September 2010 issue that 19% of the companies ranked in the magazine’s “Inc 500″ list hold patents. This is reported on page 188 of the print magazine as a part of the CEO survey. On page 126, it is reported that the CEO survey component of the Inc. 500 list comprises data drawn from 304 responses to an online survey of the CEOs of the companies listed in Inc. 500. This post looks at what the 19% figure means and what questions it leaves open.

Inc. lists the criteria used to determine whether a company qualified for consideration in the list. The list ranks companies based on revenue growth from 2006 through 2009. To qualify, the companies had to be generating revenue by June 30, 2008, they had to be U.S.-based, privately held, and for profit. The companies could not be subsidiaries or divisions of other companies.

A number of reasons may explain why more of the companies do not hold patents. First, business operating in some sectors find more value in patents and therefore seek patent protection more than business in other other sectors. Advertising and marketing companies had more companies represented in the list than any other type of business. It is likely business in advertising and marketing, generally, seek patent protection less than say telecommunication companies. According to the graph on page 111 about 24 of the INC 500 companies were in the telecommunications sector, whereas about 60 companies were in advertising and marketing.

Next, patents are expensive to obtain. To qualify for the list, a company must be independent and not a subsidiary or division of another company. It is likely reasonable to guess that independent startup companies, at young as 3 years old, are likely to have less funds available for patent protection. See my post: Pay for a Software Patent Application or a Software Engineer?

INC. does not report the percentage of companies on the list that have a patent application pending at the U.S Patent and Trademark Office (USPTO). According to the USPTO, the average pendency of a patent application is 34.6 months based on FY 2009 statistics. That means from the date a patent application is filed it take, on average, about 3 years for the government to issue a patent on that application. Therefore it is possible that some subset of the companies on the INC 500 list might have patent applications presently pending.

Last the survey related to the INC report does not assess other types of Intellectual Property such as trademark registrations.

I am not sure that we can draw any conclusions from the 19% reported in INC. Many factors influence a companies decision to seek patent protection. Further the long patent application pendency period leaves the possibility companies that do not presently have a patent could have a patent application currently pending.

Dealertrack, Inc. v. Huber, et al., Doc. No. 06-2335 (C.D. Cal. 2009) [PDF]

Summary. The court granted summary judgment finding the asserted claims directed to a computer aided method of managing a credit application were invalid as failing the machine-or-transformation test from Bilski. The court found the process claims were not tied to a particular machine.

Facts. The plaintiff DealerTrack, Inc. (�DealerTrack�) asserted that defendant’s Finance Express and RouteOne infringed three of DealerTrack�s patents, including U.S. Patent 7,181,427 [Link] (the ��427 Patent�). The ’427 patent provides a �computer based credit application processing system [that] provides a graphical user interface, automatic software update downloading, lender to lender routing of credit applications, and integration with in-house finance and insurance systems and third party data entry facilities, among other features.�

Claim 1 of the ’427 patent provides:

A computer aided method of managing a credit application, the method comprising the steps of:

receiving credit application data from a remote application entry and display device;

�

selectively forwarding the credit application data to remote funding source terminal devices;

�

forwarding funding decision data from at least one of theremote funding source terminal devices to the remote application entry and display device;

�

wherein the selectively forwarding the credit application data step further comprises:

�

sending at least a portion of a credit application to more than one of said remote funding sources substantially at the same time;

�

sending at least a portion of a credit application to more than one of said remote funding sources sequentially until a finding [sic] source returns a positive funding decision;

�

sending . . . a credit application . . . after a predetermined time . . . ; or;

�

sending the credit application from a first remote funding source to a second remote finding [sic] source . . . .

DealerTrack arged that the claims of the �427 Patent were tied to a (1) central processor �consisting of a specially programmed computer hardware and database,� a (2) �remote application entry and display device,� and a �remote funding source terminal device.�

Central Processor Not Specially Programmed. The court stated, “The �427 Patent does not specify precisely how the computer hardware and database are ‘specially programmed,’ and the claimed central processor is nothing more than a general purpose computer that has been programmed in some unspecified manner.” See Ex Parte Nawathe, No. 2007-3360, 2009 WL 327520, (BPAI Feb. 9, 2009) (rejecting under Section 101 a claim reciting a �computerized method� of inputting and representing XML documents as insufficiently tied to �a particular computer specifically programmed for executing the steps of the claimed method�).

Not Tied to a Particular Machine. In an earlier claim construction order the court found:

• “remote application entry and display device� included �any device, e.g.,personal computer or dumb terminal, remote from the central processor, for application entry and display.”
• �terminal device� as �any device, e.g., personal computer or dumb terminal, located at a logical or physical terminus of the system.”

The court has little trouble finding these devices were not particular machines withing the meaning of Bilski after finding that these various “devices” include “any device.”

• Microsoft Puts C#, CLI Under No-Lawsuit Umbrella [TechNewsWorld] –
  "Microsoft stated Tuesday that it will not pursue legal action against open source software developers using C# and CLI programming languages. This will likely make some developers much more confident in using the technologies. However, the promise does not include the non-ECMA parts of Mono . . ."

• Start-up Entrepreneurs & CEO’s: If Your Goal is Investment or Acquisition, You are Probably Patenting the Wrong Things [IP Asset Maximizer Blog] -
  “The great majority of patent seekers (including those at otherwise sophisticated large companies) believe that patents are best used to keep others off their ‘technology lawns’.” However, Jackie Hunter asserts that companies should engage in offensive patenting by “putting a patent fence around the big [competitor] company’s technology lawn. . . [This] will reduce or prevent the bigger player’s free movement in its desired business space.” See Jackie’s article for more details on “offensive patenting” strategies.
• Patent Map [FreePatentsOnline] -
  “FreePatentsOnline has launched a patent map . . . The Google Map mashup is located at www.localpatents.com, where today 3,143,630 patents and patent applications are shown in their respective locales, based on inventor and assignee cities. An assignee is the entity that holds the rights to the patent. “A big reason we now show patents on a map is for job searching,” said Erik Reeves, CEO of Patents Online, the company behind FreePatentsOnline. “You may imagine that where you live, or where you’re moving, is a place with limited innovation. But with a few clicks in a given geographic area you may discover one or more companies inventing new products or services of great relevancy to your job interests. And, to interview armed with knowledge about a company’s intellectual property makes you a much better prepared candidate.”
• Bilski, Software Patents and Business Method Patents [State of Innovation] -
  “Will the Supreme Court use the In re Bilski 545 F.3d 943, 88 U.S.P.Q.2d 1385 (Fed. Cir. 2008) case to deny patent protection to information age technology? Many observes believe that this case will have major implications for software and business method patents.”

• Bilski at the BPAI – What a Mess (Part 1) – [The 271 Patent Blog] –
  "…the process of determining patentable subject matter after Bilski has become a weird, metaphysical endeavor. It has gotten to the point that a given claim may receive 4 different interpretations from 4 different people, and each of them could be arguably correct. In the case of computer-related inventions, the end result of a patentability analysis is rarely supportable with a single, cogent rationale."
• In Re Bilski Discussion [Intellectual Property Colloquium] –
  "In its . . .decision in In Re Bilski, the Federal Circuit articulates a new test for whether a given innovative process falls within the subject matter of federal patent law. In this audio presentation, Professors Rob Merges and John Duffy join moderator Doug Lichtman to think through what the new test actually means; where it came from; and whether it will actually change the kinds of patents that issue." (Nov. 2008)