Patently absurd? Ownership rights now include 'ideas'
David Geske, who ran a packaged-ice business, was entertaining his friend Len Kretchman, a consultant. For lunch, their kids wanted peanut butter and jelly with the bread trimmed and folded over. As they were preparing the meal, Kristen Geske and Emily Kretchman told their husbands: "You guys should make a sandwich with no crust."
That offhand comment spawned Incredible Uncrustables, a sandwich that the two entrepreneurs successfully mass-produced for Midwestern schools. It also began a long-running dispute over whether the U.S. Patent and Trademark Office went too far when it gave Geske and Kretchman the first patent on a mundane household sandwich.
"This doesn't mean your grandmother can't make you a peanut butter and jelly sandwich," said Ann Harlan, a lawyer for J.M. Smucker Co., which now owns Geske and Kretchman's company.
But it does mean that Smucker will try to prevent other companies from making them. For more than two years, Smucker has been arguing in court and the patent office that a crustless peanut butter and jelly sandwich made by Albie's Foods Inc. is violating its patent and must be taken off the market.
A generation ago, Smucker's sandwich, which looks like a flying saucer, and Albie's, which is a fat square, would have fought it out in the marketplace. The best sandwich would win.
Now the corporate urge is to get a patent to stifle competition. It's a process being helped along by the courts and Congress, which keep broadening the nature of what is patentable, while limiting the patent office's ability to reject an application on the grounds of common sense.
Meanwhile, the system as a whole is breaking down. Patents are increasing in complexity and length, but the 3,500 examiners still are evaluated by how many they approve. The inevitable consequence, says one former examiner: "The path of least resistance is saying yes." No wonder three-quarters of applications get approved.
Beyond the plight of an antiquated government bureaucracy overseeing a field that is undergoing explosive growth, there are deeper questions.
Patents played a key role in the technology boom of the past 25 years. Companies licensed their innovations to others, who in turn used them as springboards for new inventions. Yet there's a point where patents impede innovation. It can cost more to check whether a software program infringes on previously patented programs than it cost to write the program in the first place.
Since patents tend to be complex, infringement can be determined only by a professional. That's one reason why the number of intellectual-property lawyers has quadrupled since 1985. During the same time, the number of court cases involving intellectual property has doubled.
Technology companies in particular spend massive amounts of time and money in legal disputes over patents. Research in Motion Ltd., maker of the popular Blackberry hand-held organizer, sued competitors for alleged patent violations, gaining licensing fees.
Then a private holding company named NTP Inc. said Research in Motion was violating its patents on wireless e-mail. Research in Motion lost that case, recording a $32 million charge for litigation and related expenses. NTP is seeking an injunction to prevent the company from selling Blackberrys.
Meanwhile, the patent office is reviewing whether it should have granted the NTP patents in the first place.
"Developing software is like crossing a minefield: with each design decision, you might step on a patent that will blow up your project," said free-software advocate Richard Stallman. "A modern program combines hundreds of ideas, so be prepared for a long stroll among the mines."
The system was never supposed to be so combative. Patents, which last for 20 years, are enshrined in the Constitution as a means of promoting creativity and encouraging progress by rewarding inventors.
For a long time, the scope of patents was sharply limited and easily understood. Ideas and natural phenomena were not patentable. Machines and industrial processes were — provided they were both new and useful.
In 1880, Supreme Court Justice Noah Swayne added a third requirement: A patentable invention, he wrote, should be inspired by "a flash of genius."
But in 1952, Congress removed the "flash of genius" standard and replaced it with a vaguer requirement of "non-obviousness."
That began to loosen the patent floodgates. In 1980, the Supreme Court said life, in the form of genetically engineered bacteria, was patentable. The ruling gave birth to the modern biotech industry.
Five years ago, the patent court, the Court of Appeals for the Federal Circuit, essentially erased the increasingly blurry line between what was patentable and what wasn't.
At issue was a patent held by the Signature Financial Group Inc. for a system that channeled money from mutual funds into a central investment pool.
Under existing law, two things should have invalidated this patent. First, it was a method of doing business. Previous courts always had held that business methods, like ideas or laws of nature, were not something one could patent.
But Signature's system wasn't only a method of doing business. It also was a mathematical process using algorithms.
An algorithm is a set of instructions for doing things in a certain order. And if a business plan, like "sell quick, cheap food close to major highways," seems like an unpatentable idea, then an algorithm had seemed doubly so.
This time, however, the court said that since Signature's algorithms produced a useful, concrete and tangible result, it could be patented. As for the long-standing exception for business methods, the court found it "ill-conceived."
The ruling amazed intellectual-property experts.
"What the Signature system was doing was accounting. It was dividing numbers by other numbers," said Duke University law professor James Boyle.
The number of business-method applications, many of which involved algorithms, rose sevenfold between 1998 and 2001. One patent that quickly became notorious was given to IBM Corp. for a "system and method for providing reservations for restroom use" on airplanes. The method: first come, first served.
"You're no longer patenting the corkscrew. You're patenting the idea of taking the cork out of the bottle so you can drink the wine," Boyle said.
That brings us back to the case of Patent No. 6,004,596, the idea of the peanut butter and jelly sandwich.
Jelly has been around for centuries, commercial peanut butter from 1890 and machine-sliced bread since the late 1920s. A decade later, some unknown genius combined all three to make the quintessential American sandwich.
A PB&J is pretty simple, but that didn't stop food companies from trying to make it simpler. One such innovation was premixed peanut butter and jelly, reducing the number of ingredients from three to two. Then Geske and Kretchman came up with the notion of prefabricating the whole thing.
They developed the sandwich at home and then did taste tests at schools. Incredible Uncrustables was an immediate hit.
An intellectual-property attorney helped secure a trademark on the name. The patent came about more casually. "It took about a year and half," Geske recalled.
By the end of 1998, about 50 employees in Fargo were making 35,000 Incredible Uncrustables a day for schoolchildren in eight Midwestern states. Smucker, the Orrville, Ohio, maker of jams and jellies, realized the sandwich could be a valuable addition to its product line. Smucker bought the company and shortened the name to Uncrustables.
Smucker also got the patent, which was granted Dec. 21, 1999, for a "sealed crustless sandwich."
"On what basis they granted it, I have no idea," said Geske.