The reason Tim Lee holds the title of “adjunct scholar” at the Cato Institute is that there’s no position called “adjunct moron.” Consider his attack on Claudio Ballard*, published in the National Review.
In 1994, Claudio Ballard was an unemployed computer programmer with a great idea: a system to scan paper financial documents and store them on a secure server. Ballard built a prototype, raised venture capital, and founded a company called DataTreasury to commercialize his system. At the peak of the dot-com boom, DataTreasury had an office on Long Island with over 100 employees.
At the time, banks were still clearing checks by shipping them around the country, and Ballard knew they would save a lot of money by scanning checks and exchanging the images instead. He thought his system would be perfect for the job. But the major banks weren’t interested, choosing to work with other vendors or implement digital checkclearing systems of their own.
Lee goes on to use Ballard as the poster boy for patent trolls. What he neglects to mention is that seconds after Ballard left the building, every bank he approached immediately went to their own computer guys to replicate his system, because Ballard was absolutely right. They would save a bloody fortune using Ballard’s system, and a fortune saved is a fortune earned. The only difference is that they could cut Ballard out of the deal.
Lee neglects to mention that judge after judge after judge, jury after jury after jury, have found that the banks shamelessly stole DataTreasury’s patents, their methods, processes, ideas, which were ground-breaking at the time, and used them to save a ton of money. And yet Lee would make the banks the poor victims of Ballard?
It’s hard to see how anyone could build a digital check-clearing system without infringing this patent. I suggested to a company spokesman that DataTreasury had effectively patented the concept of digital check clearing. He disputed that characterization, but he struggled to explain what specific techniques the patents covers. And he couldn’t think of any kinds of electronic check-clearing systems that didn’t infringe DataTreasury’s patents. In 2002, DataTreasury, by then just a shell of its former self, launched a patent-litigation campaign against the nation’s banks. Those legal battles continue to this day, and have netted DataTreasury hundreds of millions of dollars in licensing fees and damages.
Today, the ubiquity of digital check clearing makes this all seem incredibly obvious. The same could be said of the wheel, but somebody had to invent it. Before Ballard, the poor banks had to do with what they came up with on their own, and it stunk. After Ballard, they were floating in excess dough off of his patents, his efforts, his sweat. Not so sweaty? So what? He came up with it and they didn’t.
The banks turned to their friends on Capitol Hill for help. In 2009, Sen. Jon Kyl (R., Ariz.) proposed an amendment to that year’s patent-reform bill that limited financial institutions’ liability for infringing DataTreasury’s patents, which the amendment listed by number. The bill didn’t pass, and the banks got a lot of bad press for the stunt. So this year’s patent-reform bill, known as the America Invents Act, is a little more subtle. A provision inserted by Wall Street’s senator, Chuck Schumer (D., N.Y.), singles out data-processing patents related to financial services for extra scrutiny from the patent office. The banks’ response to DataTreasury is a microcosm of the broader patent debate. The banks describe DataTreasury as a “patent troll”: a company that has no products of its own but earns a living by filing patent-infringement lawsuits.
The shoe does seem to fit.
While I share many beliefs with the guys at Cato, and always enjoy hearing from Tim Lynch about overcriminalization, it’s intellectual dishonesty like Tim Lee’s that cause me to turn away. This isn’t about free markets, as some would try to characterize it, but about a person’s ability to create something and reap the benefits. Banks don’t get to steal from others any more than anyone else. Well, at least they shouldn’t.
Still unsure of Lee’s intellectual dishonesty? Try this on for size:
And DataTreasury is just one of the hundreds of patent trolls now shaking down productive companies. And the explosive growth of patent trolling is just one of the many problems created by our dysfunctional patent system. The America Invents Act is full of such technocratic provisions that tilt the playing field toward big businesses without doing anything to address the system’s deeper flaws.
So DataTreasury is the Goliath beating up on the poor little Davids, like Citibank and JP Morgan Chase? This is just embarrassingly stupid. Banks are “productive companies” while Ballard’s DataTreasury is just a patent troll. There is simply no intellectually honest basis to contend that Ballard’s efforts, his creation of patentable methods that allowed for banks to save billions (which, I note in passing, they didn’t give back to their customers, not even a little bit) are societally worthless while we owe a debt of love to big banks for all the good and productive things they do for us.
A fundamental precept of capitalism is that a person can create something of value and reap the rewards. This is the incentive that keeps America vital, pushes people to come up with new ideas. Some involve products, hard things made of plastic that won’t break until minutes after the warranty expires, and some involve ideas that facilitate progress. Lee values shiny things. Lee doesn’t care much for ideas.
It’s hard to imagine that my pals at Cato are really as antagonistic toward ideas as this blitheringly misguided article suggests. Or as socialist.
Maybe it’s time they create a new position at the Cato Institute, and Tim Lee can be the first to hold it. All that will be required is that he trade in his tux for a jester’s hat.
*Let’s not forget that I have an interest in DataTreasury.
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Wow! Powerful beginning and the argument that supports this is perfect.
Another “Citizens United” for this nation?
I wonder what my libertarians friends will have to say about this. I haven’t seen any of them around here today.
This case boils down to a simple question of fact: did Ballard really “create something of value,” or did he merely use existing technology in an obvious way, which does not legally or morally justify a patent?
I take the position that it was obvious. And I think I’m a typical libertarian.
Yeah, it was so obvious that the banks didn’t even think of it until Ballard pitched the idea to them.
I don’t buy it.
“Patent trolls” are companies that buy patents for the specific purpose of bringing patent infringement lawsuits. Ballard is not a patent troll.
Before Claudio Ballard, neither the technology nor the concept existed. But before you could take a position, you would have know something about it. Do you know what he created, and what banks so desperately want and need (and were utterly unable to achieve without) that they are willing buy off the Senate? No, of course you don’t. Obviously, knowing what you’re talking about is no greater a concern for you than it is for Tim Lee.
I suspect other libertarians would prefer you call youself something else, like Republican.
JDG has a habit of reaching spurious conclusions without any basis. Despite his adopted name, he doesn’t reflect the thoughtfulness of most libertarians, whether you agree with libs or not.
If by republican you mean “Rotarian Socialist” I would agree. CB created something, banks stole it. They should pay up. And I am a libertarian.
I disagree with your facts.
What technology did he create?
OCR was first patented in the 30’s (per wikipedia).
What does his patent cover?
One of them covered the concept of attaching a scanner (an “imaging subsystem for capturing the documents”) to a server (a “central data processing subsystem”) via a “communication network.” [linked Tim Lee article]
Connecting two computers or a peripheral to a computer via a networks was not novel in 1994 (if ever).
What about his concept – using OCR and a computerized system to record and exchange financial instruments?
The second [commercial OCR] system was sold to the Standard Oil Company [in the 1950’s] for reading credit card imprints for billing purposes. I hardly think it’s novel to apply the same technology to checks as was applied to credit card imprints. Especially if the former is done 40 years after the latter.
[Edit. Note: Link deleted per rules.]
Unless the description of his patent in Lee’s article is in inaccurate I would not consider this to be a novel use of OCR, computer servers, or communications networks. It’s just combining existing technologies in predictable ways.
AFAIK, the standard for obviousness is if a practitioner skilled in the art would consider it novel, not if businesses have adopted it.
Do you have trouble when you get out of bed in the morning finding the floor? If you want to know what the patents are, read them. To rely on Lee’s description is idiocy. If you can’t be bothered to find out what you’re talking about before commenting, then don’t waste my bandwidth.
So despite not contracting his description, nor even addressing it, I’m an idiot for taking Lee at his word? And you’d rather hurl ad hominen attacks that address the substance of my comment?
Ok, I’ll bite, I have read patent 6032137 ( http://www.patents.com/us-6032137.html ), and I agree with Lee’s description.
Furthermore, the patent makes it more clear how little innovation was actually involved. Here is one selection:
Previous approaches have been proposed to meet the challenges associated with the maintenance and processing of paper and electronic records. For example, data archive service companies store the information from paper receipts and documents acquired from their customers on microfilm or compact disc read only memory (CD-ROM) at a central facility. Customers typically deliver the paper receipts and documents to the central facility. For sensitive documents which cannot leave the customer site, some data archive service companies perform data acquisition and transfer to magnetic tapes at the customer site and deliver the tapes to the central facility.
So the innovation here is to scan documents at the client site and then transfer the data via a circuit instead of via magnetic tape. Oh and to store it in a database.
This is a BS patent that never should have been granted and is a good example of why our patent system is broken.
1. If you’re going to use fancy Latin words like “ad hominem,” learn what they mean first. Saying you’re a moron because your argument is stupid is not an ad hominem attack. Saying your argument is stupid because you’re a moron is. No need to thank me. I’m here to help.
2. You’ve looked up one of numerous patents.
3. Of the one you looked up, you’ve been disingenuous. You omit the significant part:
The critical part is the encryption and verification, not just the transmittal.
4. In order to address the substance of a comment, there has to be substance of a comment. You have now made two comments, one devoid of substance and another showing you to be disingenuous.
Whenever the DataTreasury patents come up, bank trolls show up to either smear Claudio or claim the patents (which have been upheld twice by the USPO) are unworthy. You fail.
Neither the encryption nor verification are novel.
A new encryption algorithm would be novel, the mere use of encryption is not. As is admitted in the patent:
the DAT controller 210 executes an encryption algorithm which is well known to an artisan of ordinary skill in the field to encrypt the CBI
As far as verification, all verification activities mentioned were preformed by other technology outside the scope of the patent. For example:
The workstation 604 also performs identification verification by comparing signature data retrieved remotely by the DATs 200 with signature data stored at the DPC 600. In the preferred embodiment, signature verification software, available from Communications Intelligence Corporation of Redwood Shores, Calif. executing on the workstation 604 performs the identification verification. As is known to persons of ordinary skill in the art, the workstation 604 could execute other software to perform identification verification by comparing biometric data including facial scans, fingerprints, retina scans, iris scans and hand geometry.
This patent, like too many others, consists linking together existing technology in completely obvious, non-innovative ways.
You have yet to even offer an argument as to why anything covered by this patent is novel. Instead you have just made bald statements that the technology described was unheard of, when it was commonplace.
The fact that it was initially granted and then upheld is proof that the bar for granting patents is too low and the one for overturning already granted patents is too high. If you don’t believe me, just look at the billions tech companies have paid for patent portfolios recently.
Now you’re just being silly. You don’t know what Claudio’s encrypation and verification methods are, which resolved problems that precluded banks from using digital processing before then. Nor can you talk about what’s available now that wasn’t even a twinkle in anyone’s eye in the 90s.
And your argument that having survived multiple challenges at the USPO proves its too easy is purely circular. Have you left out any logical fallacies yet? Try reductio ad absurdum. It’s Latin, and we know you like Latin.
Dear the person who wrote that neither the encryption is novel.
Please go watch the movie Flash of Genius, where the man fights for the same reason that Claudio=Datatreasury did and Ford stole his idea of the intermittent windshield wiper and you will learn that it was as novel as the light bulb and Thomas Edison, after all the elements to build a light bulb also existed prior to Thomas Edison arranginging them in the proper sequence in order to produce light.
Furthermore the Canadian Banks sued Datatreasury in Canada, they thought they could win on their own home court. The end of that play was that they not only settled but admitted spending millions of dollars in an effort to try to build their own check imaging system and were not successful.
What has just transpired in our government passing HR1249 the new patent bill is the worst peice of bill making not only does it hurt the small inventor but it destroys our patent system which was one of the only industries left to our country . First to File rather than first to invent now go prove you are the inventor, RIDICULOUS and unconstitutiional . You work for IBM and invent something, why shouldn’t it bear your name while you have a contract since you are working for them. People simply forget was an invention 5 years ago becomes obvious 5 years later .