Internet transaction patent case goes to trial

A retired electronics engineer from Florida claims to have invented the way in which secure transactions are processed on the Internet, and opening arguments were heard Wednesday in his lawsuit asking for license fees from two technology companies.

Leon Stambler is suing RSA Security and VeriSign, alleging that the companies violated his patents relating to secure transaction systems. Stambler was granted seven patents between November 1993 and October 1999.

Representatives from both VeriSign and RSA Security said it's against their company policy to comment on active court cases.

Stambler's lawyer, Douglas Whitney, argued that Stambler should be able to profit from his inventions as the companies he's suing have. Stambler claims his patents cover the Secure Sockets Layer (SSL), a Web security standard used to scramble data during Internet transactions between Web sites and their customers. Netscape Communications, now part of America Online Inc., patented the SSL protocol in 1997.

RSA itself has profited from an encryption algorithm patent that SSL was based on, Whitney said, until that patent expired in the United States in September 2000. Started by researchers from the Massachusetts Institute of Technology, RSA patented work done at the university before the 1990s.

"When it comes to security, there are a few companies who managed to make a lot of money on that, most notoriously RSA," said Whitney, based in Wilmington, Delaware. "People fear, 'They'll shut down the Internet,' but that's not going to happen. All we're asking is for a fair compensation."

In February 2001, Stambler filed a patent infringement lawsuit against several companies, and he's since settled with First Data, Openwave Systems, and Certicom, according to Whitney. The trial in his case against VeriSign and RSA started Monday in U.S. District Court in Wilmington with jury selection, and the court case is on the court calendar through mid-March. It is divided into two separate jury trials, an infringement phase and a patent validity phase.

Stambler's last patent, granted in October 1999, is U.S. patent number 5,974,148, for a "method for security information relevant to a transaction." The patent, in part, reads: "A transaction system is disclosed wherein, when a transaction, document or thing needs to be authenticated, information associated with one or more of the parties involved is coded together to produce a joint code. This joint code is then utilized to code information relevant to the transaction, document or record, in order to produce a variable authentication number (VAN) at the initiation of the transaction."

Critics of Stambler argue that his patent doesn't cover an original invention. Greg Aharonian, a patent-reform activist and publisher of the Internet Patent News Service, said he believes enough "prior art" exists to debunk Stambler's claims, but he wouldn't predict what a jury will do in the Delaware case. If just one of Stambler's patent claims survives, RSA and VeriSign lose, he said.

"If you're in front of a jury, a fair number of times it's a crap shoot," Aharonian said. "Juries are not wizards on this stuff, and there are going to be two sets of dueling experts testifying."

Aharonian called Stambler's claims "bizarrely written," adding to the case's complexity. "Even if you're an expert in network security and all this stuff -- even if you're a patent lawyer -- trying to figure out what the hell this guy claims takes forever," Aharonian said. "There are two reasons for doing that: one is you just don't know how to write well, or you're just trying to complicate things."

Whitney disputed Aharonian's assertion that the claims were written strangely. "We fully expect that by the time the jury has to decide it, they will understand the claims very well," he said.

Aharonian downplayed some concerns being raised on Web logs and e-mail discussion lists that the future of the Internet is at stake in the case. Companies using SSL will find alternatives if Stambler wins, he predicted, and everyday Internet users won't notice a difference.

"No one sues people with no money," he said. "If you do get sued because of a software patent, it means you're succeeding, which in the software business is pretty damn good.

"It's not going to stop anything on the Internet," he said of Stambler's case. "It's going to rearrange some money if he wins. The Internet goes on, good or bad."