ANTenna Blog -- Business & E-Business

How bad will things have to get before the U.S. legal system finally slams the door on patent trolls? We might find out very soon.

This week, Eolas filed a monster patent lawsuit against a who's-who of IT companies that includes Adobe, Sun Microsystems, Apple, Google, eBay and Amazon. The point of contention: Eolas' claim that it holds a patent covering any technology capable of embedding an object in a Web document.

Eolas says its patent applies to any browser-based applet or plugin technology. And like any fashionable patent troll, the company conveniently picked the U.S. District Court for the Eastern District of Texas to launch this exercise in insanity.

If you think a patent covering such an immense range of technologies sounds ludicrous, join the club. Unfortunately, the U.S. Patent and Trademark Office (USPTO) forgot years ago how to distinguish legitimate innovation from this sort of garbage.

The USPTO and the U.S. court system were also unable to recognize compelling evidence that prior art -- namely, previous examples of Web browsers incorporating this sort of technology -- should invalidate Eolas' claims. Like most such arguments over prior art, however, this one is beside the point, since it fails to address the systemic failures that make these kinds of patents possible at all.

How does any of this affect the countless thousands of companies that rely on Web-based technologies to conduct business today? There are two important answers to this question:

First, companies like Eolas represent an immense, cumulative source of economic drag. The cost of fighting patent trolls -- and the cost of paying them off when the USPTO supplies their legal ammunition -- runs easily into many billions of dollars.

To some extent, the victim companies' shareholders' shoulder the burden of paying for this litigation. Mostly, however, these companies simply pass along the costs to their customers. That was a problem even in a robust economic climate; today, it represents an unacceptable source of economic waste.

To explain the second answer, I'll turn to none other than Bill Gates, who wrote the following words in a 1991 Microsoft internal memo:

“If people had understood how patents would be granted when most of today’s ideas were invented, and had taken out patents, the industry would be at a complete standstill today."

Never mind that Microsoft is hardly a hero to patent-reform advocates. Gates' words succinctly describe the threat that the country's pathetic, hopelessly broken patent system poses to the country's ability to benefit from technological innovation.

Our legislators can't bring themselves to inject some sense into the USPTO's patent-troll treadmill. Could the U.S. Supreme Court finally do the job for them?

A case now before the Supreme Court could invalidate all patents that now cover "intangible" technological innovations. If that happens, the legal foundation for granting business-process patents -- including software patents -- would literally disappear overnight.

Such a decision would also yank the rug out from under patent trolls that claim abstract technological "innovations" as their exclusive intellectual property.

Opponents predict that upending the current patent system will actually stifle technological innovation. These folks have short -- or perhaps selective -- memories.

Bear in mind that before the 1990s,. the U.S. patent system had not evolved into its current, peculiar state. Software was protected under copyright law, not patent law; there were no companies trying to claim patents on vague "business process" innovations.

As I recall, the IT industry got by just fine. After all, that was precisely the era Bill Gates had in mind when he wrote his 1991 memo describing the dangers of the current patent system.

As one legal expert observed, intellectual property cases don't get any bigger than this one. Pray the Supreme Court has the wisdom to toss software patents into the bit-bucket. If it doesn't, companies like Eolas will continue to extract their pound(s) of flesh from the IT industry in exchange for doing precisely nothing. And inevitably, your business will wind up surrendering its share of the booty.