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A Tale of Two Patents

UPDATED: Google's Gmail could be a huge moneymaker for the search leader. But someone else may have thought of it first.

Google got gobs of publicity when it announced a beta test of Gmail, its free Web-based e-mail service (Webmail). Some users salivated at the thought of a whole gigabyte of storage space, while others were shocked at the price tag: letting Google's ad servers scan the contents and include contextual ads. (The ads run alongside the e-mail, similar to the way Google AdWords ads are displayed on its search site.)

The Catch

Google evidently had been planning Gmail for some time. The Mountain View, Calif.-based company applied for a patent on "serving advertisements using information associated with e-mail" on June 2, 2003. On that date, Google's engineers couldn't have known that a little tiny company called Sponster had a similar idea -- and had applied for a patent on the "method and apparatus for adding advertising tag lines to electronic messages" on April 5, 2002.

Because the U.S. Patent & Trademark Office doesn't publish patent applications immediately, the Sponster filing didn't see the light of day until October 2003, after Google had applied.

Salt Lake City, Utah-based Sponster was founded early in 2002, but CEO Roger Little said he and CTO Jason Bosarge had been working for some time on their technology to scan the body of an e-mail message for key words, and then attach a relevant, contextual ad. Bosarge shares an earlier patent for returning search results that includes results ranked by previous searchers.

Sponster began testing its server technology internally in 2002. This month, it completed an eight-month-long consumer beta test of a free Webmail service with contextual ads. Gmail launched in March.

Far from being worried, Sponster's founders welcomed Google's move. "It legitimized an idea we've had and have been pursuing for a number of years," Little said.

In a sense, the well-financed Google did Sponster's market research for it, including taking flak from privacy advocates and even being the subject of legislation banning its service.

"We had been wondering how to get this concept out to the public," Bosarge said. "We thought it might take some time to educate people. Because Google has such a high profile, we could have them get the concept out there and market for us, without us having to do anything."

Google did not respond to several requests for comment. It's being sued by Overture Services, now a division of Yahoo! , for its use of the bid-for-ranking method it employs for its AdSense and AdWords services. Overture claims it has a patent covering the method -- and that Google willfully infringed on it.

Little and Bosarge are willing to wait for the patent examiner to determine whether the two patents overlap, a process that could take years to complete. "We think [the patent applications] are similar," Bosarge said, "but we don't know yet. We're not patent attorneys."

He declined to say what the company's attorney has determined. Meanwhile, Sponster's application has been amended to focus on the concept of contextually enhancing private personal communications, including SMS and instant messaging, with both ads and content.

In the best of all possible worlds, such similar applications might be given to the same examiner, who could evaluate them together and, if there was overlap, quickly determine which should prevail.

Process and Prior Art at the Patent Office

The USPTO has seven technology centers, each broken down into smaller areas known as art units. "The supervisors of each art, who determine which examiners get which cases, tend to give similar cases to the same examiner," said USPTO spokesperson Brigid Quinn. In this case, the two applications were assigned to different examiners, and their official status still is "ready for examination."

Quinn said that prior to granting a patent, examiners are supposed to search the files to make sure that a similar application isn't pending. But the patent is awarded to the first person to invent, not the first person to file, said Douglas Kline, chair of the intellectual property practice of Testa, Hurwitz & Thibeault.

"At the end of the day, if it turns out that these competing applications are trying to claim the same thing, what will become important is who did it first," Kline said "And that party will be entitled to the patent." He said that the application itself makes Sponster's service prior art. "If Google wanted to get a patent on something described on Sponster's application, it will have to convince the Patent Office it made the invention earlier than [Sponster did]."

In an environment like today's technology industry, "There's a high likelihood that people are applying for patents, these patents are being granted, and there's a high potential for overlap," said David Bohrer, a partner in the IP litigation group of Dechert LLP. "It's very difficult both for the U.S. government examiner and for a potential infringer to discover [relevant patents]."

Bohrer said that while patents are designed to give the inventor control, often companies have other strategic reasons for building up an intellectual property portfolio. For Google, he said, "It's a way of developing leverage to force competitors to cross-license their ideas with Google. If someone does come after them, [that company] will be counter-sued by Google if Google can find something in its portfolio that they're infringing."

For example, if Gmail becomes lucrative, and Yahoo! decides it wants to use Overture's technology to insert contextual ads into Yahoo! Mail, Yahoo! might be willing to drop its patent infringement suit against Google in return for a free license to the contextual ads in e-mail concept.

But if Sponster wins the patent, Google would be deprived of that bargaining chip.

If the patent examiner can't determine which company actually "made" the "invention " first, the case will be sent to the USPTO Board of Patent Appeals and Interferences.

If Sponster's application prevails, it could tell Google to pay a fee or close Gmail. That would suit Sponster just fine; its business model is to license its technology to other companies. Little and Bosarge already are seeking licenses, though they declined to state their terms. But Google could do some bargaining, Bohrer said, for example by offering Sponster the opportunity to serve some ads to Google users. "The horse trading that goes on is almost a currency in itself," he said.

If they can't work it out, the two companies will be headed to court, where the decision will be made by a jury of twelve people, some of whom may never have used the Internet. In that case, Bohrer said, "They're going to be looking for who's wearing the white hat and who's wearing the black." And that will be anybody's guess.