Defending patents takes financial toll on inventor

That's the course Lockwood, now 64, pursued after he received patents in 1994 and 2001 covering e-commerce systems to market merchandise and services.

Programs for translating customers' search terms into multimedia screenfuls of goods and services for sale may be common today, but the patent office concluded that Lockwood's combination of searching, retrieving and displaying data — originally aimed at the travel agency and banking businesses — was sufficiently unique and original to warrant protection.

From his La Jolla home he set up a firm to enforce his patent rights. He sued dozens of retailers — including small merchants of chocolates, furniture, plumbing supplies and camping equipment — for alleged infringements, and has also reached licensing deals with big companies such as Walgreen, Kohl's, and Lowe's, according to court filings. His patents appeared to be worth $100 million, maybe more.

Then he discovered how easily his rights could be taken away. The process is known as reexamination, and it has developed into a powerful weapon for alleged patent infringers to use against patent owners. Because it's comparatively cheap, it is shifting the balance of power in patent fights against inventors.

The U.S. patent system is riddled with flaws. The patent office is underfunded, examiners are overworked, and the backlog of unexamined applications is horrific.

Lockwood's case points to a less obvious flaw: A system that should be based on judicious consideration of technology, science and engineering has become another arena for legal gamesmanship in which money brings all the advantages. This undermines American competitiveness — if U.S. politicians and business leaders are going to grouse about piracy in China and elsewhere, shouldn't the rights granted by U.S. patents be more secure?

Lockwood says gamesmanship defines his case. He points the finger at the big Century City law firm Sheppard Mullin Richter & Hampton, which eventually represented a stable of alleged infringers of Lockwood's patents. He blames the firm and an associate for planting stories in the business press portraying him as a blackmailer targeting the little guy. A website entitled "youmaybenext" solicited clients and contributions for an anti-Lockwood campaign. "They made me look like a monster," he says.

In 2003, Sheppard Mullin filed a reexamination petition for Lockwood's patents with the U.S. Patent Office. As is customary, Lockwood's pending infringement lawsuit was put on hold and potential licensees refused to make deals until the reexaminations were completed.

That took four years, cost Lockwood huge legal fees — and resulted in his patents being upheld. "This is the tragedy," he told me recently. "Your patent can be stolen from you in the dead of night and you have to spend hundreds of thousands of dollars to get it back."

What's worse, he says, is that Sheppard Mullin tricked the patent office into accepting the reexamination request by engaging in fraud.

Before we get into that, let's examine the reexamination process. There's nothing inherently wrong with providing for the reexamination of issued patents. Patent examiners aren't exempt from making mistakes, especially with novel technologies. Properly applied, reexaminations help examiners refocus on things they may have missed in the original applications.

But accused infringers know that time is on their side because a patent is a wasting asset. Although reexamination can chew up a big chunk of a patent's 20-year term, there's no provision in the law for recovering the lost time, even when the process results in a reaffirmation, as it did in Lockwood's case.

Moreover, the rapid march of technology can sap a patent's value long before the 20 years are up. Inventors often have to move fast to extract any value from their government-granted monopolies. The nearly three years lost to the average reexamination can mark the difference between a patent system that creates a genuine incentive for innovation and one that generates worthless scraps of official paper.

The chief imbalance is that the costs of reexamination all weigh on the patent holder's side. Requesting a reexamination is dirt cheap; fighting it can cost hundreds of thousands of dollars, not including the value of the time lost before expiration. Online legal forums bristle with advice for accused patent infringers about how to use the process — as Irell & Manella partner Greg Gardella wrote in a recent California law newsletter, fighting an infringement lawsuit in court can cost $2.5 million to $5.5 million. Filing a reexamination request can cost as little as $10,000.