When New York-based ActiveBuddy made it clear it reserved the right to enforce the controversial patent covering instant messaging bots, the move trained a harsh spotlight on the inner workings of the United States Patent and Trademark Office (USPTO).

ActiveBuddy was granted Patent No. 6,430,602, which covers the method and system for interactively responding to instant messaging requests, but the availability of several examples of prior art has not only poured cold water on the company's patent claims, it has turned the USPTO into the laughing stock of the software developer community.

The USPTO, the Commerce Department-run agency tasked with handling all trademark and patent filings, has long been ridiculed for issuing patents that are either "too broad" or "just horribly bad," in the words on one intellectual property expert.

"Software patents -- any patents for that matter -- are a critical part of our innovative society. People who are spending a lot of time and money innovating need to know they are not going to be copied as soon as they get into the marketplace. The problem we have, and it's a big problem, is that the right patents are not being issued," said Thomas Colson, CEO and president of IP.com, a company offering a novel approach to protecting inventors.

Colson is quick to defend the process of applying for and securing patents. In his mind, innovators and inventors who make big investments to develop new things should have some form of protection. But he is equally harsh in his criticisms of the USPTO, an agency he claims is "overworked and overburdened" by the increased rate of patent claims.

In the software/technology field especially, patent claims are a dime a dozen. In 1993, for instance, about 180,000 patent applications were filed with the USPTO. This year, Colson estimates that more than 350,000 claims will be filed, a "mind boggling" increase for an office that has not upgraded facilities to handle the upsurge in claims.

Bad Patents
"Bad patents are what's wrong and what needs to be fixed. Bad patents are things that never should have been issued in the first place. The issue is, how do you work within the laws to make sure that overly broad patents aren't being issued," he argued.

At BustPatents, a site dedicated to exposing what it calls the "patenting frenzy of the Internet, bioinformatics, and electronic commerce," the list of software patents that have been invalidated either by the USPTO during a patent re-examination or by the courts (in litigation) reads like a page out of Mad Magazine.

The San Francisco-based BustPatents, which acts as a legal resource for software/technology patents, echoed Colson's claim that the USPTO is undermanned and overworked. "One of the reasons so many bad software patents (are issued) is that patent examiners do not have enough time and library resources to do their jobs," BustPatents said, adding that "strained conditions under which patent examiners do their jobs (lead to many patents of questionable quality being issued)."

The ActiveBuddy patent is just one example. ActiveBuddy founder Tim Kay, who is listed as an inventor in the patent win, had earlier claimed the company invented interactive agents (IM bots). "Anybody using his or her own tools (to make bots) is obviously using our technology without paying us to license the server, for example. We are a startup company and we have to protect out future. That's basically why we secured this patent," Kay said.

But botmakers laughed off Kay's invention claim, arguing that if USPTO examiners had simply done a Google query, the availability of prior art would have been striking. In an e-mail exchange with internetnews.com Jeff Bone said his former company, Activerse, developed and released an IM bot development toolkit called DingBot SDK in 1997-1998, more than two years before ActiveBuddy's initial patent filing.

"I was the CTO of Activerse during most of this period, and there's something particularly and personally galling about the egregious lack of due diligence exercised by the PTO in granting ActiveBuddy's patent," Bone argued.

IP.com's Colson agreed that the availability of prior art should be the first thing that patent examiners use to strike down applications. In order for something to be patentable, three things have to exist, Colson explained. "It has to be novel, it has to be useful and it has to be non-obvious," he said, noting that the majority of patent disputes surround the contentious 'non-obvious' requirement.

'Overworked and Underpaid'
"But, patent examiners at the USPTO are overworked and underpaid. And, because of that, we are seeing some very bad and overly-broad patents being issued. If you could do a turnover of every rock on the planet to find prior art, I would say about 40-50 percent of all patents issues would be overturned. That is obscenely high," Colson said.

"If people spend a lot of money to get a patent, shouldn't I have some sort of protection? In a sense, I guess people should really be suing the patent office for issuing patents that are utterly unenforceable," said Colson, who served as an IP lawyer for many years before taking the reins at Rochester, N.Y.-based IP.com.

To immediately clean things up at the USPTO, Colson recommends patent examiners get more easy access to the right prior art. "If it's true that there is prior art that predates by more than a year of the date of filing, that's no use if the examiners don't see it. "In the case of ActiveBuddy, the world came together to find prior art but, in most cases, patent disputes have only one plaintiff and one defendant."

And because the average legal fees to attempt to enforce a patent is in the range of $1.5 million, Colson said it is imperative that the government-run USPTO can be relied upon to issue valid and enforceable patents.

"The only issue about patent infringement should be: did the person infringe or not? Nothing else. But, you do have to worry about a lot more because of the problems at the USPTO," he added.

Reform is Coming
For its part, the USPTO has basically admitted operations are in a mess and has embarked on an ambitious "21st Century Strategic Plan" to clean things up.

"The House and Senate Appropriations Committees' reports for fiscal 2002 expressed dissatisfaction with past USPTO performance regarding key components of USPTO operations: management of workload, patent quality, patent and trademark pendency times, failure to improve retention and productivity in the examiner workforce, the need for improved training, and the need to invest in e-Government" according to the USPTO Web site.

"While the current processes have served us well, there are numerous shortcomings that, if unchanged, will make it difficult to deliver the quality patents and trademarks in a timely manner as needed to promote expansion of business opportunities, stimulate research and development, and expand American businesses globally. The new strategic plan will transform the USPTO into quality driven, highly productive, and cost effective organization," it added.

In the meantime, Colson's IP.com is moving full-steam ahead with plans to build a repository to secure innovation and prior art claims. The company, which launched in 2000 with $7 million in seed funding from Mellon Ventures and Manning & Napier, provides a Web-based portal which allows users to publish and authenticate inventions, in lieu of filing for patents.

"Basically, our authenticated system means the published work can be used to either prevent patents from issuing or to defend yourself if you get sued by someone with an overly broad patent," he explained.

Defensive Publishing
IP.com has already snagged big-name clients like Motorola , General Electric and Eastman Kodak for its defensive publishing platform. Instead of patenting every aspect of its daily inventions, the companies use the IP.com platform to publish prior art. "They patent a lot but they also publish a lot and they publish with us specifically so that patent examiners will find prior art before issuing patents," he said.

Private inventors can also post work for $155 per publication, Colson said, boasting that IP.com has expanded its defensive publishing customer base to 250 corporate accounts in less than three years.

The company also authenticates private documents relating to intellectual property claims. "It's basically the same as defensive publishing, except that this is not searchable or available to the public. It is to help inventors prove they invented something at a certain time. And, the key is that we safeguard and authenticate the documents in a rock-solid database," Colson said.

Full-fledged reform at the USPTO might be a full five years away, but in the meantime the grumbles about incompetence in the process have reached a crescendo. The controversy over ActiveBuddy's patent is just the tip of the iceberg.

EDITOR'S NOTE: This report was modified from its original form to delete references to a cease and desist order from ActiveBuddy against an IM bot developer. ActiveBuddy said it had never sent a C&D notice related to its patent, describing the letter as a "complete fraud and fabrication." The company said it was investigating the fake letter, which purports to have originated from ActiveBuddy's mail server.