MORPH: Lemelson's Law

MORPH: Lemelson's Law

For a concept that is not easy to McDonaldise and export to the rest of the world, litigation is one of the few Americanisms universally embraced by business-minded Earthlings from ideologically opposed corners of the globe.

Paradoxical though it may sound, the relative merits of its pragmatic adoption have never been advertised as a democratic value per se, though few would deny that the ability to sue lies at the very core of democracy. But its merits are rather less ethereal; as every American businessman will tell you, successful litigation is about fiscal - and not democratic - outcomes.

An unofficial axiom of business has it that in times when opportunities for growth are few and far between, litigation serves as a worthy substitute for dried-up revenue sources.

So, when British Telecommuni-cations filed hypertext-linking patent violation charges against American Internet service provider Prodigy in a US federal court last year, the Americans fired back accusing the company of predatory behaviour and intellectual property law opportunism.

Executives from America's Internet-centric ranks claimed the financially troubled telco was out to make a buck from a patent that could hardly stand critical examination. References to hyperlinks, they claimed, had been made long before BT obtained a patent for it in the late 1980s.

BT begged to differ. For its legal team, the facts of the case were simple: BT developed the hyperlinking technology in the 1970s and was issued a patent for it by the US Patent and Trademark Office in 1989. Prodigy has no licence to use the technology from which it has derived revenues by offering its 3.6 million customers access to the Internet - which uses the patent. Prodigy, the argument goes, should thus pay royalties to BT.

A preliminary hearing began in February in the Federal Court for the Southern District of New York in White Plains. It is the place where Prodigy - America's oldest ISP, now part of telecommunications company SBC Communications, originally set up shop 18 years ago. Should BT succeed in its claim, it will also be the place that reminds every American ISP of the ninth level of financial hell in which royalties will be paid for every click an American Internet user takes through a hyperlink. Chances are it could.

What the one-time British telecommunications industry monopoly is betting on is the interpretation of one of the most controversial intellectual property laws, which allows process concepts - as opposed to finished products - to be registered as patents.

"A patent is a series of claims that have to be described in terms of how they will be applied to a certain technology," explains Trevor Choy, the principal of Melbourne-based intellectual law specialist Choy Lawyers. "In this case, BT is claiming to have the right to the concept of accessing one server from another server via a hyperlink."

And that makes ISPs a logical starting point for litigation since the service they derive their largest portion of revenue from exists purely on the basis of hyperlinking.

The thorn in BT's claim is that the patent they'd like to cash in on was lodged long before the Internet was what it is today - a product commercialised in the form of domains and access services. Put simply, to succeed, BT has to prove the Internet of the late 1970s was a technology not much removed from its current incarnation or use. The company's claim is also open to attacks by any other claimants who could assert their right to the potential goldmine that is hypertext linking. One of the most valid challenges to BT's case is a Stanford University Web page, which contains footage of a 1968 demonstration by Stanford researchers showing a process in which clicking on certain words in a computer program causes a new page of text to appear.

Still, few would believe the anxious BT naïve enough to head to court at a risk of incurring millions of dollars in legal fees without doing its homework. For starters, BT's choice of target was not accidental. Though it could have gone after a number of potential patent violators - from developers to Web publishers - it chose to sue the weakest link in the chain. In fact, one of the most famous and lucrative licensing campaigns ever carried out, by patent litigator Gerard Hosier on behalf of barcode scanning inventor Jerome Lemelson in the late 1980s, may well have been BT's inspiration.

Lemelson was the man who proved that the image of inventors as impractical, likely-to-die-in-poverty types with Einstein hairdos and no business savvy is a romantic myth of bygone eras. Apart from patenting more inventions than anyone in history (except Thomas Edison and Edwin Land), Lemelson identified a loophole in the US patent laws which allowed him to cash in on his patents long after their supposed expiry date. Legend has it that Lemelson's bottom line was a cool $1.5 billion dollars.

In 1952, this prolific inventor came up with the idea of a computer that could analyse the visual information recorded onto a magnetic tape. Lemelson called his concept "machine vision", but when he applied for a patent, the US Patent Office asked him to divide his application into separate parts as they all represented separate inventions. The first patent was issued to him in 1963. It took another 36 years for Lemelson to obtain patents for the rest of his application. And herein lies the catch: under US law, a patent expires after 17 years. However, a patent's life does not begin at the time of filing an application; it begins when a patent is formally issued. For Lemelson, this meant that as long as parts of his application were pending, none of his patents would lose any of their 17-year lifespan. What's more, as long as Lemelson's application was under consideration, the details of the patent remained secret, making it possible to claim that anyone else developing similar technologies at the time was in violation of the patent.

It was arguably the most brilliant business strategy an inventor could have conceived. In 1989, Hosier approached a number of manufacturers creating everything from cars to computer chips to inform them they were infringing on a number of patents held by his client. The message was simple: pay up or face a lawsuit.

Two things made Lemelson's case one of the most profitable intellectual property campaigns in history: one, that he was claiming to have invented the process of barcode scanning; and, two, that it allowed him to sue pretty much anyone who used the technology in any shape or form.

Call it the scientists' revenge but BT has certainly learned from the case. Though commercial Internet service didn't exist in 1976 when it applied for the hypertext linking patent, it certainly existed in 1989 when the patent's official life began. Logically speaking, its conceptual territory goes back to the mid-1970s when the technology was developed.

The significance of the fact that BT got its patent in 1989, the year Lemelson's campaign was launched, hardly goes unappreciated if for no other reason than (as Lemelson's case shows) we are in for some fascinating court battles.

"It's a machine-gun process in which ISPs are only part of the link," says Choy. "They are the easiest people to sue, but they are only an integral part of the chain that could see different groups - from Web site owners to Web designers - with a lawsuit."

It may not be fair, but it's the law that Lemelson made hundreds of millions out of.

Anyone who's seen LA Law knows that the technical intricacies of a case will not play a big role with US juries, famous for their unpredictability and willingness to award large amounts of money to whomever they consider wronged.

What could work in Prodigy's favour, though, is not so much that a single company could potentially cash in on every click made by 3.6 million customers using Prodigy as their Internet service provider, but the fact that it is a British company that would be doing so. If the ingenious ability to turn litigation into profitable business model is a God and Constitution-given right of every American, could they really bear the thought of getting beaten at their own game, on their own turf, using their own rules? Indeed, for a country that stands apart from the rest of the world by exercising one of the most litigious forms of democracy, beating BT may well become a matter of national pride. For the rest of us, the battle is always going to be just a case of Lemelson's Law.

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