Wednesday, February 19, 2003
By Jon Makoff
SAN FRANCISCO, Feb. 19 - The patent claims of a 74-year-old inventor over a technology that is the foundation of virtually all online commerce will come to trial next week in a court test that could force huge payments from some of the Internet's most powerful companies.
The legal challenge was filed two years ago against VeriSign Inc., RSA Security Inc. and four other companies by Leon Stambler, a retired electronics engineer who lives in Pompano Beach, Fla. He is contending that software they use to let Internet commerce companies authenticate their customers and secure communications with customers violates his patents.
Beginning in 1992, Mr. Stambler obtained seven patents covering the creation of a code to be used in electronic transactions, making it possible for one party to authenticate another and to create a secure transmission of data.
In 1999 he began contacting a wide range of technology and electronic commerce companies, asserting that his patents covered an Internet Web security standard known as the Secure Sockets Layer, or S.S.L., which was developed by Netscape Communications, now part of AOL Time Warner. The approach, which scrambles the data passing from a Web site to its customers, has become the industry-standard method for protecting Web communications and is widely used in all popular Web browsing software.
In February 2001, Mr. Stambler sued RSA Security, VeriSign, the First Data Corporation, the Openwave Systems Corporation and OmniSky in the United States District Court in Delaware. In September, he added a Canadian security company, the Certicom Corporation, to the lawsuit. Several of the companies have since settled with Mr. Stambler in response to the threat.
The patents have infuriated Internet security experts who contend the Stambler patents simply imitate the original work done by cryptographers at Stanford University and Massachusetts Institute of Technology during the 1970's and 1980's. The technology underlying Netscape used public algorithms licensed from RSA Data Security, a company started by the M.I.T. researchers, based in Bedford, Mass.
"This is outrageous, there's nothing novel here," said Bruce Schneier, chief technology officer and founder of Counterpane Internet Security Inc. in Cupertino, Calif. "I believe this is a classic submarine patent."
The phrase submarine patent refers to the practice popularized by a Nevada inventor, Jerome Lemelson, to take advantage of the patent application process by extending and continually broadening the scope of initial patent claims to encompass technologies created and commercialized by others.
The United States patent process has recently been altered in an effort to try to restrict such tactics.
Internet technologists also say that the United States Patent Office is overburdened and is frequently not able to discover prior inventions that would invalidate new patent claims.
"The Patent Office is woefully overworked," said Jack Russo, an intellectual property lawyer at COMPUTERLAW GROUP LLP in Palo Alto, Calif. "It is not uncommon to see stuff slip through."
Mr. Stambler, however, has had success in persuading several corporations to license his patents. First Data, a credit card processing company, has paid $4 million for access to the technology, according to a person close to the dispute. A spokesman for the company said it had taken a license on the patents but said that under the terms of the agreement the amount of the license was confidential.
Such settlements frequently do not reflect the strength of the patent claims as much as a judgment made by defendants about what it might cost to go to court, Mr. Russo said.
"Patent litigation is fairly expensive and you will see people settle for what seems to be large sums," he said, adding that it was often simply based on an analysis of the potential risk.
Openwave and Certicom have also struck licensing deals with Mr. Stambler, according to Securities and Exchange Commission records. OmniSky, a wireless Internet company, has filed for bankruptcy protection and was recently acquired by EarthLink, the Internet service provider.
A spokesman for VeriSign said the company would not comment on pending litigation.
A spokesman for RSA Security said, "We believe that Mr. Stambler's claims are without merit, and we intend to defend the lawsuit vigorously."
Telephone calls to Mr. Stambler in Florida went unanswered.
2003 NY Times