Patent Trolls Lurking Around Speech Technologies – Will UC be Next?

At the recent Mobile Voice Conference in San Francisco at the end of April there were some delightful departures from the focus on speech technologies and mobility — although there is nothing wrong with speech and mobility. In fact, Mobile Voice was a name change away from the original name of the conference, Voice Search, due to the incredible growth in the use of speech technologies in mobile applications over the last five years or so. And that, of course, has everything to do with unified communications.

The departures from the expected presentations included a very interesting panel on patent law, which included Marie Meteer, of MM Consulting, speaking on “Speech Technology Consortium – Building the Prior Art Library to Enable Better Patent Application Examinations”, Jason Peltz, an attorney with Bartlit, Beck Herman Palencher & Scott LLP, speaking on “Patent strategy: considerations in filing a patent infringement suit and in defending such a suit”, Mark Powell, the Director of the Technology Center 2600 of the US Patent and Trademark Office, speaking on “United States Patent & Trademark Office – How You Can Work With Us”, and Ria Farrell Schalnat, a patent attorney with Frost Brown Todd, speaking on “Speech Technology Consortium – Using Re-examinations Proactively to Clear the Threat of Patent Trolls”.

It was a very educational and interesting session given that the topic involved the legal in and outs of intellectual property, not technology introductions, product information, or applications. Still it was a fascinating panel and one that struck a cord with me. Why? Because there is evil lurking out there in the form of patent trolls, which is threatening to stifle creativity and stall the speech technology industry, and related industries, one of which again is unified communications.

So just what is a patent troll? In a nutshell, it is a non-practicing individual or group/entity that buys up patents from willing sellers or struggling companies, that then turns around uses to sue related companies for patent infringement. In other words, this is someone who has not practiced their patent, and is not contributing or innovating in the industry in any way. Instead, they accrue patents as an arsenal (with multiple claims in each patent), bundle them up, and then take companies to court. We saw this happen starting more than a decade ago, with Michael Katz taking on the voice processing industry (at the time, voice messaging and IVR), and now, extremely aggressively, with Phoenix Solutions, who have sued big companies such as Sony, PG&E, and Wells Fargo, for their use of speech technologies.

To set the stage, Jason Peltz explained that there are 200K patents that are issued annually, with 2700 patent suits filed annually. Currently, there are 4000 patent cases pending. The average case takes two years, with an average cost of between $4.5 to $5M to defend, with an average jury award of $6.5M. Something that was equally interesting is that 30-40% of patent cases are overturned on appeal, which is dramatically higher than any other form of litigation. Also, in the case of patent law, the higher courts at the federal level do not have to defer to the trial court’s interpretation of the claims in the subject patent, so if a company successfully defends their patent, and the “troll” decides to appeal, they may get a second bite at the apple, with all the associated costs escalating. Many small companies just fold, as it’s often less costly to pay license fees than legal fees. But it is not just small companies that fold. In a recent case filed in 2002 (US patent 5,799,273) Allvoice Computing, PLC vs. Nuance, Nuance won their first case, and then ended up settling rather than going through it again on a federal level. Why does this matter? Because even though Nuance won, when they settled in July of 2007 rather than pay, it gave the patent troll a big stick to use against smaller companies by being able to say that Nuance paid rather than fight — we can beat you too.

The panel discussed what could potentially be done about this, and Ria Farrell Schalnat talked about using re-examination as an alternative or supplement to litigation. Depending on the type of re-exam conducted, costs may initially be anywhere between $5,000 – $50,000+. It all depends on the complexity of the patent as well as whether the initial decision is appealed. Although these fees are a fraction of litigation, they may still be too cost prohibitive for one company to take on by themselves. The potential solution would be to band together to fight the trolls as a group – hence the birth of the idea of a Speech Technology Consortium (STC), which would pool money and intellectual property resources to defend and win against the trolls. There would be a membership fee for participating companies, but no charge for the cost of accepted re-exam requests. A key component of this effort would be to uncover, gather up, and create a database of prior art to be used as evidence in the re-exams.

Ria cited statistics showing a 73% patent “kill rate”, through August 2008, which is a complete elimination of all claims targeted by a requestor, which represents a rate much higher than litigation at 33%.

I just love the whole concept of a group effort to defeat something which only hurts the industry. Needlessly spending money to defend or settle “claims” only drains the coffers of companies trying to honestly innovate, and has the effect of inhibiting new companies from emerging because it jacks up the cost of entry to the market. I believe that as the STC is developed, that companies in the unified communications space should definitely jump on board and help out as the technologies used in UC, and the features and functions in these claims are interwoven, leaving UC companies at risk of attack too.

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