Inside Apple's iPod patent problems

Apple Computer and Microsoft Corp. last week found themselves at the heart of a patent dispute that could have far reaching effects for Apple’s iPod business. Last month the United States Patent and Trademark office denied Apple a patent for some user interface elements of the popular iPod MP3 player, citing a patent submitted by Microsoft developer John Platt five months before Apple’s claim.

While the patent has been issued to Microsoft, Apple said that it plans to continue the fight with the patent office.

“The US patent process is often a lengthy one, involving much back and forth with the US patent office,” said Apple in a statement. “Apple will continue to pursue this patent application, as well as the many others covering iPod innovations.”

Longtime industry analyst, Roger Kay said that even if Microsoft were to win a patent challenge from Apple, the chances of it having any significant effect on Apple’s future business are slim.

“I think that in practical terms, no judge will allow Microsoft to stop Apple’s iPod business from going forward,” said Kay, president of Endpoint Technologies Associates Inc. “I think that if Microsoft makes a narrow claim stick, the settlement will be a cross-licensing deal with little or no money changing hands.”

Microsoft’s Director of Intellectual Property Licensing, David Kaefer noted in a statement last week the two companies close relationship and that Microsoft does tend to license its patents to other companies.

“In general, our policy is to allow others to license our patents so they can use our innovative methods in their products,” Kaefer said in a statement. “Microsoft and Apple have previously licensed their respective patent portfolios to one another and we maintain a good working relationship with Apple.”

While a licensing deal might have an effect on Apple and Microsoft, Kay believes that long-term the effects on consumers will be minimal and there will be no effect on the iPod as the two companies battle for patent rights.

“Consumers don’t buy with the long term in mind,” said Kay. “That’s why the industry calls them ‘transactional buyers.’ They just want what they want and they want it right now. Later, everything might be different, but if I want an iPod, I’m just going to buy one.”

Legal wranglings a bit trickier

While looking at potential licensing agreements and the outcome of the patent decision may seem complex, the reality of the legal proceedings before the two companies could be even worse.

“United States patent law is a ‘first to invent system.’ Microsoft could argue that they invented it before Apple put its product on the market,” said Scott Culpepper, a patent lawyer and partner with Thomas, Kayden, Horstemeyer & Risley, LLP in Atlanta, GA. “Microsoft’s options are to sue Apple for infringement of its patents or to sit back, wait and not worry about it. Apple, on the other hand, has a lot more options.”

Having already been denied their patent application, the options available to Apple at this point are to apply for Patent Interference or a “swear behind.”

Characterized by Culpepper as “an extremely long process that is very complicated and expensive,” the U.S. Patent office will grant an Interference when two parties claim to have invented the same technology. If Apple were to win the Interference proceeding, Microsoft’s patent would be revoked and Apple would be issued the patent.

Apple could also use a procedure called “swear behind.” This procedure is used when the company believes that their patent claim has nothing to do with an earlier granted patent. For instance, Apple could argue that Microsoft’s patent does not cover their technology – if successful, Apple would be issued a patent for their technology and Microsoft would keep their patent.

“Even though the patents may describe similar subject matter, the claims could be very different,” said Culpepper. “They may not legally claim or cover the same subject matter. If that’s the case, there is no basis for an Interference – then the only issue is whether Apple gets a patent.”

If Apple chooses to ask for an Interference proceeding, believing that the Microsoft patent and its claim cover the same technology, both companies would be required to submit what could become mountains of documentation.

“Most large companies maintain lab notebooks where they keep logs of daily investigative activities,” said Culpepper. “The patent office will take a look at those books to try to determine who conceived the idea. It is going to come back to lab notebooks, internal memorandum and other internal documentation.”

Culpepper said that generally the rule for a patent is the party that invented it first and then diligently worked toward building the product is going to get the patent. However, as an example, he said that if a company invented a technology and put it away for a few years and a second company comes along, invents a similar technology and produces a product, they will get the patent.

Culpepper also didn’t know what effect the longstanding agreement between the two companies would have on the patent. Although expired, he said that it is “very common in the hi-tech industry that you often have some type of cross-capture clause” in the agreement.

“This is certainly not the end of the story. I think we are at the very beginning of this,” said Culpepper.

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