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Billionaire sues high-tech companies over patents

Marketplace Staff Aug 27, 2010

Billionaire sues high-tech companies over patents

Marketplace Staff Aug 27, 2010


Bill Radke: Like Alisa said, businesses have lots of their own problems to worry about. A few of the top companies just got handed a new headache today in the form of a great big lawsuit.

Microsoft’s co-founder, the billionaire Paul Allen, is suing some of the world’s biggest high-tech companies. He claims they are running key parts of their business using technology developed by a cutting edge research lab that he founded back in the 1990s.

Marketplace’s Steve Henn joins us now. Steve, who is Paul Allen suing?

Steve Henn: Well, you know, he’s covering the entire alphabet of tech companies here, starting with AOL, Apple, eBay, Facebook, Google — all the way to Yahoo! and Youtube. There are 11 defendants, but there are a couple notable exceptions. Allen is not suing Amazon or Microsoft.

Radke: Yes, I noticed that. Both of them based in his hometown of Seattle.

Henn: Yup, that’s right.

Radke: So what is Allen claiming here?

Henn: Well, he’s claiming patent infringement. Back in the 1990s, Allen spent a couple hundred million dollars funding a technology lab called “Interval Research.” This was a big industrial research and development laboratory. Initially, they weren’t supposed to create products at all, but do cutting-edge research that looked at what would be possible in the future. And it was sort of modeled after the famous laboratories at Xerox PARC Labs, which invented the mouse, and Bell Labs, which invented the transistor.

Radke: Early “big think” stuff.

Henn: Exactly. Big think stuff. But Allen always hoped that his laboratory would actually create products that he could profit from. It never quite worked out that way though.

Radke: What are some of those patents?

Henn: He did a couple of things that are really important to how the Internet works now. One of the patents involved in this case allows sites like Amazon or Netflix to recommend to consumers other products that they might like. Another patent that is in dispute allows news consumers to quickly search the net for stories about the same subject they’re already reading about.

Radke: Yeah, this is fundamental stuff to some of these giant web companies. And did Paul Allen ever do anything with those ideas back then?

Henn: He really didn’t, but he doesn’t have to. In the last couple of years, an entire industry has grown up around patent enforcement. There are companies and investors that don’t really make any products, but instead, buy up patents they believe are being infringed upon and then sue the companies that are actually using the technology.

Patent attorneys, who usually work on the other side of these lawsuits, refer to these investors derisively as “patent trolls.” But there’s billions and billions of dollars at stake in these suits, and no matter how this case plays out, folks in the patent litigation law firms around this country are likely ecstatic. It’s going to be a full employment act for patent attorneys.

Radke: Alright, well, somebody’s got jobs. Marketplace’s Steve Henn, thanks.

Henn: Sure thing.

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