1. Open Source, Learning, and Patents Michael Feldstein April 23, 2007

2. Author’s Note: Adapting to the audience, the sequence of slides presented was changed during presentation. This presentation is in the sequence given. A recording of the presentation is available and can be reached at http://www.immagic.com/eLibrary/MEDIA/PRODUCER/IMM/P070425A/FELDSTEI.mp3 http://www.immagic.com/eLibrary/MEDIA/PRODUCER/IMM/P070425A/FELDSTEI.mp3 (Audio MP3 01:07:59 31.9mb).

3. About me

4. Who I am not A lawyer An intellectual property expert Knowledgeable about patents outside of the U.S. A journalist A spokesperson for my employer

5. Who I am An interested party A lifelong educator Involved in educational software for 11 years A partisan One of the early reporters of the Blackboard patent and lawsuit Started the Wikipedia page on prior art Translated the Blackboard patent claims into plain English

6. Some wake-up calls Blackboard v Desire2Learn Firestar Software v RedHat Jacobsen v Katzer Washington Research Foundation v. Matsushita et al Alcatel-Lucent v Microsoft

7. Basics about patents

8. Patent vs Copyright A patent is a temporary monopoly on an idea (or “invention”) A copyright is a temporary monopoly on the expression of an idea

9. Reasons for patents To provide incentive for innovation in the fields of “science and the useful arts” To provide incentive for sharing of that innovation, to the public good

10. The issues

11. Pros and cons BenefitsCosts Innovation Creates an incentive for research and new process/product development Encourages disclosure of inventions Impedes combination of new ideas and inventions Provides an opportunity for rent-seeking Competition Facilitates the entry of new (small) firms with a limited asset base or difficulties in obtaining finance Creates short-term monopolies, which may become long-term in network industries, where standards are important Transaction Costs Creates a neatly packaged negotiable IP right Creates patent risk uncertainty and/or search costs Creates economic friction Raises transaction costs for follow-on development Source: http://en.wikipedia.org/wiki/Software_patent_debate (2 March 2007, 14:43)http://en.wikipedia.org/wiki/Software_patent_debate

12. The software patent challenge Tricky: Algorithms are not patentable, but devices that use them are Controversial: Inventions are often additive Source: http://en.wikipedia.org/wiki/Image:Software_patents2.JPG#file (30 April, 2006, 00:32)http://en.wikipedia.org/wiki/Image:Software_patents2.JPG#file

13. EduPatents as special cases

14. The economics of Bb v D2L Estimated litigation costs to Desire2Learn: $1.5 million - $3 million Additional cost for inter partes challenge at USPTO Desire2Learn’s estimated annual revenues: $10 million Desire2Learn’s estimated annual profits: 5%, or $500,000 Conclusion: The patent litigation will cost Desire2Learn 100% of their profits for 3-6 years or longer.

15. And what if they lose? They pay all litigation costs Plus USPTO challenge costs Plus the royalty Plus treble damages for willful infringement (some calculate ~$800K/new customer from suit to settlement) Plus Blackboard’s legal fees

16. The positions

17. Views about software patents Good (and good for you) Generally good, but patent quality is a problem Bad, but we’ve learned to live with them Evil, bad, and yucky

18. Views about EduPatents They protect innovation Good, but particularly vulnerable to patent quality problems Open Source should be protected Open Source and its support vendors should be protected Do more harm than good

19. Hierarchy of EduPatent Needs This section drawn in part from Jim Farmer, “eLearning Patents: An Institutional Perspective,” SUNY Wizard conference, November 8, 2006

20. Safety for users License from a firm that has a patent indemnity clause Use Open Source software that has obtained an opinion of non- infringement or licensing agreements Encourage patent holders to provide guarantees not to sue

21. Safety for Open Source contributors Contribute to a legal entity; retain a non-exclusive right to use and distribute Execute a contribution agreement Maintain records (including copies of contributions) Publish your records Maintain hard copies if possible

22. Safety for software projects (especially Open Source) Provide opinion of non-infringement or design around patents that are being asserted Publish documentation of design processes, and contributions Reveal all sources of code Work with patent holders and community to establish ground rules and “treaties” When necessary, license patents

23. Safety for innovators Engage with the community regarding quality of patent applications Think carefully about trade-offs around patent assertion Consider non-assertion promises or royalty- free licenses for relevant communities Consider defensive patents or publication as alternative strategies

24. The future

25. What to expect More assertion of software patents More liquidity in the patent market Some patent reform, particularly around patent quality The rise of patent indemnification and insurance as a line of business

26. Developments to watch Blackboard v Desire2Learn The Blackboard patent pledge and similar efforts KSR v Teleflex Microsoft v AT&T Patent reform legislation in House and Senate USPTO patent application peer review pilot

27. Questions? Michael Feldstein http://mfeldstein.com/ Michael@mfeldstein.com For EduPatent Alerts: http://mfeldstein.com/edupatents/