New Patent Rules Open High-Tech Battlefield
In a little-known lawsuit wending its way to trial in San Francisco, Sun Microsystems Inc. is seeking hefty royalty payments from Kingston Technology Co., claiming that the Fountain Valley company is infringing its patents.
The battle between the two computer giants is one of a growing number of lawsuits that are testing the boundaries of what can be covered by patents in the fast-changing world of high technology.
Sun Microsystems in Palo Alto, one of the largest makers of computers that run Web sites, contends that Kingston has usurped six patented technologies for the way memory chips are put on modules that go into computers.
Kingston, the world’s largest maker of after-market memory modules and other products, contends that patents don’t cover ordinary designs, especially those that have become industry standards to which all manufacturers must adhere.
Kingston co-founder David Sun said he isn’t so worried about paying out millions of dollars in royalty payments if his company loses. It won’t hurt the bottom line, he said.
“This is not about money. This is about principle and how people do business,” said Sun, 48. “I will not roll over and pay a license for patents that I know are wrong.”
Legal tussles over patents have become increasingly common in the high-tech world, where success in business often hinges on technical innovation. Californians have received nearly twice as many patents as people in any other state in the last year, according to the U.S. Patent and Trademark Office.
The government agency has awarded an increasing number of patents for technical innovations, like those that Sun Microsystems obtained for its module design, since 1996 when it issued new guidelines on its approach to awarding patents for computer software and hardware. A federal appeals court approved patent protection for business processes two years later.
Legal experts say the ensuing flood of patents--and the fast pace of today’s business world--has led to a bounty of legal action. Today, patent disputes range from scientific and technical discoveries to the business methods used to conduct transactions over the Internet.
The means for enabling consumers to place online bids for airline tickets and other goods, for instance, has been patented by Priceline.com Inc. The notion of paying consumers to view Internet ads has been locked up by Cybergold Inc.
Amazon.com Inc., long criticized for seeking patents on some of its Net business processes, recently proposed rewriting U.S. patent laws and vastly reducing the term of patents on business methods and software.
People like David Sun are dismayed by the growing number of patents being awarded. They worry about the expense--both in time and money--of having to wade through a minefield of patent claims.
“I’m shocked that the government would issue a patent for something I consider only evolutionary, not revolutionary,” Sun said.
Federal patent office officials say the patent boom reflects a necessary evolution in intellectual property law. Business models and concepts are the drivers of the Internet Age, just as inventions and gadgets fueled the Industrial Age.
“I don’t want to challenge the U.S. government,” Sun said. “But when they say something is good, and it’s not, do you know how many businesses suffer because of it?”
Sun Microsystems seeks royalties from sales of memory modules that are covered by its patents, which officials at privately held Kingston say is about 80% of all products it makes. Memory modules are Kingston’s core business, accounting for most of the company’s nearly $1.5 billion in sales last year.
The Sun Microsystems-Kingston suit involves patents that include continuations or expansions of original patents that were approved by the government in the early 1990s.
The parties, now in the discovery phase, are scheduled to return to court in the next few months.
Sun Microsystems insists that its suit against Kingston, which was filed in July, was the only recourse it had after the Orange County company refused to pay royalties.
“We’ve spent a lot of money in the research and development in this area, and the government has rewarded us with these patents,” said patent attorney Joe Fitzgerald, an associate general counsel with Sun Microsystems. “We have half a dozen licensees and are receiving royalties under those licenses . . . for this family of patents.”
Dean Dunlavey of Latham & Watkins, co-lead counsel for Kingston, disagrees. “Sun’s position is that because it has obtained patents, the matter is closed,” he said. “That’s ridiculous, and it’s not the law.”
