american express – Techdirt (original) (raw)

Intellectual Ventures' Evil Knows No Bounds: Buys Patent AmEx Donated For Public Good… And Starts Suing

from the despicable dept

Intellectual Ventures may be running out of cash, but that doesn’t mean it’s slowed down the pace of evildoing. If you look over its recent lawsuits, you’ll notice that over the summer, Intellectual Ventures was busy suing a bunch of banks, including Capital One (that lawsuit is embedded below). At least some of those lawsuits involve US patent 6,182,894 entitled: “Systems and methods for authorizing a transaction card.” In short, it basically describes the concept of the CID or CVV number that is found on the back of most credit cards today, which you often have to enter when purchasing stuff online with a credit card. Now, we may question how the hell the idea of adding 3 numbers to the back of a card as a security measure should be patented in the first place, but let’s leave that aside for a moment.

Instead, let’s go back a bit to look at the history of this patent, and a man named Bernard Bilski. As you may recall, Bilski was involved in what appeared to be a key lawsuit concerning the ability to patent software. Eventually, the Supreme Court gave a very narrow ruling on the issue that didn’t provide very much clarity at all on the question of software patents. However, go back a little bit further, to one of the Bilski appeals, heard by CAFC. Lots of different players on all sides of the patent debate lined up to supply amicus (friend of the court) briefs. One of them was American Express, who (somewhat ridiculously) argued in favor of software and business method patents. And, in a bit of news that is rather important here, it happens to use patent 6,182,894 as an example of why these kinds of patents are so important, wherein it gives us a history of that patent up until 2007 or so. It talks about the importance of CID/CVV numbers for credit card security and fraud reduction, and then notes the following:

Recognizing the value of this fraud reduction process to not only the financial services community, but also to the individual consumer, American Express donated the ’894 patent to the not-for-profit corporation Consumer and Merchant Awareness Foundation (“CMAF”). According to the CMAF, “the core objective of CMAF is the cultivation and encouragement of responsible, proven practices that sustain and build consumer and merchant confidence in the financial services marketplace.” The CMAF seeks to achieve this objective by raising awareness of best practices to protect consumers and merchants. The “CMAF views the ’894 Patent as an asset that should be used to help fulfill its mission.” As owner of the ’894 patent, the CMAF can license the process disclosed in the ’894 patent throughout the financial services industry. If patent protection had not been available to drive the initial innovation costs, this method may not have been developed or made available to the CMAF to advance the process industry-wide. CMAF, which is currently developing its licensing policy, states that it is committed to “refrain from actions that will result in enforcement of intellectual property against issuers, acquirers, merchants or consumers related to activity in the retail financial services and payment areas.” As a result of this policy and its licensing efforts, CMAF will make this important fraud-prevention technology available throughout the financial services industry.

Those quotes are from CMAF’s website. As a quick aside, I’ll note that AmEx’s argument here is totally nonsensical. If AmEx was planning to donate the details of this patent to a non-profit and make sure that any card issuer could use it… then what’s the patent for? AmEx could have just as easily publicly released a description of the concept or tried to create a standard or something. There’s absolutely no reason for a patent since the only thing a patent lets you do is exclude others. The idea that you’d need a patent to come up with this… only to then donate it to a non-profit that promises not to enforce the patent against anyone in the space just doesn’t make any sense. You don’t need a patent for that.

And, actually, the end result here shows why patents like this are bad. Because even after AmEx got the patent and donated it, and after CMAF flat out promised not to enforce the patent against banks, that’s exactly what’s happening now — thanks to the pure evil of Intellectual Ventures. The record shows that, in June of 2009, the patent changed hands from CMAF to an organization called Losipial Wireless, who has been identified as an Intellectual Ventures shell company. And then, just this past May, right before IV started suing banks over this patent, Losipial assigned the patent directly to Intellectual Ventures. And then Intellectual Ventures started suing. So you have a situation where even when the original patent holder donated the patent for “the public good,” sooner or later, an obnoxious patent troll like IV comes along and turns it into a weapon.

Again: AmEx patented those little numbers on your credit card, and then for the good of the industry and consumer protection donated the patent to a non-profit, who promised not to enforce the patent against banks… and then proceeded to sell the patent to Intellectual Ventures who is now suing banks over it.

What I haven’t yet been able to figure out is what happened to CMAF itself. The website still exists, though it’s pure brochureware, and there’s little info on the site. If you poke around, the page with the description of the patent still exists (even though AmEx cited the wrong link in its brief). If CMAF sold off the patent in 2009, you’d think somewhere in the intervening 4 years, someone would think to take down the page about that patent — if anyone actually worked at CMAF. I’ve sent them two separate emails, but never heard back. It’s worth noting that American Express has a deal with Intellectual Ventures. I’m sure AmEx also got a nice tax deduction for “donating” the patent to CMAF (CMAF’s website plays up that there are tax benefits to donating patents to it). And then IV gets to still sue a bunch of AmEx competitors over the patent AmEx insisted it was donating for the good of the public… Nice trick.

Filed Under: anti-fraud, cid, credit cards, cvv, fraud, patents, security
Companies: american express, capital one, cmaf, consumer and merchant awareness foundation, intellectual ventures, losipial wireless

.Rip .Off: Highlights From The Top-Level Domain Scrum

from the .goo-me dept

The whole ICANN process for creating generic top level domains (gTLDs) has clearly been designed to allow certain groups to make a ton of money by basically pressuring individuals and companies to snap up more domains they don’t need. The whole thing has appeared impossibly corrupt from the very beginning. However, with ICANN finally releasing the full list of gTLDs that have been applied for (using the obnoxious title “reveal day” — as if the world was really waiting impatiently for this crap), there are at least some bizarre or interesting factoids as we skim through the list. Here are a few:

There’s plenty more to dig into, but those were the ones that caught my eye. It seems like the key story is just how often Amazon and Google come up against each other…

Filed Under: cash grab, gtld
Companies: amazon, american express, chrysler, google, icann, johnson and johnson, microsoft, monster cable, ralph lauren, starbucks

Find A Massive Security Hole At American Express? If You're Not A Cardholder, It Doesn't Care

from the ouch dept

One of the general tenets of white hat security hackers is that when they find a vulnerability they alert the company first and allow them to fix things before they reveal the details. But what if it’s impossible to reach anyone at the company? That Anonymous Coward points us to a recent case of someone discovering a serious zero-day vulnerability at American Express… and not only not not being able to find anyone to contact, but also being told that the company would pay more attention to him if he were a cardholer:

To my great surprise American Express doesn?t allow anybody to contact them. Instead, you?re sent through their ten-year-old copyright noticed website?s first line support jungle to be attacked with questions ensuring that you?re a paying customer. If you?re not then you might as well not bother, unless you feel like speaking technical advanced 0day vulnerabilities with incompetent support personnel either through Twitter direct messages or phone. They will leave you no option of contacting them in a manner that circumvents any theoretical possibility they may have of boosting sales numbers.

The only acceptable contact methods that I found on their site were telephone, fax or physical mail to some typoed country called Swerige. I figured none of them were suitable for 0day reports and decided to turn to Twitter and ask for an e-mail address or some other modern protocol.

As TAC mentioned in his submission, perhaps black hat hackers are merely white hats who got tired of the muzak on hold…

Filed Under: reporting, security, security hole, vulnerabilities
Companies: american express

If At First You Don't Succeed As A Patent Troll, Just Sue Again

from the why-not dept

The excellent new Patent Examiner blog has a post up about a company called SmartMetric, which claims to be in the business of making biometric technologies, but admits it hasn’t actually made any money doing that. Instead, it seems to be in the business of being a patent troll. Despite the fact that banks and others have been testing variations on “smart card” technology for many decades, SmartMetric ended up with patent 6,792,464, which it claims covers all kinds of smartcards. Last year, it sued Visa, MasterCard and American Express. And lost.

But why worry about that when it can just sue again?

Yes, even as it’s appealing the initial loss, the company has sued the same companies a second time using a nearly identical filing. You can see both filings embedded below. Feel free to do a diff on the two, but Patent Examiner summarizes the two cases this way:

This new lawsuit against MasterCard and Visa concerns both ?contact? and ?contactless? smart cards (the former are inserted into a card reader, the latter only need to be placed in proximity to a reader), while SmartMetric?s first lawsuit against the credit companies only referred to contactless card systems.

So, basically, after losing, they’re just trying to expand what they claim the patent covers. It’s hard to see this as anything more than a standard patent troll shakedown of a company that doesn’t do anything demanding cash from the companies who do things… even when those things are obvious next steps that were discussed decades before the troll came on the scene.

Filed Under: patent troll, patents
Companies: american express, mastercard, smartmetric, visa

Store Payment Info In Your Online Store? Watch Out For Patent Infringement Lawsuits

from the pay-now dept

Bill Squier alerts us to the news that a bunch of companies have been sued for daring to store consumer payment information and allow either stored value payments or one-click payments on their site. The article linked here focuses on Apple as a defendant, and notes 14 other companies were sued as well, but in researching this, I found that Joe Mullin actually wrote about another batch of companies (20 of them) that were sued back in April. The earlier lawsuit included Google, Wal-Mart, Bank of America, Capital One, JP Morgan Chase, Mastercard, Visa, Vivendi, Disney and Western Union among others. The more recent lawsuit has (as mentioned) Apple, Best Buy, Amazon, American Express, Barnes & Noble, Citigroup and eBay among others. So… basically any online e-commerce site, credit card company or big bank.

As for the patents in question, they’re all a variation on a “method and apparatus for conducting electronic commerce transactions using electronic tokens.” The specific patents are 7,376,621, 7,249,099, 7,328,189 and 7,177,838. Reading through the claims, this seems like an incredibly typical online system for storing payment info and seeing if the person can actually pay. Since the patent system defenders among our readers get quite upset whenever I say something seems “obvious” to me, let’s flip this around. Can anyone explain how these concepts were not obvious at the time of filing?

Not surprisingly, the cases have been filed in Marshall, Texas… and as Joe Mullin figured out, the guy who is running “Actus” is a lawyer known for representing some infamous patent hoarding companies. He also discovered that the lawyer representing Actus in these lawsuits appears to share an office (or at least the same address) with the son (who is also a patent attorney) of the judge handling the case. At some point, do people start questioning whether or not there’s a conflict of interest there?

Filed Under: patents, payment
Companies: actus, amazon, american express, apple, bank of america, barnes & noble, best buy, capital one, citigroup, disney, ebay, google, jp morgan, mastercard, visa, vivendi, wal-mart, western union

The Case For And Against Software And Business Model Patents

from the and-the-battle-begins dept

Things have been busy, so I haven’t been able to add to my ongoing series of posts on intellectual property until now. I’ve also been working on a post for the series that is a bit involved, which has taken extra time. However, just as I’m working on finishing that up, the various friend of the court briefs on the Bilski case were due, which is a perfect opportunity to discuss the question of business model and software patents. Back in February, we mentioned that the Bilski case was a big deal, as it gave the appeals court that handles patent issues (CAFC) a chance to admit it made a mistake in allowing patents on software and business models. Some of the various individuals and groups who filed briefs have written about them, but Dennis Crouch over at Patently-O has an excellent summary and many of the amici briefs available for download.

As you might imagine, with 30 different amici briefs filed, they represent a wide variety of opinions, with some companies like Accenture and American Express in favor of allowing these patents, and others like IBM and SAP explaining why these patents don’t make much sense. Red Hat (expectedly) explained how software patents harm open source development (and how open source shows that patents aren’t necessary for software innovation). The group End Software Patents highlighted some ridiculous lawsuits resulting from software patents (and even noted that CAFC’s own website violates some software patents). The EFF focused in a bit more on the very specifics of the argument at hand and suggested a three-step litmus test to determine whether an invention is actually technological.

So How Come Software And Business Models Are Patentable In The First Place?

For many years people simply assumed that software and business models weren’t patentable. It was pretty well established that patents needed to be tied to a real, tangible technology — even if there didn’t need to be a working model. The courts had recognized for many years that a “process” could be patentable, and that was codified in the law in 1952 by the patent act written by Giles Rich. Rich later went on to serve on CAFC interpreting the very law he had a major hand in writing, almost always in favor of extending what could be patented.

In 1981 the Supreme Court ruled in the Diamond v. Diehr case, saying that the patent office shouldn’t dismiss a patent application just because it’s software, noting that if it was tied to a technology, then the entire combination of technology and software could be patentable. It made it clear, however, that algorithms, by themselves, were not patentable. That’s somewhat problematic, as it assumes a concrete world where the technology and the algorithms aren’t mixed together. Following this, most decisions on patents were left to CAFC, who went through a series of cases trying to refine and hone in on what was and was not patentable when it came to software. This went on until 1998 when CAFC decided the State Street case, which basically said both software and business models are patentable — and that they’ve always been patentable, quoting a phrase first used in a Congressional report in 1952 that “anything under the sun made by man” is patentable. This statement has all sorts of problems, of course, because when you get into intangible goods and algorithms and business models, it’s not always clear if that’s something “made by man” or merely an explanation of something that was already there. Either way, the State Street decision opened the floodgates.

Suddenly there was a massive rush to the patent office to apply for both business model and software patents. Researchers, for example noted that from 1995 (before the lower court ruled on State Street) to 2001 (two years after the Supreme Court refused to hear State Street) the number of business method patents grew by nearly 3,000% (yes, 3,000%). Things became even worse because there were so many fewer software and business method patents prior to this case, patent examiners had much less “prior art” to go on. Typically, examiners use things like earlier patents as well as journal articles to determine prior art. But, there weren’t patents on earlier software and business models and not many journal articles either. So plenty of bad patents got through. The patent system itself became overwhelmed, and the incentive structure started encouraging examiners to approve patents when it doubt. And that’s how we got to some of the mess we’re in today.

The Case For Software and Business Model Patents

Let’s start with the case being made in favor of such patents. Again, with so many amici, there are a ton of different opinions offered here (and they certainly don’t all agree with each other). But the simplest argument being made is reflected in the BSA’s opening argument which is the same core defense of the patent system overall. It goes like this: patents are supposed to promote the progress, and we want progress promoted, so of course software and business models should be patentable. This argument, obviously, ignores the question (and all of the evidence) suggesting that patents don’t actually promote the progress, but we’ll leave that aside for now. Related to this, companies like American Express and Accenture trot out the claim that patents have tremendous beneficial impacts on the economy (again, without proof).

From there, a few of the briefs jump off into claims about how our modern economy is different than in the past. Rather than tangible goods and manufacturing, we’re now a society of services and intangible goods, leading to the claim that if patents were helpful in those old days, they should also be extended to this new economy. Regulatory Data Corp. takes this point a step further by claiming in its second argument that “applied economics” is a part of “the useful arts” that are supposed to be protected under patent law. RDC, by the way, also has a bit of fun at the beginning of its brief talking about how its software stops terrorists, hinting at the idea that without patents, the terrorists would win. Many of these briefs also argue on the precedent of prior cases and the idea that creating a specific “exemption” from patentability is a bad thing and would do more harm than good.

Effectively, the arguments are:

The Case Against Software and Business Model Patents

For folks who read Techdirt and work in the software industry, I’m sure the basics won’t come as much of a surprise. The arguments revolve around the fact that you’re not supposed to be able to patent an idea — and then making it clear that software and business models by themselves are really just ideas. They need to be tied to some sort of tangible technology to actually be considered patentable. Microsoft, Dell, Symantec, IBM, SAP and others all make that point. The EFF takes things a bit further to suggest its test for whether or not something is “technological.” The EFF also highlights how much harm patents on purely non-technological material may cause — noting that it limits the normal delivery of important information. The ACLU picks up on this as well, suggesting in its brief that software and business model patents fundamentally run the risk of violating one’s First Amendment rights and argues that First Amendment rights should trump patent rights.

Effectively, the arguments are:

There are many more arguments made within the briefs, and you can dig into them if you’d like — but I believe that’s a decent summary of both sides.

So Should The Court Get Rid Of Software And Business Model Patents?

To be honest, this question is a lot trickier than it sounds at first, and my answer may surprise some people. Part of the issue is how you look at the question being discussed — and on this I agree with some (though definitely not all) of what Stanford professor Mark Lemley wrote in his brief. While I disagree with the claims in his brief that a loss of these patents would decrease innovation, he does make an important point: the real problem isn’t in what’s being patented, it’s in patents that shouldn’t be granted getting approved in the first place. Furthermore, if the court cuts out all software and business models, people will just rewrite their patents in a manner to make it appear as though their business models and software really have a “technology” component. In other words, the real net effect may be meaningless.

He then argues that it doesn’t make sense to create a special “exemption” for software and business models. This is the same sort of thing that many others arguing in favor of software and business method patents claim. It’s effectively a “why should we carve out a special exemption for these things?” And they’re right. We shouldn’t carve out a special exemption — but not for the reasons they think. Carving out an exemption implies that these types of things really do deserve patent protection, except for the fact that they’re software or business models. It’s granting the premise that they’re patentable. That’s a problem.

The real issues is that most software and business model patents shouldn’t be granted at all in the first place, but not because they’re software or business models, but because they don’t meet the criteria of what deserves a patent. They are often neither new nor non-obvious to those skilled in the art — and patents on them most certainly do not promote progress. So there doesn’t need to be a special exemption because they already shouldn’t qualify for patents.

As anyone who has worked in business or in software knows, both business models and software evolve constantly over time. They are not static at all, but highly dynamic — often driven by changes in the market. It is that market that forces the innovation to occur, and doing anything to limit the ability for anyone to change or modify their model or software only hinders that innovation. So, there shouldn’t be a special “exemption” for these goods — it should just be recognized that they are unlikely to qualify for patent protection in the first place.

So while I agree that software and business models should not be patentable, the Bilski case worries me somewhat. If the court does effectively create an “exemption” for software and business models, it’s setting a dangerous precedent that could be revoked (or gamed). It also could make things worse for all other kinds of patents. Instead, there should be straightforward rules that apply to all patents that determine whether or not an invention meets the basic criteria of being new and non-obvious and whether or not a patent is necessary to promote the progress of that space. With that sort of recognition in place, you don’t need a special exemption at all. It would just make it clear that software and business methods would almost never qualify for patent protection in the first place, while also raising questions about the patentability of many other things as well.

So, in the end, I don’t think that software and business models deserve patent coverage — but I worry that the results of the Bilski case could lead to many more problems for the entire patent system by suggesting that software and business methods get “special treatment.” In the end, it seems unlikely that the courts are going to see it this way at all, so a decision in Bilski severely limiting software and business method patents may be a short-term solution, but it would really just be a band-aid on a much bigger problem.

Links to other posts in the series:

Filed Under: amicus brief, bilski, business models, cafc, patents, processes, software
Companies: accenture, american express, bsa, dell, microsoft, sap

My Life. My Card. My Intellectual Property Battle.

from the the-world-we-live-in dept

Barely a day goes by when we don’t hear of yet another story about some sort of intellectual property claim being asserted where it doesn’t belong. It’s a function of a current culture where people are being incorrectly taught that every idea, every concept, every word and every sound should be protected and “owned” despite the fact that these things, by their very nature, are infinite and can be freely shared at no cost to anyone. The latest such case involves a guy who apparently pitched the slogan “My Card. My Life” to American Express a while back. Soon afterwards, entirely independently, AmEx’s own ad agency pitched the same slogan, which is now being used. After discovering that the other guy was trying to trademark (we assume, even though the article claims “patent”) the phrase, AmEx sued to get a declaratory judgment that its use of the phrase did not infringe. Thankfully, a judge has agreed that no infringement occurred. Yet, in this age, where we’re being incorrectly bombarded with the message that ideas can be owned and protected, it’s no surprise that American Express would worry about such a thing.

Filed Under: intellectual property, ownership, slogan
Companies: american express