For years, specialists in intellectual property have been warning that a spate of broadly defined patents issued in the 1990s covering ”business methods” — ways of doing things, not classic inventions like a new mousetrap — were likely to trigger a wave of costly lawsuits. That warning is now coming true.
After Sun Microsystems patented the Internet ”shopping cart” in 1998, and Amazon.com won a patent on one-click online shopping a year later, Internet entrepreneurs howled. Aspects of online shopping as common as writing a check, they warned, could become subject to demands for royalty payments. British Telecom fought — but last year lost — a two-year lawsuit to enforce what it argued was a patent on hyperlinks, clickable highlights on Web pages that pull up a linked page.
Now the Route 128 technology belt has produced its own poster child for the perils of this kind of patent: Boston Communications Group Inc.
The Bedford wireless technology company is fighting for its life. In May, a federal jury slapped BCGI with a $128 million judgment for infringing on a patent owned by a tiny Phoenix company that covers prepaid cellular calling plans. If upheld, the judgment, which is three times BCGI’s market value, would almost certainly drive the 400-person company into bankruptcy.
BCGI is waging a long-shot battle to overturn the judgment, arguing it’s a victim of an absurdly broad patent that never should have been issued.
Freedom Wireless, a four-person company, has never set up an actual business serving customers; it seeks royalties from companies like BCGI, Verizon Wireless, and Nextel Communications Inc. At the heart of Freedom’s 1996 patent is the idea of using a computer to match a cellphone number with a database showing how many paid-up minutes the cellphone owner has, then deciding whether to complete a call.
BCGI gets sympathy from some top patent lawyers.
”Some of these claims are very, very broad,” said Sarah Chapin Columbia, of Choate Hall & Stewart in Boston, which has no involvement in the BCGI case. Columbia, who reviewed the case at the request of the Globe, said the Freedom Wireless patent ”is a very good example of a very broad business-method-type patent of the type that would be very difficult to invalidate.”
Joseph G. Hadzima Jr., a senior lecturer at the Massachusetts Institute of Technology who specializes in intellectual property issues, said: ”You’re going to see more of these cases, and they are going to get worse. You’ve got more and more of what we call ‘patent trolls’ that go and acquire IP just for the purpose of suing people.”
One reason intellectual property specialists are so leery of business-method patents: It is almost impossibly difficult to document the so-called prior art, or what already existed when an inventor came up with a purportedly new idea. Finding evidence that a thing never existed — such as a chemical compound — is, as a rule, considerably easier than proving no one ever had a method of doing something.
US Representative Howard Berman, a California Democrat who has for years tried to change the patent process, refuses to take a yes-or-no position on business-method patents. But Berman has said ”we must pay attention to those who raise concerns about whether business method patents are being issued for obvious inventions, or for inventions determined to be novel, based on inadequate information about prior inventions.”
BCGI and Freedom lawyers are preparing to meet this week in hopes of negotiating an alternative to the $128 million judgment, but have reported no progress in preliminary two-party talks. BCGI is set to return to US District Judge Edward Harrington’s courtroom next week to argue that the Freedom Wireless patent should be invalidated, because its owners knew about but failed to give the Patent Office evidence that others had thought of the idea.
Freedom denies the allegation, calling it a standard sore-loser legal gambit.
Before BCGI rolled out its technology in 1996, prepaid wireless calling plans either required people to dial an 800-style number and then enter the number they wanted to reach, or buy a special phone that had the equivalent of a timer built in to shut off service when they used up their minutes.
Freedom’s lawyer, William C. Price of Los Angeles, said the trial proved that Freedom had a patentable idea that BCGI violated.
”The best minds in the industry hadn’t figured out how to do it” before Freedom’s two inventors filed their patent, Price said.
”Once you see what somebody invented,” Price added, ”it’s easy to say it looked obvious in hindsight.”