The Cost Of Ideas 2The Cost Of Ideas 2

Businesses that use technology aren't mere observers in all this. As Kaefer points out, "Increasingly, customers are becoming technology companies themselves--developing their own software, acquiring software." Advo Inc., a leading provider of direct-mail services, filed a patent last year for software, developed under contract by IBM, that's used to schedule the machines that process its mailing inserts. "My biggest issue is making sure that, once the [programming] work is done, Advo owns the code, and it cannot be replicated outside of Advo," CIO Daniel Sheehan says.

Advo uses IBM's Java middleware, but Sheehan's not worried about Kodak's actions. If necessary, he says, "I'll go to my agreement with IBM" for protection. But Sheehan knows what it's like to get caught up in an intellectual-property grab: When one of his application-service providers went bust, a vendor that had previously been one step removed from Advo showed up requesting royalty payments.

Such issues are "on my mind a lot," says Mike Green, CIO of United Pipe & Supply, which provides water systems for irrigation and golf courses. "You have to worry about bringing liability [to the company] where you never saw it." For that reason, Green tries to use only "mainstream" technology because it has been vetted more carefully, he says.

Microsoft's aggressive strategy keeps its lawyers busy. Last month, the company settled a dispute with Sendo Ltd., a British manufacturer of smart phones, and in July, it settled a trademark-infringement case against Lindows.com, now renamed Linspire. In April, Microsoft paid Sun $2 billion after a prolonged legal battle over patents, copyrights, and Java licensing issues. The same month, Microsoft made peace with InterTrust Technologies Corp. by making a one-time payment of $440 million that gave Microsoft access to the company's digital-rights-management technology.

But what the Patent Office giveth, the Patent Office can taketh away. The government agency is reexamining a patent previously awarded to Microsoft for its File Allocation Table technology. Microsoft plans to make its case for retaining the patent within 60 days. A separate development has swung in Microsoft's favor: The Patent Office is reassessing a patent for Web browser plug-ins that had been awarded to the University of California and licensed by Eolas Technologies. Microsoft faced the prospect of having to make changes to both Windows and Internet Explorer.

Some point to the U.S. Patent & Trademark Office as a big part of the problem. The Patent Office's process of issuing software patents has all the virtues of an 18-wheeler with no brakes, says John Rymer, an analyst with Forrester Research. While the government agency is charged with protecting innovation through patents, it's issuing patents on software code that applicants claim are unique software processes without much basis in fact. "Process patents are fairly easy to get," Rymer says. "There's no rigorous standards for issuing them. The result is you have conflicting and overlapping patents that aren't worth much."

Kodak might not agree. The whole issue of software patents and intellectual property is likely to remain contentious, if the angry reaction to Kodak's suit against Sun is any indication. Late last week, Java programmers were still taking digs at Kodak--a Java user itself--for launching legal action against their preferred development language. Noted one poster to Slashdot, the programmer news Web site: "Soon we'll be calling every patent lawsuit a 'Kodak moment.'"