The Exchange – Executives’ Edge

UTILIZING BUSINESS METHOD AND SOFTWARE PATENTS

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The Exchange – Executives’ Edge

UTILIZING BUSINESS METHOD AND SOFTWARE PATENTS

TODAY’S PANELSteve Gardner

Partner

TODAY’S PANEL

Keith AgismAssociate General Counsel for Global IP

TODAY’S PANEL

Rob TillerVP and Assistant General Counsel

The Exchange – Executives’ Edge

UTILIZING BUSINESS METHOD AND SOFTWARE PATENTS

About Kilpatrick Stockton LLP’sIntellectual Property Practice

� With 17 intellectual property attorneys listed in the 2008 Best Lawyers in America®, Kilpatrick Stockton ranks in the top 5 nationally for number of intellectual property attorneys named for the sixth year in a row.

� Over 100 Kilpatrick Stockton attorneys concentrate on intellectual property. Over 50 of those are registered patent attorneys.

� KS attorneys hold scientific and engineering degrees in virtually every discipline—11 IP attorneys hold a Ph.D. in their field; 17 hold masters degrees.

� We obtained over 1600 United States patents for our clients in the past 5 years.

� More than 25 of Kilpatrick Stockton’s 120+ attorneys in North Carolina concentrate on intellectual property.

� North Carolina offices in: Charlotte, Raleigh, and Winston-Salem. Other offices in Atlanta, Augusta, London, New York, and Washington, DC.

About Kilpatrick Stockton LLP’sIntellectual Property Practice

� Managing Intellectual Property’s 2008 survey ranked Kilpatrick Stockton’s patent prosecution practice as one of the top 9 in the country.

� IP Law and Business ranked Kilpatrick Stockton in the top 15 of law firms in its 2007 national patent litigation survey.

� IP Law and Business ranked Kilpatrick Stockton in the top 10 of law firms in its 2006 national patent litigation survey.

� US Legal 500 named Kilpatrick Stockton as one of the top 4 law firms in the intellectual property litigation area and the copyright area.

� Managing IP Magazine’s 2008 survey ranked KS as one of the top 5 firms in the country for trademark and copyright litigation.

� We have represented clients in patent suits in the district courts of more than 25 states and work with clients located throughout the United States and internationally.

Patent Basics

PATENT –A document issued by the government giving the owner certain rights.

PATENT APPLICATION –An application filed with the Patent Office asking the Patent Office to grant the applicant a patent.

PATENT RIGHT –The right to exclude others from making, using, selling, offering for sale, or importing the product, process, or design covered by the patent

Patent Basics (Continued)

BASIC REQUIREMENTS FOR A PATENT

� Patentable subject matter (product or process, ornamental design, or plant)

� Useful� New� Non-Obvious� Described to enable others to make and use it and to know that

the inventor is in possession of the invention

PATENT INFRINGER –Anyone who makes, uses, sells, etc., the product, process, or design covered by the patent without the owner’s permission.

Risks with Patents

ENFORCEMENT RISK FOR DEFENDANT

� Damages – Lost Profits, Defendant’s Profits (for Design Patents), Reasonable Royalty

� Enhanced Damages – x3 Damages, Plaintiff’s Attorneys Fees� Preliminary Injunction – Against use, sale, …� Permanent Injunction – Against use, sale, … + colorable

imitation� Cost of Defense; 2007 AIPLA survey, average $2 – 6.6 million

TRANSACTION IMPACT RISK –M&A, Suppliers, Purchasers (bids, etc.)

DISCOURAGING PORTFOLIO RISK –Entry of markets/product

United States Patent Applications File1980 – 2007

1980

1981

1982

1983

1984

1985

1986

1987

1988

1989

1990

1991

1992

1993

1994

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

50,000

100,000

150,000

200,000

250,000

300,000

350,000

400,000

450,000

500,000

Source: US Patent & Trademark Office web site; Delphion

Patent Suits in U.S. District Courts1985 - 2007

0

500

1000

1500

2000

2500

3000

350019

8519

8619

8719

8819

8919

9019

9119

9219

9319

9419

9519

9619

9719

9819

9920

0020

0120

0220

0320

0420

0520

0620

07

Source: PACER; Federal Judicial Center

0

50

100

150

200

250

300

350

400

1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007

Source: PACER

Patent Suits in the Eastern District of Texas1997 - 2007

Red Hat Vital Statistics

� Founded in 1993

� Over 2000 employees, in 58 worldwide offices in 26 countries

� Cash and investments: $1.3 billion

� FY08 revenues: $523 million

� IPO, 1999 (NYSE: RHT)

Headquartered in Raleigh, NC

Free and Open Source Software is Mainstream

� Open source applications used in most enterprises � Expanding exponentially – doubling every fourteen months

(per Deshpande and Riehle in 2008)�� Average savings for mid-sized companies – more than $1

million� Used in mission critical applications and research

� Fortune 500 companies, Wall Street, U.S. Military� IBM's Roadrunner supercomputer – 1,000 trillion

operations per second (a petaflop) on Red Hat Enterprise Linux operating system

Free and Open Source Software Defined

1. A type of software involving a collaborative development model

2. A type of software distributed in intelligible source code form under relatively permissive licensing terms that effectively do not limit internal use, copying, and modification, and that permit distribution of copies under relatively non-burdensome conditions

Source Code

� Programmers write and edit source code in human-readable programming languages.

� Source code is then translated or compiled into object code, a string of 1s and 0s which is unintelligible to humans.

� With source code for a program, it is possible to fix bugs and to improve and modify a program.

� Without source code, you can run the program, but that's it.

Open Source Software

� All open source programs

� Distributed with source code or source code available

� Permissive licenses that allow royalty-free copying, modification, and distribution with minimal restrictions

� Various licensing models

� Permissive (e.g. BSD, MIT)�

� Strong Copyleft (e.g. GPL, LGPL)�

� Weak Copyleft (e.g. MPL, EPL)�

Copyleft

� Seventy percent of software licensed under the GNU General Public License (GPL) version 2, a strong copyleftlicense

� If a work derived from a GPL program is distributed, that work must be licensed under the GPL without additional restrictions

� This means that a GPL-licensed work cannot be made proprietary, and that the commons of open source software expands

Advantages of Open Source

� Rapid innovation

� High quality

� Bugs are fixed quickly

� “Many eyes make all bugs shallow”

� Customizability

� Low cost

The Exchange – Executives’ Edge

UTILIZING BUSINESS METHOD AND SOFTWARE PATENTS

THANK YOU SPONSORSPremier Partners

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Wednesday, Nov. 5, 2008

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