Even your company's identity can cause legal headaches. With prime Web domain names such as Business.com, Wine.com, and Loans.com selling for millions of dollars, the greed machine is kicking into high gear. And unbelievably, you may not even have the right to your own name—if someone else has a tenuous claim and a crack legal staff.

Content publishers are vulnerable too. According to the International Intellectual Property Alliance, the core copyright industries (including software, music, books, and film) accounted for $348.4 billion in 1997, or 4.3 percent of the United States gross domestic product. And revenue generated by patents portfolios has increased from $15 billion in 1990 to $110 billion today. That's enough to make even the most restrained company unleash the dogs of law.

And a number of recent laws designed to address the changing technological landscape have added even more obstacles.

Now that the pursuit of riches has become the national bloodsport, one formidable challenge is to protect genuine innovation while preventing uninformed government meddling and savage legal maneuverings from stifling growth.

Another is to keep the other guy's lawyers from eating into your company's bottom line.

Your Name's Not Your Own

While blaming Washington might seem like a knee-jerk reaction, the 106th Congress has been widely criticized for passing the Trademark Cyberpiracy Protection Act, aka the Anticybersquatting Consumer Protection Act (ACPA).

"I think the ACPA is a tragedy," says attorney Carl Oppedahl, a founding partner of Oppedahl & Larson and an adjunct professor at the University of Denver School of Law. "I think it will cause much more harm than good in the Internet community. It already has increased and will continue to increase what is called reverse domain name hijacking. . . . People who have no legitimate claim to a domain name will assert that law to try to panic somebody into handing over a domain name that they covet."

To guard against this practice, Steven Weber filed suit in December against the National Football League. He contends that the NFL interfered with his right to sell two domains he registered in 1997—Dolphins.com and Jets.com—by asking Network Solutions, the domain registrar, to place his domains on hold.

In Weber's complaint, attorney Anthony DeGidio states, "The defendants in this action seek to expand their trademark rights beyond those contemplated by the law by exerting an illegal monopoly over the use of the generic words jets and dolphins."

And that's precisely the problem with the ACPA—it empowers trademark holders at the expense of everyone else.

According to Ellen Rony, co-author of The Domain Name Handbook (R&D Books; 1998, 1999), the ACPA doesn't help consumers at all.

"I think limited safeguards for trademark holders who have unique or coined names is appropriate," she says, "but what this act does is expand trademark rights at the expense of the interests of domain name registrants."

Rony says the Lanham Act, the basis of trademark law, was intended to prevent confusion over the source of goods and services.

"But the ACPA doesn't do that," she says. "It allows a trademark holder to look at a domain name and, irrespective of how that name is used, make a claim that it is used in bad faith, without regard to goods and services."

DeGidio says he believes the ACPA may be overturned on constitutional grounds.

"The statute makes clear that if you register a domain name with bad-faith intent to sell it for profit, that's against the law," he says. "But what is bad-faith intent? The wording of the statute makes it look as if they want to call bad faith buying a domain name and selling it for a big profit. If that's . . . what they mean by bad faith under the statute then our American ideals have now been made illegal. Buying something and selling it for a profit is what capitalism is all about."

If you do find yourself hauled into court as a suspected cybersquatter, you might be able to recoup the cost of your defense.

"Interestingly," Oppedahl says, "the anticybersquatting act says that legal fees will be awarded to the prevailing party, which might be the innocent domain-name owner. So I think we will see some cases where a covetous party who has no legitimate claim to a domain name will in fact find itself having to pay legal fees to the wrongly accused domain-name owner."

Until the courts revisit the ACPA, domain-name owners are vulnerable—but they're not defenseless. In 1996, Hasbro, maker of the board game Clue, challenged the registration of Clue.com by Clue Computing. Last September, U.S. District Court judge Douglas P. Woodlock dismissed the case, saying, "Holders of a famous mark are not automatically entitled to use that mark as their domain name; trademark law does not support such a monopoly."

Retired U.S. Air Force Tech. Sgt. Don Henley came to the same conclusion. The sergeant is fighting with the like-named musician and onetime member of the Eagles for the rights to the domain name don-henley.com.

"I think that it is important for people to stand up for their rights in the face of unfair persecution and bullying tactics," he says. "I could have saved myself a lot of trouble by 'giving up and giving in' to the demands of a wealthy, well-connected person. However, why would the musician have more right to his name than I have to mine?"

For business owners facing down domain name hijackers, the message is clear: A trademark is not a legal trump card. And on the flip side, when shopping for a defensible domain name that will also serve as a trademark, coin a word like Expedia, instead of choosing a generic expression.

Sincerest Form of Flattery

As the Internet increasingly becomes a viable means of distribution, content owners are torn between a desire to join the online party and fear of mingling with pirates.

The International Intellectual Property Alliance estimates that worldwide losses of copyrighted works to piracy total $18 billion to $20 billion per year. Even skeptics who dispute the groups' new math—which downplays the possibility that buyers of pirated content might not have bought the pricier genuine article anyway—recognize that content producers need protection.

Enter the Digital Millennium Copyright Act (DMCA) and with it more lawsuits. Passed by Congress in October 1998, the DMCA has won praise from the trade groups of corporate copyright holders such as the Motion Picture Association of America and from entertainment companies such as Disney.

"We think the law has worked well for us and the other studios," says Disney spokesperson Ken Green.

Among the law's more controversial aspects is a provision that makes it illegal to crack copy protection schemes.

Despite the exemption for "purposes of achieving interoperability of computer programs," the MPAA has won a preliminary injunction that prevents three Web sites from distributing a program called DeCSS, designed to circumvent the encryption that makes DVDs unplayable on Linux systems. The MPAA sees the program as a piracy tool. For the open-source community, it's all about being able to watch movies on machines that run Linux.

Peter Jaszi, an American University law professor, says he finds it troubling that the DMCA anticircumvention provisions make no allowance for fair use—the idea that you can make limited use of copyrighted materials for socially and culturally desirable purposes without liability. He says he believes that as copyright holders press their advantage under this law, lack of accommodation for fair use may bring constitutional challenges.

"I think . . . there is going to be a collision between the DMCA on the one hand and free expression principles on the other hand," he says. "What the DMCA does in effect is to regulate, and in many cases suppress, speech. When the Linux community hosts the patch that you can use to play DVDs on a Linux box, they are speaking. Now, not all speech is protected. Some speech, as we know, is subject to regulation and even to prosecution, but it is speech."

The entertainment industry's curiously Stalinist approach to capitalism paints new ideas as threats to be quashed rather than market opportunities. This irony, however, is nothing new: Hollywood executives once voiced similar objections to the VCR, which now represents a major revenue stream.

The Recording Industry Association of America's lawsuit against MP3.com is even more threatening. In an open letter to MP3.com CEO Michael Robertson, RIAA president and CEO Hilary Rosen writes, "Simply put, it is not legal to compile a vast database of our member's [sic] sound recordings with no permission and no license."

But Robertson says MP3.com isn't pirating these recordings and reselling them—it's simply providing remote hard disk storage space on which its users can store their legally purchased music.

"When a consumer buys a CD," Robertson says, "does the industry get to tell the consumer where she can listen to her music? The type of technology that she can use to play the CD? Whether she can use new Internet technologies?"

It gets thorny because the Internet makes it more difficult for copyright holders to control how their content gets used.

Jaszi imagines a future where content owners will strike back. It might mean that downloading music, text, or video would require consumers to accept a contract that imposes more restrictions on how content may be legally used than copyright law—a situation already present in the software license agreements that computer users must accept.

"Somewhat ironically, if they [content owners] are very successful in doing that, they will open themselves up to a significant legal challenge on the grounds that state law [contract law] is in effect compromising or interfering with the basic design or pattern of federal law [copyright law]."

Ultimately, it may be technology rather than the law that will make the Internet safe for those who sell digital content. Already a company called Vyou.com offers a way to control the use of intellectual property on the Internet, from text to images to streaming media. There are also file-based protection schemes, including Adobe Acrobat and Xerox ContentGuard. But content vendors need to consider what security will cost in terms of customer goodwill and whether embracing new business models might eventually prove more profitable than fighting the tide.

Mind Your Own Business

In contrast to its questionable forays into trademark and copyright law, Congress's most recent patent legislation—the 1999 American Inventor's Protection Act—may do some good by reconciling European and American patent law. But this law doesn't fully address what critics contend are the real problems with the U.S. patent system—the threat to innovation posed by business-method patents and the difficulty of establishing whether software patent applications represent original ideas that deserve protection.

In State Street Bank & Trust vs. Signature Financial Group (1998), the U.S. Court of Appeals held that software-enabled business methods could be patented. Thus, Priceline.com sued Microsoft for using reverse auctions. And Amazon.com sued Barnes & Noble for letting customers purchase items with a single click. And this is just the beginning: Since the State Street ruling in January 1999, filings for business-method patents have increased 700 percent.

Let's Play Monopoly

Lawrence Lessig, Berkman professor of law at Harvard Law School, describes the situation this way: "Patents are government-granted monopolies that impose huge costs when they are wrongfully granted, and there's real question whether this is a cost that will slow down innovation in cyberspace. The one that concerns me the most is not software patents, but these new business-method patents, which give software owners control over a certain way of doing business in cyberspace. This is what you see with the reverse auction patent or the Amazon one-click patent. And there's a slew of these patents that have been filed that basically give one person monopoly power over what seems . . . to be very obvious ways of doing business. That, I think, is going to present a real threat to creativity in cyberspace."

Amazon spokesperson Bill Curry says he doesn't see it that way.

"Our one-click patent is important," he says, "because every way that we can differentiate ourselves from others helps us deliver a better experience for customers. So when we look at people copycatting one-click, it reduces the advantage that we have. We took the time and energy to innovate, and we want to protect one-click."

Attorney Carl Oppedahl says no one should be surprised that business methods can be patented: "It's important to know that this is not new. It's big in the headlines, but it's not new. Merrill Lynch got a patent on its cash management account 12 years ago, and that's a business method patent."

Though opinions differ on the merits of business method patents, the consensus among attorneys is that they're here to stay. For businesses small and large, that means developing an intellectual property strategy from the very beginning. Companies with substantial patent portfolios can often reduce the risk of being sued by licensing their patents to one another. Startups seldom have this opportunity and should seek guidance from experienced patent attorneys.

While it may not be possible to avoid legal skirmishes, you can get an edge without paying for lawyers. Aurigin Systems, for example, offers software for managing intellectual assets. Kevin Rivette, co-founder and chairman of the board for Aurigin and co-author of Rembrandts in the Attic: Unlocking the Hidden Value of Patents (Harvard Business School Press, 1999), describes his company's wares like an arms salesman: "With our Aureka system, you can actually see where you would want to apply pressure, where the minefields are, who you should buy, whose patents you would want to get, so your competitors didn't get them. It is like having an electronic spreadsheet for patent analysis."

Dismissing the notion that the turmoil engulfing the Internet is anything new, Rivette points to the patent battle between Western Union and a startup called Bell Telephone early last century.

But relying too heavily on patents leaves a business vulnerable if that patent gets overturned—and according to Greg Aharonian, a technical analyst and computer expert who runs an e-mail newsletter called the Internet Patent News Service, that's a real danger given the U.S. Patent and Trademark Office's inability to adequately examine each application.

"A lot of the patents being issued to these small companies are crappy," Aharonian says. "They create a strategy of relying on future patent protection, the patent issues, they try doing something with it, and the patent gets savaged in court."

Which may be what happens to Priceline's reverse-auction patent. Oppedahl, who says his firm has a client that dislikes the patent, expects it to be invalidated in court.

Aharonian says he believes such patents distort the marketplace: "It gives investors misinformation. Every time some company comes out with its latest patent, they announce it, and the stock price goes up. People think it means something. In the long run, it usually doesn't."

Easy Exam

Why so many bad patents? Some suggest it's a lack of examiners who understand the software and Internet technology. Aurigin CEO Rivette points out that the government has to find qualified employees from the same pool as his company, Microsoft, Oracle, and others—and that's not an easy task.

"I haven't seen how you can get stock options out of the government lately," Rivette says.

While Patent and Trademark Office commissioner Todd Dickinson argues that his agency does attract enough high-caliber examiners, he says his office, which is fully fee-funded, could better serve its mandate if Congress would stop diverting its revenue.

"There is a permanent amount of money that is unavailable to us that is paid in fees," Dickinson says, "I would say about 20 percent of our revenue this year."

James Pooley, a lawyer with Gray Cary Ware & Freidenrich, agrees that the Patent and Trademark Office has been doing a better job recently. But he maintains that its examiners are pressed for time and are further hampered by the fact that discontinued products, manuals, and papers necessary to determine whether an idea has been used before are not easily available.

"As one of my partners keeps reminding me," Pooley says, "they don't call it the 'No Patent Office.' It's the place you go to get patents. When you consider how fast we move in this industry, how important it is to have design freedom, my concern is that the system of awarding patents, which has served us so well in other more traditional technologies that move at a slower pace, will in fact drag us down and present us with drags on the efficiency of the market that we cannot afford."

Despite concern that patents overcompensate inventors and create pockets of extortionate activity, the patent system is one of the few things that level the playing field between large corporations and startups. With any luck, Congress will inject some sense into the process by insisting on more rigorous standards for the granting of patents. In the meantime, find yourself a good lawyer—you'll need one sooner than you think.
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Top Five Patent Awards

Infringing on someone's patent can cost your business—big. Consider these top five paydays for patent holders.

Award: $1.2 billion Date: 1993

Upshot: Litton awarded more than a billion dollars in Honeywell electronics lawsuit.

Award: $1 billion Date: 2000

Upshot: SnapTrack profits big from an electronics buyout by Qualcomm.

Award: $873 million Date: 1991

Upshot: Kodak pays dearly for infringing on Polaroid's chemical patent for instant film.

Award: $700 million Date: 1997

Upshot: Digital receives huge award in computer lawsuit with Intel.

Award: $300 million Date: 1999

Upshot: IBM profits from a multimillion-dollar electronics license to Cisco Systems.

source: www.bustpatents.com
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Innovation or Intimidation?

Many companies amass patents as legal ammunition. To judge by these numbers, the high-tech industry is arming for war. Whether all these patents represent unique ideas won't be known unless each is tested in court. Regardless, if you're looking for a glimpse into the future vitality of a company, the number of patents it receives annually is a good indicator.
Rank Number of Patents Organization
1 2,756 IBM
2 1,842 NEC
3 1,795 Canon
4 1,545 Samsung Electronics
5 1,409 Sony
6 1,200 Toshiba
7 1,193 Fujitsu
8 1,192 Motorola
9 1,153 Lucent Technologies
10 1,054 Mitsubishi

source: 1999 U.S. Patent And Trademark Office
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Top Legal Resources

Before you hire an attorney, consult the wealth of information about the intricacies of intellectual property on the Web. Here are the best places to start.

The Domain Name Handbook

Co-authors Ellen and Peter Rony run this site to promote their book, The Domain Name Handbook (R&D Books; 1998, 1999). It includes a Domain Name Dispute Index and a list of domain name clashes with links to related articles.

www.domainhandbook.com/dd.html

Patents.com

Oppedahl and Larson, a firm specializing in intellectual property services, maintains this informative site.

www.patents.com

Internet Patent News

Patent researcher Greg Aharonian offers his services to those who want to find holes in other companies' patents.

www.bustpatents.com

Copyright Resources

Steve Smith of Media Technology Services has compiled this excellent copyright resource.

groton.k12.ct.us/mts/pt2a.htm1
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The Price Is Right

What's in a name? Several million for the lucky few. The lesson? You might own the trademark in the real world, but you aren't necessarily protected in cyberspace.

Business.com $7.5 million

AltaVista.com $3.3 million

Wine.com $3 million

Loans.com $3 million

ForSaleByOwner.com $835,000

Drugs.com $823,456

Question.com $175,000

Fruits.com $160,000

PhoneCalls.com $120,000

HappyBirthday.com $55,000