"Every Patent Is a Double-Edged Sword"


Former patent attorney Charles H. Cella is something of a zealot. He believes the exponential growth in patent filings is causing an overextended U.S. Patent & Trademark Office (PTO) to grant an increasing number of patents that are far too broad or fail to make significant advances in technology. So he set out to find a way to help overturn patents of the sort that he believes should never have been issued. With a group of investors that includes Jeff Bezos, founder of Amazon.com, and Internet publisher Tim O'Reilly, Cella formed a Boston-based dot-com called BountyQuest that offers cash rewards of $10,000 or more to individuals who uncover "prior art" that can be used in a patent challenge.

They hope to garner a share of the billions that are spent each year by companies defending themselves against costly patent-infringement lawsuits. The concept, says Cella, is "market-based reform." After just three months, www.BountyQuest.com recently trumpeted four rewards to bounty hunters who ferreted out information that might help invalidate 4 of the 19 initial patents posted to the Web site.

BusinessWeek Online Science & Technology correspondent Alan Hall exchanged e-mail with Cella about BountyQuest and the need for patent reform. Here are edited excerpts from their virtual conversation:

Q: You've just announced your first four rewards since your Web site went live in October, including patents held by Oracle and Cisco Systems. Can you briefly explain how BountyQuest works?

A: Companies who need information, such as prior art to invalidate a patent, contact BountyQuest and tell us what reward they are willing to pay. We post a bounty on our Web site, which specifies the information required and the amount of the reward. People around the world visit the site, submit documents that contain the required information, and [some of them] collect the rewards.

Q: Isn't determining the validity of a patent the job of the PTO and the courts?

A: The PTO determines whether a patent is issued, and a court has final say whether a patent is valid. However, we think some critical voices are missing from the current system, such as the other players in the marketplace covered by the patent and consumers who have to buy goods and services in that marketplace.

Q: How does BountyQuest fit into the picture?

A: The PTO and the courts are limited by the problems with current information- searching techniques.... We don't replace the PTO or the courts. Instead, we ensure that they have a better chance to make the right decision. Essentially, BountyQuest reaches into the desk drawers and file cabinets of knowledgeable people across the world to uncover the one piece of information necessary to settle a patent dispute.

Q: What areas do you think are rife with potentially shaky patents?

A: Internet business methods, semiconductors, computer software, financial services, advertising, and many others, including biotechnology and genomics. Patents have expanded dramatically both in subject matter and in number.

Q: How did you get the idea for BountyQuest?

A: One of the co-founders, [attorney] Matt Vincent of Foley, Hoag & Eliot in Boston, had the idea years ago. He faced the problem of many patent attorneys -- the desperate need for prior art that could free a client's business operations from the threat of an injunction or large damages lawsuit.... Matt had the idea of posting the requests for information on a computer network and providing rewards that would motivate a large community of scientists, engineers, patent attorneys, and other experts to network and provide the results.

Q: Why is prior art so important?

A: It's the crucial foundation on which an entire defense can be built. A patent challenge can consist of anything from a simple letter costing almost nothing to a declaratory judgment lawsuit that can run into the millions in legal fees. Most patents are challenged in private settlement negotiations, where the legal costs are in the thousands and the amounts at stake are much higher.

Q: Do companies posting have to be extremely specific about what they're looking for?

A: The bounty-poster crafts the posting and is typically looking for very specific information, such as information tied to a particular patent claim. However, posters may also be looking for more general information, such as presence of activity in a marketplace, or other related information. A bounty can...ask for information that is not technically prior art.

Q: How do you determine when a bounty is granted?

A: A bounty is awarded when the document that is submitted by a bounty hunter exactly matches the requirements listed in the bounty posting that appears on the site.... The posting company has access to all information submitted, whether it wins the bounty or not.

Q: Aren't Jeff Bezos, who is defending a broad patent on "one click" Internet marketing, and Tim O'Reilly, a staunch advocate of open-source software and an opponent of business-method patents, strange bedfellows?

A: Tim O'Reilly is against bad patents, and so are we. Jeff Bezos...believes his one-click patent is valid, and he's funding BountyQuest even though we put the one-click patent to the test on Day One. Like Jeff, we also posted a bounty on our own business-method application -- "Broadcast Reward Technology." It covers the idea of using the Internet for a service allowing people to post requests for information and providing the answers to win rewards. It could apply to many kinds of searches, but we are focusing on technical information, such as prior art.

Q: Do you have plans to take BountyQuest public?

A: We plan to build a sustainable, profitable business. We have an advantage in this respect over classic dot-coms in that we offer a cash-based service in a market that already pays a lot of money for inferior tools. We might go through an IPO, but we want to be in a position to choose to do so for our own reasons.

Q: What impact do you think BountyQuest will have on the patent system?

A: Every patent is a double-edged sword, aiding innovation only at the expense of suppressing competition. By weeding out bad patents we help consumers, and by weeding out enough of them, we may help restore faith in the ones that remain.

Q: The final proof of your business model will come when the courts invalidate a patent based on information from a BountyQuest posting. Now that you've awarded four bounties, when do you expect that to happen?

A: Soon.


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