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Magazines > Information Today > June 2004
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Information Today

Vol. 21 No. 6 — June 2004

Investigative Report
Who Will Knock These Heads Together?
By Richard Poynder

Last month, I reviewed the current state of the patent information industry and concluded that commercial vendors are caught in a vicious circle of rising costs and falling revenues. The decision by patent and trademark offices (PTOs) to start offering patent information on the Internet appears to be a major source of pressure.

In particular, all the major patent offices—including the U.S. Patent and Trademark Office (USPTO), the European Patent Office (EPO), and the Japanese Patent Office (JPO)—have launched free Web-based services. While users welcome this, commercial vendors—both database producers and online hosts—are becoming increasingly angry about it.

Vendors argue that in unleashing a flood of free data on the world, PTOs have gone beyond their mandate, which is primarily to grant patents. In the process, they add, PTOs are threatening to destroy the commercial market for patent information.

The PTOs dispute this, arguing that the distribution of patent information is a core part of their mission. As USPTO spokesperson Brigid Quinn explains, a patent represents a quid pro quo between the government and an inventor. In return for getting a 20-year monopoly, patent holders disclose how to make and use their technology. To spur further technological development, the government (USPTO) then makes that information available to the public. "What is known can be improved upon," says Quinn. "Thus, disclosure is critical to advancing technology."

The EPO concurs. "Patent offices are the instruments responsible not only for a fair granting process but also for the efficient publication of information on the details of inventions," says EPO spokesperson Rainer Osterwalder.

Not a Threat

Besides, adds Osterwalder, the PTO sites are not a threat to vendors, whose services are aimed at professional searchers. The purpose of the PTO sites is simply to provide the general public with "easy access to patent documents using simple search features which are not comparable to those needed by patent professionals or offered by commercial operators."

Doing so, Osterwalder says, allows vendors "to concentrate their investments on the creation of value-added services which the EPO does not produce." To assist in this, he adds, the EPO sells raw patent data to vendors at marginal costs. In short, there's room for both commercial services and the PTO sites.

As we saw last month, however, vendors maintain that the PTO sites are also increasingly being used by patent professionals, thereby depriving them of sufficient revenue to provide the value-added services.

Moreover, says Richard Burgess, CEO of Sensory Publishing, this revenue leakage is exacerbated by the ineffectual way in which PTOs have sought to limit the functionality of their sites. This allows professional users to exploit the free data in ways that were not intended. For instance, while the EPO and the USPTO have sought to limit the downloading of patent documents to one page at a time, circumvention tools are available that can bulk-download complete patent documents.

"Just like computer disk copy-protection schemes, the single-page-access limitation has been circumvented by several 'entrepreneurs' who now sell or annually lease their software to law firms and companies to download the data (in an unattended fashion) in much larger volumes than was originally intended by PTOs," explains Burgess. "This has several obvious negative effects on the industry as a whole."

"We are very concerned with the medium and long-term damage that free patent information will have on the industry," confirms David Dickens, director of Questel•Orbit's patent business.

Vendors also question claims that PTO data is available to them at marginal costs. This year, for instance, the USPTO hiked its prices by an inexplicable 50 percent, says Burgess.

If vendors are truly only charged marginal costs, how could prices have risen by 50 percent in 1 year? "The USPTO sells information priced only to recover dissemination costs. All USPTO operations are fully funded by the fees it collects for its products and services," replies Quinn unhelpfully, rebuffing all requests for a clearer explanation.

Specification Drift

But circumvention software and price hikes, say vendors, are not their greatest concerns. What really worries them are the constant incremental enhancements to the functionality of PTO sites, each one making further inroads into their revenues.

The bulk of the criticism here is leveled at the EPO, which, says Dickens, is constantly adding new data and improving the features of its free site, esp@cenet, in a way that "directly competes with the private sector."

In 1999, commercial vendors became so concerned about the activities of the EPO that they formed an association called PATCOM to lobby on the issue. As Thomson Scientific's Brian Gore writes on the Web, PATCOM was a response to the EPO's "confusing statements" and mounting concern about "specification drift."

Vendor concern has only increased over time, says Willem-Geert Lagemaat, CEO of Dutch-based vendor Univentio. "When we first had discussions with the EPO within PATCOM, we were told esp@cenet was only for basic searches, to give, for instance, SMEs in Europe a tool to look quickly at patents and get a sense of what is happening in the field. But that they would then be expected to go to their patent attorney or patent search firm for a proper search."

Lagemaat adds that the EPO's actions belie such public statements. First, there was the downloading issue, in which per-page download limits were circumvented
—and which neither the EPO nor the USPTO has sought to prevent. "Then esp@cenet began offering legal-status information. But why would a novice user working for an SME, who has no idea what a legal status is, want this information?"

One can sympathize with vendors. Consider for instance the EPO's attitude to the circumvention issue. Acknowledging that the EPO is aware that robot software is available to bulk-download patent documents, PR director Godehard Nowak explains that it "sees the present system offering documents on a page-per-page basis, not as a final solution, and aims in a direction to allow download of full documents."

In short, rather than block the software (a simple process), the EPO has chosen to remove the page-at-a-time restriction altogether.

Consider also, adds Lagemaat, the breadth of data now being offered. "What, for instance, are Mexican patents and Mexican full text doing on esp@cenet? There is also Brazilian full text and Singapore full text. I can't see why a European-based governmental agency with the obligation to publish European patents needs to offer access to Brazilian patents to its European audience."

"esp@cenet does not provide indexed searchable full text, but facsimile data of patent documents," responds Osterwalder. Moreover, he adds, it does not offer "facsimile data of Mexican, Brazilian (although we do have some), and Singapore patents, only basic bibliographic information of these documents completed by abstracts of family members."

But why does the EPO provide access to non-European patents? "In order to do its work as well as possible, the EPO must maintain the largest possible documentation collection," explains Osterwalder. "It therefore tries to gather patent data (and nonpatent data) from anywhere in the world. Since it has this data available for its own purposes, the EPO can, and does, make it available to the public via esp@cenet, the only limits being those imposed by copyright laws for nonpatent literature."

If, as Osterwalder points out, PTOs effectively need the entire corpus of patent information for internal purposes and the only limit to its dissemination to the public is copyright law—which does not cover patent documents—the inevitable logic must be that everything will eventually be freely available on the Web. It's not surprising that vendors are concerned.

In justification, Osterwalder says that the EPO now invites the PATCOM group to regular meetings. Here, he says, the "EPO openly discusses its plans with PATCOM and shares information about projects planned in the area of patent dissemination."

Nonsense, says Lagemaat indignantly. That is simply not true. "In September 2002, for instance, we had a meeting with the EPO. The next month, at EPIDOS, things were introduced that we didn't even discuss or know of at the September meeting."

In short, vendors complain, the EPO says one thing and does quite another.

Battle of Words

One thing is clear: Vendors and PTOs are engaging in an increasingly bitter battle of words. Users, meanwhile, are becoming more and more frustrated.

"To try to protect the commercial services by preventing the patent offices from improving their services is economic nonsense," commented Ursula Schoch-Grübler, senior vice president of BASF Group Information Center, at a recent conference. "The order of the day for their vendor survival is to quickly rationalize their data input and to develop innovative added-value products with the help of the patent-office data."

Unfortunately, she added, this appears not to be happening. "Whilst the patent offices have made great strides with their provision of first-level data, we get the impression that some commercial providers have not yet been able to utilize the opportunities open to them. I strongly hope that this is not the result of a lack of goodwill among the partners."

It's hard not to conclude that there's indeed a shortage of goodwill on the part of PTOs. But what about vendors? Are they simply crying wolf and exaggerating the financial impact on them?

Ron Simmer, proprietor of PATEX, a Canadian search and consulting service, certainly thinks so. Vendors, he says, should stop "sniveling about people saving a few bucks" by using PTO sites. "Better they should work on making their products compete rather than trying to monopolize a commodity business."

But as we saw last month, the patent information industry has never been a gold mine, and PTOs are chipping away at vendors' revenues at a time when the cost of developing and maintaining value-added products is growing. We also saw that many companies have already disappeared as a result of PTO activities and that the industry has undergone intense consolidation. Maybe there's no more slack in the system?

Even if there is, the intransigent and bullying attitude of PTOs, coupled with vendors' awareness of their duty to preserve shareholder interests, could force large value-added providers like Thomson Derwent to exit the market.

Would that matter? After all, the patent information industry has never been a hothouse of entrepreneurial talent or go-ahead innovation. Any vacuum would surely soon be filled by other, more resourceful, companies?

The problem, says Lagemaat, is that the PTOs are now developing their products so rapidly that it's approaching the point at which no company can hope to compete effectively in the patent information market. "The scary part of this is that if commercial organizations are investing in developing new products and services, they need to have a certain amount of time in order to be able to generate revenues from those new developments. If during that time period the PTOs go in the same direction and launch a similar product, they are going to put more companies out of business."

And that, vendors argue, is precisely what the PTOs appear bent on doing. Indeed, Lagemaat believes the hidden agenda is to slowly starve commercial players out of the market, leaving PTOs as the only game in town. "I have even heard patent-office employees talking about it in these terms," he says.

Monopoly Suppliers

Would it matter if PTOs became monopoly suppliers? Yes, says Burgess. "Invariably, when governments step in to compete with private industry (killing it off or hurting it badly in the process), it is very, very rare for them to provide the level or range of services and support the private sector is capable of supplying."

This, he adds, is not because government employees are less smart, but because "they answer to a different master, and that master is no longer the customer—the attorneys, professional searchers, and commercial concerns in this case—and these 'clients' will not be footing the bill or helping to make the payroll each month."

What is certain is that PTOs would not provide the value-added indexing currently offered by database producers. Nor would they ever replicate the search platforms developed by online hosts to exploit this indexing or the other sophisticated search tools that hosts offer.

But in the age of Google-type search technology, couldn't Web search engines sift through the data on PTO sites to equal effect? Might it be that human-intensive manual indexing-and-abstracting services have become an expensive luxury, and commercial vendors have become redundant?

Absolutely not, says David Saari, a patent searcher at Schering-Plough Research Institute. At least, not where chemical information is concerned. "Chemical information in patents usually cannot be searched in full text because of the absence of text descriptions for the chemical substances (the information is disclosed in one or more structural drawings) or the complexity of chemical nomenclature rules. Further, the authors of the patents make up their own nomenclature."

In short, many patent documents are simply too opaque to give up their secrets to Web search engines, so value-added services remain essential. Moreover, with inventions becoming more and more complex, Schoch-Grübler believes the importance of indexing is growing. As such, she suggests, it needs to be updated, not dispensed with.

Vendors provide many other vital services too, not the least of which is translating patents into a uniform language (English). "We cannot expect that national PTOs will be prepared to translate their patent literature into English for our convenience or vice versa," argues Schoch-Grübler.

But if the PTOs remove the financial incentive for vendors to provide these services, who then will provide them? "We should think carefully about the consequences if the commercial services were to disappear," concludes Schoch-Grübler.

The Stakes Are High

But the most absurd aspect of the current situation, says Lagemaat, is that if they were to destroy the patent information industry, PTOs would create serious problems not just for industry, but for themselves too, since they also rely heavily on the products of commercial vendors.

PTOs do not dispute the need for the commercial patent information industry. As Osterwalder says, to promote a knowledge-based society in Europe, "it is necessary that not only patent information as such is easily available, but also that value-added services are offered, which are not a byproduct of the activities of the patent offices."

What is in dispute is the ability of vendors to continue operating in a market where more and more of the raw material on which their business is based is becoming freely available on the Web and the functionality of PTO sites is constantly being enhanced. In turning a deaf ear to their complaints, PTOs are presumably gambling that vendors are crying wolf. But what if the PTOs are wrong?

Let's be clear about what's at stake. If the commercial market did collapse, it would impact not just on industry but on the patent system itself, since the ability of PTOs to judge the novelty of new applications could be seriously compromised.

The stakes, then, are high. Isn't it time the PTOs stopped acting like bullies and started listening to vendors? And if vendors really do have a valid case, isn't it time they made it more persuasively to the PTOs? Who will knock these heads together?


Richard Poynder is a U.K.-based freelance journalist who specializes in intellectual property and the information industry. His e-mail address is
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