How Standard Setting Organizations Can Help Prevent ‘Patent Taking’

11 Jul How Standard Setting Organizations Can Help Prevent ‘Patent Taking’

One of the key ways of calculating the financial cost of patent infringement is whether there are alternative substitutes for the infringed upon patent that could be used to render a similar result. Because of this, the value of a patent is greatest when it’s combined with other patents to protect against the possibility of sidestepping the patent.

For technological patents, particularly those having to do with communications, the best way to do this is by combining your patent into a pool of similar patents.

These pools are known as Standard Setting Organizations (SSOs), which cover protocols that enable computer hardware to communicate.

One of the most well-known SSOs is the German Institute for Standardization, which for more than a century has been setting standards for everything from paper sizes to how to convert Arabic to a standard typeface.

Modern SSOs tend to cover telecommunications standards, and group together standard essential patents into sort of a single package, with each patent strengthening the protection of the other packaged patents, which are referred to as ‘standard essential patents.’ If you come up with a new communications standard and patent it, and get it accepted into one of these SSO pools, then you’re likely to generate a sizeable income for yourself.

For example, if you take a look at your cable bill, you may see an entry labeled ‘Intellectual Property Fee.’ This is a fee paid to an SSO to license the use of a pool of communications patents.

SSOs and their resulting fees aren’t popular, and Congress has occasionally tried to suppress them in Constitutionally questionable ways.

Occasionally, politicians will respond to the discontented rumbling of the electorate by attempting to squash an unpopular fee. For instance, back in 2003, Congress passed the Check 21 Act, which would allow banks to convert paper checks they received into digital versions, eliminating the need to continue to handle and store paper documents. This also enabled the adoption of remote deposit systems, which have become very popular in recent years.

However, this raised something of a problem. The company DataTreasury had a portfolio of patents related to the digitization and transmission of checks. In 2002, DataTreasury sued 56 banks and financial companies for infringement on a collection of check-capturing patents known as the ‘Ballard Patents.’

Several of the defendants settled, while others fought the patents. Congress heard the pleas of their donors, and in the Patent Reform Act of 2007, they inserted a section which would specifically prevent the owners of check-imaging patents from collecting damages. The official summary of that section of the bill was as follows:

(Sec. 14) Shields a financial institution that infringes by using a check collection system from the infringement remedies of civil actions, injunctions, damages, and attorney’s fees. Applies the amendment made by this paragraph to any civil action for infringement pending or filed on or after the date of enactment of this Act.

Soon after, the Congressional Budget Office issued a statement indicating that if that particular provision of the bill was passed, DataTreasury and other affected patent owners would likely sue the federal government for illegally seizing their property, a violation of the Fifth Amendment’s protection against the property of citizens being “taken for public use, without just compensation.” As the Supreme Court found in James v. Campbell back in 1882, patents are in fact property, and thus afforded the same Fifth Amendment protections enjoyed by any piece of physical property.

The CBO believed that patent holders would likely win their case, and that the government’s financial liability would amount to $1 billion.

While DataTreasury’s patents were eventually invalidated for being abstract ideas, rather than fully developed inventions, the case above demonstrates the value of SSOs. By combining similar patents into a single pool, each patent enjoys far stronger protections than would otherwise be the case. SSOs have spent years refining their litigation strategies, and have a very efficient patent protection system in place.

The most profitable patents of tomorrow will not be those covering the next Facebook or a better mousetrap, but rather ones involving telecommunications and data transfer. An inventor who devises a lower power, higher fidelity substitute for Bluetooth, and gets their invention patented and licensed by an SSO will make billions, and will also enjoy protection from the occasional overreaches of Congress.

If you believe that you have come up with the next Bluetooth technology stand, the next Facebook, or something altogether new that will change the way our society works, it is imperative that you speak to a registered patent attorney. We can help you protect your invention. To make an appointment, call us at (916) 760-8265, or send us a message using our contact form.