Private equity firm Apollo Global Management will take Rackspace private in the all-cash deal.
In a bid to defuse a potentially crippling explosion of Internet business-method patents, the U.S. Patent and Trademark Office last month outlined a process to work closer with the e-commerce industry and improve patent screening. The plan coincides with the office being named one of two so-called performance-based organizations, a federal designation that will give the agency more flexibility in procurement, hiring and staff pay in exchange for meeting certain goals. “We’re listening to our customers and trying to improve our pro-cesses,” says patent commissioner Nick Godici.
Though the number of business method patents represents only a fraction of all patents issued-583 in 1999, compared to more than 161,000 overall-they’ve set off a firestorm of controversy and litigation since a federal court reaffirmed their legality in 1998. Many of these patents offer broad protection to features at the heart of Internet commerce, such as Amazon’s one-click buying and Priceline’s name-your-price reservation system.
Critics have assailed business-method patents, questioning whether the tactics that e-retailers use to drive business should be protected as intellectual property. Recognizing them as such will stifle innovation, they warn. The patent office also has come under fire from attorneys who say it has failed to screen applications adequately and has dumped that duty on the courts.
The patent office’s response is a two-part plan. By holding roundtables and meetings with industry leaders, it will set up a partnership similar to one it created in the biotech field. “We hope the industry will help us identify needs and issues to train our examiners on the technology,” explains Godici.
Big among the needs is a database of “prior art” that examiners can check before issuing a patent. The biotech industry faced a similar problem. But unlike Internet companies, biotech has a large academic base, with a culture of publishing its results.
The second leg is improving the office’s technical training, revising examiner guidelines in light of recent court cases and beefing up the patent review process, which today averages 22 months. Currently the office has 3,200 examiners, 40 dedicated to computer and Internet-related patents, up from 12 in 1997.
Critics say they’ll wait and see. “It’s certainly a recognition that there needs to better screening,” says patent attorney Claude Stern, who chairs the software and technology litigation group at Fenwick & West, Palo Alto, Calif. “Whether or not their good intentions will lead them out of hell, remains to be seen.”