Cheer for David vs. patent Goliath


Tom Stites* wrote the following in the form he knows best, as a newspaper column. Tom found out about this human drama when I introduced him to Claudio Ballard. I met Claudio Ballard because he is a man on a mission: return manufacturing to the United States, which he believes we can do by building and managing supply chains online, aggregating the amazing small machining and production shops that supply the big companies. To do that he needs ORGware, of course. So that’s how we found out that, no matter how accustomed one is to the cesspool in Washington, an occasional creature rises out of that black lagoon that smells so bad it horrifies even the jaded.

Cheer for David vs. patent Goliath

By Tom Stites*

Goliath enters from stage left, in the guise of the American Bankers Association, pushing an amendment to the Patent Reform Act that is suddenly on the move through Congress.  This rivets the attention of David, in the guise of Claudio Ballard, founder of DataTreasury Corp. and inventor of technology that allows the banking system to move images of checks securely through the interbank system.  The amendment is a lethal weapon aimed squarely at Ballard and his company.  He springs to his feet.

Hold your hat.  There’s going to be a big fight.

Almost no one knows about this impending fight, much less how important its outcome is not only to Ballard but to inventors and entrepreneurs all across the U.S. – and to entrepreneurship itself, one of the great engines of vitality that drives the American economy, that gives it an edge in brutal global markets, that creates jobs and prosperity.

So I write this to alert like-minded people that the Goliath that Ballard is confronting has many muscular allies, in the form of transnational corporations trying to gain an advantage in the use of patents, and that Ballard is going to need all the help he can get.  With or without the bankers’ amendment the legislation is packed with provisions that would undercut entrepreneurs’ ability to get patents and, if they do, to protect their patents from global corporations the law would give the upper hand.

Why should a veteran journalist like me care?  No one likes an unfair fight, and this is an ambush of innovative, small-scale entrepreneurs by vast corporations.  On a deeply personal level I care because I can imagine the ambush hurting me – in an era when journalism’s institutions are crumbling, I’ve spent much of the last year developing ideas for robust new ways to publish quality journalism on the Web.  If patents are required to make this work, whether the Web journalism is for profit or not, I don’t want Rupert Murdoch coming after them, wielding this new law.  I’m hardly alone among innovators and wannabe saviors of journalism or, thus, hardly alone among journalists and publishers to whom patents could matter.

I stumbled into knowing about this fight because I’ve taken a part-time position as the publisher of, a site that makes it easy for citizens to understand, debate and even shape legislation that affects their lives and communities.  Britt Blaser, who has invented new software that will enrich Politicopia’s potential for civic empowerment, is part of a network of inventor/entrepreneurs that includes Claudio Ballard, and Britt called me up, all excited, wanting to pick a journalist’s brain about what was going on.  Conference calls started happening, I heard Ballard’s passionate account, emails flew, the links piled up, I jumped on Google and read a lot in a hurry, and here’s the story:

For six years patent reform legislation languished in Congress as lobbyists and legislators from both parties negotiated behind the scene.  A little more than a week ago, they reached agreement and the House and Senate judiciary committees suddenly both passed similarly sweeping bills on consecutive days. On its website Forbes says the legislation passed with overwhelming bipartisan support and predicts that it may pass in a big rush, possibly even before Congress goes on its August recess at the end of next week.

A broad range of voices from left to right on the political spectrum, and not just Ballard and Blaser and their network of entrepreneurs, sees the many provisions of the bill as adding up to a comprehensive disaster. The most detailed and informed critique from this perspective that I found comes from Dana Rohrabacher, a Republican congressman from California, in this article summarizing his July 12 speech on the floor of the house.  It takes the bill apart provision by provision and describes the harm each would cause and why.

Rohrabacher is passionate:  He calls the bill “legalized larceny” and cites icon American inventors starting with Benjamin Franklin and Thomas Jefferson, to Cyrus McCormick and Thomas Edison, to George Washington Carver and the Wright Brothers.  He calls them heroes and says the new patent law would make their contributions difficult if not impossible, that it hands patent control to what he calls globalist forces. Among these, he says, “are the leaders of multinational corporations . . . an elite whose allegiance is to no country.”

Ballard, the entrepreneur, is no less passionate. “This is a challenge to the backbone of entrepreneurship in this country,” he says.  “We’re in danger of killing off innovation.”

The bill’s biggest supporters are Microsoft, Apple, Research in Motion, Cisco Systems and other huge tech corporations that make products that Forbes says typically include hundreds of patented items.  The big opponents, so far, are the pharmaceutical and biotech industries, Caterpillar, major patent holders like Texas Instruments and Qualcomm, the AFL-CIO, which is concerned about outsourcing union jobs to overseas patent thieves, and the Innovation Alliance, an association of innovative companies, mostly of modest size.

So Ballard’s David has some help, but it remains to be seen how many of the opponents oppose the whole bill and not just some of its language.  “There is a fierce lobbying effort under way,” says.

The global tech firms’ PR megaphones support their lobbyists’ mantra, repeating and repeating the idea that big firms are victims of “patent trolls,” speculators who buy up patents and sue big corporations in pursuit of settlements.  The firms complain about their legal costs, saying their use of so many patents in so many products makes them easy targets, that they are often sued for inadvertent or minor violations.  But clearly not all patent violations are minor – Alcatel-Lucent won a $1.5 billion judgment against Microsoft (the judge said the violation had not been willful) earlier this year.

Proponents of the “reform” bill call attention to provisions designed to reduce litigation as if the companies that draw suits are always innocent victims.  For another perspective, which doesn’t yet have a PR firm pushing it but should, you can read Jim Moore’s blog called I Love Inventors for story after story about how big corporations take advantage of the little guys, the innovators with new ideas that make a difference and create jobs.

Which brings us back to Claudio Ballard and DataTreasury, the company he founded to bring the technology he developed and patented into the market.  After he showed them how his system works, big banks set up their own system for moving interbank check images.  He sued and won a long, costly battle charging that the banks had copied his patented technology to avoid paying royalties.  To the banks this may have seemed like a minor or inadvertent infringement, but to Ballard his whole company was at stake.

The fight seemed to be over. Ballard started on his latest invention: VEEDIMS, the Virtual Electrical Electronic Device Interface Management System, a new approach to automotive wiring that eliminates the traditional concept of a harness. Claudio just can’t stop inventing things.

The sad news is that despite his legal success his company is still at stake:  The ABA’s Goliath got a friendly senator to add an amendment to the bill that bears the title, “Limitations on Damages and Other Remedies with Respect to Patents for Methods in Compliance with Check Imaging Methods.”  Aim carefully with your slingshot, David.

*Tom Stites‘ long journalism career includes ranking positions at major newspapers including managing editor of The Kansas City Times; national correspondent, national editor, and associate managing editor for project reporting at The Chicago Tribune, and night national editor of The New York Times. Projects he has directed have won every major journalism award, including the Pulitzer Prize. (source)

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