Transcript of Alexander Poltorak's Radio Interview with Bloomberg News on May 3, 2000

Dr. Poltorak discusses e-commerce and the growth - and complexity - of the new "business method" patents

Interviewer: David Zielenziger

Interviewee: Alexander Poltorak

Bloomberg: This is David Zielenziger of Bloomberg News. Welcome to Internet Action. On the line with us from Suffern, New York is Alexander Poltorak, the Chairman and Chief Executive of General Patent Corporation. Alex, welcome to Bloomberg.

Alex: Thank you David.

Bloomberg: I guess that with intellectual property, a company like General Patent must be out working with people to manage intellectual property in the internet age, is that correct?

Alex: That's correct. As you know, intellectual property is an exploding field. The rate of patent application filings is accelerating and the importance of patents in general is becoming greater and more appreciated. General Patent Corporation is one of the leading intellectual property management firms helping companies and individual inventors to manage their intellectual property through technology transfer, patent licensing and enforcement.

Bloomberg: Alex, many customers, and we won't even talk about investors, are already using e-commerce to buy books from or, to book travel reservations at Microsoftexpedia or Travelocity, to buy things using cybercash, and so on. Is this the kind of business that General Patent is doing for some of your customers?

Alex: We don't do e-commerce business per se. We help companies that are involved in e-commerce to understand the importance of intellectual property in expanding their business, for protecting their companies from possible infringement laws suits, and for enforcing their own IP rights.

Bloomberg: Investors, Alex, have seen that the publicly traded companies such as Microsoft and Sun Microsystems, or Maremba Incorporated and Novadyne, have had celebrated disputes about intellectual property. I mean, that's the kind of things we are talking about here, isn't it?

Alex: Indeed. The patent disputes in this area are as old as e-commerce itself. In fact, the e-commerce patents relate to a new category that is known as "business method" patents, which came into existence relatively recently. Methods of doing business were not patentable until the Federal Court of Appeals reversed its long-standing position on this issue in 1998, and from then on thousands of companies rushed into the patent office to protect their methods of doing business. Now, many companies involved in e-commerce are attempting to patent their traditional methods of doing business in the "brick and mortar" economy, as these methods are being transplanted into cyberspace and reincarnated in the e-commerce embodiment. There are already problems with these patents. By definition, patents have to be based upon novel inventions. It is the job of the patent office to examine patent applications on the subject of novelty. The way they do this is by comparing the patent application to the existing database of published patents. Since the business method patent is the new kid on the block, there is literally no prior art available to the patent examiners. Since there is no known body of knowledge that is published in the form of patents, the patent office has a really difficult time discerning which of these methods are novel and which are not. Therefore, the quality of business method patents coming out of the patent office is sometimes questionable. On the other hand, many companies are already using, and will continue to use, these patents in infringement litigation. As a matter of fact, a recent survey indicated that most intellectual property attorneys expect that patent infringement litigation will literally explode within the next few years, due to the thousands of patents on e-commerce and business methods coming out of the patent office, and these patents will be asserted by one company against another.

Bloomberg: So, Alex, does that mean that if I am a promising inventor and I think that I have something really good for e-commerce, or something that I think should be patented, I would come to General Patent and use them to represent me as an agent to make sure that we can register my intellectual property and perhaps offer to sell it to a company that would pay me royalties?

Alex: We represent individual inventors as their licensing agent. If an inventor has a novel idea that is protected by a patent, we would certainly help such inventor to market the technology, and to license the patents to prospective users of this technology. A common scenario is when a patent holder finds himself or herself already owning a patent which is used by somebody else, which is described as patent infringement, in which case the inventors come to us for help in protecting and enforcing their proprietary rights under the patents. The bulk of our business is in patent enforcement.

Bloomberg: Alex, with the internet and the fact that now if I have a computer say in the United States and we have some kind of application, with one stroke someone in the Island of Madagascar will have it a second later. Does the Internet simply create far more problems in terms of protection than ever before because of the sheer speed of electronics?

Alex: Most definitely. The rate of exchange of information thanks to the internet is approaching the speed of light, and it creates a lot of problems. What is more important than the rate of information exchange is the global nature of the information being shared on the internet, which has created profound challenges in a number of legal areas. A U.S. patent gives you exclusive rights in the United States. However, the infringement may now originate in another country, an offshore jurisdiction. Therefore, the complexity of the disputes involving intellectual property will increase due to the global nature of the Internet.

Bloomberg: Well, it sounds like this a growing opportunity, Alex. Thank you very much for spending time with us today.

Alex: It was a pleasure being with you.

Bloomberg: We have been speaking with Alexander Poltorak, the Chief Executive of General Patent Corporation. This is David Zielenziger, Bloomberg News.