Legal experts said increasingly large settlements for patent holders in recent years have created an incentive for patent owners to file infringement suits, rather than sell intellectual property, even when patents are years old.

NTP in July sued Apple Inc., Microsoft and four other companies over patents related to the wireless delivery of email to cellphones. BlackBerry maker Research In Motion Ltd. paid NTP $612.5 million in 2006 to settle similar patent charges.

Another Microsoft veteran, former chief technology officer Nathan Myhrvold, has amassed thousands of patents and secured hundreds of millions of dollars in patent-licensing deals from telecommunications companies and others. Mr. Myhrvold's Seattle-based firm Intellectual Ventures patents some of its inventions but also acquires patents to license.

Named in Mr. Allen's suit are Google, Facebook, eBay, Apple, Yahoo Inc., AOL Inc., Netflix, Office Depot Inc., OfficeMax Inc., Staples Inc. and Google's YouTube subsidiary.

Notably missing from the defendants' list are Microsoft, in which Mr. Allen remains a major investor, and Inc., which is based in Mr. Allen's hometown of Seattle. Mr. Postman declined to comment on the selection of defendants.

EBay said it was reviewing the complaint and planning a vigorous defense. A Facebook spokesman said, "We believe this suit is completely without merit and we will fight it vigorously."

Representatives from Apple, AOL, Netflix, Yahoo, OfficeMax and Office Depot declined to comment. Staples didn't return requests for comment.

The suit, filed by Mr. Allen's Interval Licensing LLC, lists violations of four patents for technology that appear to be key components of the operations of the companies—and that of e-commerce and Internet search companies in general. The suit seeks damages but doesn't specify an amount.

The technology behind one patent allows a site to offer suggestions to consumers for items related to what they're currently viewing, or related to online activities of others in the case of social-networking sites.

A second, among other things, allows readers of a news story to quickly locate stories related to a particular subject. Two others enable ads, stock quotes, news updates or video images to flash on a computer screen, peripherally to a user's main activity.

Mr. Allen bankrolled Interval Research. During its heyday, the lab employed more than 110 scientists, physicists, engineers, "and was at the forefront in designing next-generation science and technology," the suit says. The lab's co-founder David Liddle, a former Xerox Corp. researcher, couldn't be reached for comment.

The lab worked on numerous projects, with goals to create technology to use in Mr. Allen's ventures in cable-TV and telecommunications. In later days it also focused on developing technology to license to others. Over a decade, Interval was issued about 300 patents.

According to Friday's suit, Interval Research was listed in Google's "credits" site in 1998 as an outside collaborator and one of a handful of sources of research funding for Sergey Brin and Lawrence Page's research that resulted in Google. Google declined to comment on any ties to Interval.

Interval Research's developments included cellular voice-processing technology and motion-detection technology used in games that allows a computer to "see" commands. It also created a "smart" toy called "Red Beard's Pirate Quest" and later sold the technology behind it to Lego Group.

Work at Interval Research was phased out after plans for commercializing its technology didn't pan out as expected.
—Justin Scheck, Amir Efrati and Emily Steel contributed to this article.

Write to Dionne Searcey at

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