Net Prophet

SAN MATEO (03/13/2000) - SILICON VALLEY -- the state of mind, not the actual place -- is built on one central idea: The hubris, the conceit, that it can be done better. That working out of a basement or garage, someone can change the world. That in the free market, someone with a good idea can beat the competition. But that Silicon Valley is dying.

The New Silicon Valley is being built on dot-coms grabbing the first mover advantage, not by delivering the goods to a consumer, but by filing dubious patents and wielding the legal staff like a bludgeon.

This New Silicon Valley isn't a meritocracy, but a legalocracy. Don't innovate when you can litigate.

Traditionally, lawsuits were the domain of the sore loser, such as Apple Computer Inc.'s attempt to sue Microsoft Corp. for copying the GUI, after they copied it from Xerox Corp. PARC. Lately, however, the dot-coms haven't been too shy about flexing their legal muscles. Apparently, for companies such as Amazon.com Inc. and Priceline.com, a compelling Internet strategy involves hiring a lot of lawyers.

Previously, I've talked about a frivolous trademark suit from eToys.com.

Now I see a disturbing pattern of litigation based on dubious patents. Does paying people to sell your product strike you as a particularly novel concept?

Or that shoppers want convenience? If you say "yes," then there's a job waiting for you at the U.S. Patent and Trademark Office.

Patents grant temporary monopolies on innovative ideas -- ideas that are novel and not obvious. At least, that's the theory. But in recent years, the Patent Office has stepped into a tortuous gray area, granting patents on "business processes," especially Internet-based ones.

Take a basic business idea, do it via the Internet, and voila -- a patent.

So now Amazon and Priceline hold ludicrous patents on straightforward ideas.

Amazon.com, after a three-year wait, has received a patent for affiliate programs. In short, Amazon owns the very concept of affiliate programs, where sellers provide a link from their Web site to Amazon's merchandise for a slice of the revenue. Affiliate programs have spread across the Web, with retailers such as Barnes and Noble or CDNow having similar programs.

But now Amazon holds the patent and intends to enforce it. This, after Amazon gained the patent on "one-click buying," where someone can purchase an item online with a single click, and sued Barnes and Noble for its similar system.

Amazon isn't the only company that files and gets dubious patents. Priceline holds the patent on the "reverse auction" concept, as well as dozens of others.

Apparently, "naming your own price" is novel. I suppose no one in the Patent Office has ever traveled abroad or haggled for a car.

Our patent system is intended to spur innovation. It protects someone who invests considerable money and time in discovering a process that, once discovered, would be easy to duplicate. In short, it's based on 18th century ideas about technology. It provides an incentive for people to research new ideas, secure in the knowledge that their discovery won't be duplicated. But how does Amazon's "discovery" of affiliate marketing reduce the cost of a rival implementing a similar program?

Silicon Valley's bedrock is the idea that doing it better counts for something.

That you can beat the competition -- and make yourself rich -- by doing it better. It's the ideal of the free market, transformed into a place and a culture.

But the soul of the Silicon Valley machine is sick. Companies that should be innovating are instead using every possible maneuver from a 19th century legal system to fortify their businesses.

Where would we be today, in March 2000, if the Web's inventor, Tim Berners-Lee, had patented the concept of "viewing data transmitted over the Internet in a graphic format" back in 1990?

Silicon Valley wasn't built on multimillion-dollar lawsuits over basic business ideas. Silicon Valley was built on people saying "I can do it better."

Let's see if we can "do better" still.

I won't try to patent your ideas if you send them to sean_dugan@infoworld.com.

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