30 December, 2008
It's that time again. No, not time for more boozy egg nog, but time for someone with a patent trying to score some easy money by suing an online game provider.
In this case, it's Worlds.com, Inc. vs NCSoft over patent 7,181,690. There are a few interesting twists here, so I figured I could share some information since I've worked as an expert on a previous patent defense.
Standard disclaimer here: I'm not a lawyer, and this isn't legal advice. This is my point of view based on what information has been available to the public so far. If you are involved in a patent lawsuit, consult your lawyer before you go out of business.
Randy Farmer posted about his experience with patents. It's a really interesting read about how something as simple as word balloons can create a lawsuit. It also shows some of the insanity of the process where someone with deep pockets can just keep harassing a little guy to make the legal bills pile up even when a patent is invalid.
Patents are actually becoming a major part of the game industry, for better or for worse. The traditional, single-player game companies have seen a rise in patents lately. One of the more notable examples is Namco's patent on loading screen mini-games. This means you either have to license the patent or fight it, and as I'll point out there are reasons why it's easier to just avoid it rather than trying to fight an obviously invalid patent.
Theres actually an interesting little ecosystem that has lead to the creation of so-called "patent trolls" who sue people for patent violation without creating a product themselves. As Randy points out, it's common for mid-sized and larger companies to build a portfolio of "defensive patents" to discourage others from suing them. The theory is that if someone comes knocking at your door for violating some of their patents, you can show them some of the patents they might be violating. A cross-licensing agreement later, and no messy lawsuits come about (but the lawyers still get paid).
Well, some companies specialized in acquiring these companies after they falter and build up a portfolio of patents they can use to sue companies. Ironically enough, since these companies usually just have patents and no actual products, they're immune to defensive patents. The flawed system feeds these types of companies and makes it harder to do business for the smaller companies.
The way a company holding patents gains strength is by suing smaller and weaker companies. They can score simple victories and get at least a bit of cash settlement for their effort. It might start small at first, but then the build up a war chest to go after bigger, more lucrative targets. I think it's obvious why they're going after NCSoft in this particular case, because of the companies high-profile fiscal problems. Getting a bit of cash out of NCSoft means they can then set their sights on bigger targets.
Unfortunately, the current legal system makes it hard to put up a real defense against a patent lawsuit. It's expensive to do, and you usually have to hire legal experts in a field to do the research necessary at hundreds of dollars per hour. The minimum cost for a real patent defense is about $1 million, with some cases costing tens of millions. So, a common tactic is for the company to offer a settlement and licensing deal in that costs less than what the full defense would be. For the defendant, this often makes the most financial sense, even if they're rewarding the "bad guys". This has two benefits: first, the patent holder gets more money for their war chest to go after bigger companies, and second it avoids an embarrassing defeat for a patent. As Randy points out, almost any patent involving virtual worlds has prior art to cover it, so the patent holders play the settlement game instead of risking the defendant doing their homework and showing the specific prior art necessary.
Prior art is also a funny concept. While everyone knows the basics, there are some subtle details that can be surprising to the uninitiated. For example, in this specific case, the patent being used is a continuation of previous patent 6,219,045. So, the best defense would be to attack this prior patent to prove it invalid which would make the continuation invalid. Also, the most effective prior art was available at least a year before the filing of the patent. Art after this one year prior cut-off is weaker in the eyes of the court. So, anything like Meridian 59 that might be only a few months prior to the filing isn't necessarily the best defense, unfortunately. Thankfully there are programs like Habitat that Randy worked on that cover a lot of these things.
So, it'll be interesting to see how this sorts itself out. I'd love to see the good guys win in this case, but well see if it's meant to be.