OPTi Shows: When You Can't Compete In The Market, You Sue For Patent Infringement

from the troll-or-not,-you're-not-creating-value dept

Thu, Dec 31st 2009 1:13am — Mike Masnick

Reader BakaYaro points us to this article about OPTi, the company that recently won a $21.7 million patent ruling against Apple, where the company's CEO insists it's not a patent troll because it's only suing over patents that it got itself. It seems that Bernie Marren is trying to redefine what a "patent troll" is to mean just someone who buys patents and sues. But the real story shows that OPTi is yet another example of patents harming, not helping, innovation. The company used to produce products, but other companies eventually caught up, and OPTi couldn't compete. Now, in a true capitalistic society, the companies that can't compete, go out of business. And that's a good thing. Failure is important for free markets to work. But, thanks to the very un-capitalistic concept of government granted monopolies, known as patents, tech companies never need to fail and go out of business. They can just sue over patent infringement. So, OPTi went from a 235-person company producing products and adding value to the market, to a 3-person company that just sues and extracts money from the companies who actually provide value on the market. So OPTi went from providing value to sucking value out of the market. It might not be a troll, but it's difficult to see how it's good for the economy or for innovation.

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Filed Under: lawsuits, patents
Companies: apple, opti

20 Comments

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Matthew, 31 Dec 2009 @ 5:11am

If OPTi created legitimate technologies and still has time left on its patents then, in the best scenario, they'd be competitive at least partly because their competitors who use their technology would do so at higher cost because they'd have to pay a licensing fee to OPTi. There's a case to be made that if company A isn't competitive with company B in whole or in part because B saves on R&D costs by ripping off A's patented technology, then a lawsuit is probably justified.
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Christopher (profile), 31 Dec 2009 @ 5:31am

Well, if *you* can't make your patent work...
... maybe you didn't deserve it in the first place. Automatic default. That'd be fair.
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Brad Morrison, 31 Dec 2009 @ 7:13am

Those who can ...
Those who can, produce. Those who cannot, litigate.
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The Anti-Mike (profile), 31 Dec 2009 @ 7:55am

Re:
Mike never wants to address this.

The situation with OPTi may be the perfect explanation of what a patent is suppose to block, and in this case failed to do. It failed to protect them even for the short time that patents cover.

Mike doesn't seem to think that 232 unemployed people are bad for the economy. He doesn't seem to understand that other companies were able to better OPTi in part because they didn't have to spend the money on R&D to get on an equal footing with OPTi, they just copied them.

Mike must not have been in the class on the days the teacher discussed things like startup costs and development. He seems to think they have no cost.
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Anonymous Coward, 31 Dec 2009 @ 8:32am

It does bear mentioning that a publicly owned company owes its shareholders a fiduciary duty to maximize the financial return on its holdings. Abandon the holdings and face shareholder suits that may possibly impose financial liability on the corporate officers. Thus, it is only natural that to avoid such legal consequences a company in OPTi's position would by legal necessity shift focus from production to licensing, including resort to litigation if need be to secure at least licensing revenue, and possible other sources of revenue attendant to licensing.

I can only wonder what would be the opinion of many who decry what OPTi is doing if one of them was a shareholder? Personally, I would be inclined to either minimize my losses or grow my equity stake, and if licensing and litigation is deemed the most effective way to protect my equity, then my natural inclination would be "go for it".

Given that OPTi appears to have originally been heavily involved in the manufacture of chipsets, and given that many users of chipsets appear to have decided to take chipset manufacturing in-house, it is not unreasonable to believe that perhaps reverse engineering of chipsets such companies were purchasing and using may have been an important factor in their decisions. In the interest of candor, there is no information contained in articles discussing this and other litigation by OPTi addressing whether or not any of the named defendants were at one time OPTi customers. If this was in fact the case, and given the patent marking requirements imposed by Title 35, claims by such customers that they were not aware of the patents and thus were being blind-sided would and should fall on deaf ears.
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Steve R. (profile), 31 Dec 2009 @ 8:34am

Huh???
Sounds like free market competition was robust. According to the article: "But when Marren took over as CEO in 1998, its sales had almost disappeared, crushed by competition from Intel Corp., which was aggressively going after the core-logic chipset market that was OPTi’s bread and butter. OPTi, which went public with flair in 1993, by 2000 had revenue of zero."

The article goes on to quote Marren as asking how he will compete. Instead of developing new products to sell, he is simply suing other manufacturers. Clearly they were not able to translate their patents into viable products.

Based on the absurdities of patents being granted today, it seems quite problematic that the companies he is suing really "stole" his patents. The company may not have started as a "patent troll" company, but it is one now.
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The Anti-Mike (profile), 31 Dec 2009 @ 8:54am

Re: Huh???
Umm, OPTi was a very large producer of chipsets (such as audio), they produced products. They were not just a collector of patents. Perhaps you might want to look into the company's history before you apply the broad brush to them?
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Luci, 31 Dec 2009 @ 9:14am

Re: Re: Huh???
Still refusing to read, are you? Go back and read what you just replied to, again. This is why we question your intelligence so often, and why you are, in fact, just a troll.
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senshikaze (profile), 31 Dec 2009 @ 9:22am

Re: Those who can ...
or lobby.
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Joe Brockmeier, 31 Dec 2009 @ 9:37am

More info needed
From the story, it's not even clear whether we're looking at software or hardware patents, and whether there's any reason to believe that the other companies took ideas from OPTi or if their independent R&D efforts led them to similar designs.

The problem with the patent system right now is that it awards companies for being first to file, not for innovation that's used by other companies. Just because Apple or Intel do something with their products that is similar to something OPTi came up with doesn't mean that either company "copied" OPTi's innovations. For all we know, Apple and Intel came up with similar methods independently. I don't see any reason to reward another company just because its application landed in the patent office first.

I can't see anyone saying with a straight face that Apple or Intel don't put money into R&D. Maybe they've copied an idea, but that's not clear here. The article linked to just gives a very sparse overview of the situation, and hardly enough information to draw any of the conclusions I've seen here. It doesn't support OPTi as a troll or as a poor, beleaguered company trying to protect its inventions.
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Just another AC, 31 Dec 2009 @ 9:48am

Re: Comments by The Anti-Mike
I am going on record as stating that I do find Masnick's views somewhat one sided.
With that being said, I also disagree with the kind of abuse we are consistently seeing with regards to patent litigation. OPTi rings a small bell back in the cavern of my memories. I think I remember seeing their name on PC components. Having visited what remains of the corporate website and read thru some of the press releases it is very interesting that a California based company is filing legal actions in a District Court not only friendly to patent, trademark and copyright litigation, but is not even a "local" federal legal venue. If i were one of the alleged offenders, I would move to have the legal venue changed in light of the previous history of court rulings.
As a Texas native(generally proud of this fact) East Texas is mostly Rural with a few small cities usually less than a couple hundred thousand in population. This strikes me as a slanted venue for these types of litigation. Both parties would be served fairly if the venues had a larger and potentially more broadly educate base from which to pull the jury. I am not hinting or even outright calling those in the smaller communties of Texas uneducated, but you have a broader base of compentent and potentially more suited jurors if the venue were say Souther California, Chicago, Dallas, Houston, or other large cities. Not that this will go anywhere, but makes you wonder at the actual motives here. Fiduciary responsibility to share holders and potential ex-employees or just lining their pockets out of laziness because their business model failed(in this case, miserably)
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John Fenderson (profile), 31 Dec 2009 @ 9:51am

Re: More info needed
"The problem with the patent system right now is that it awards companies for being first to file, not for innovation that's used by other companies."

That's one of the big problems, but I would argue that an even bigger problem is that patents are issued on things that in a sane world should not be patentable at all (software patents, for example.)

OPTi appears to be engaging in righteous vengeance for being driven out of the market. It's hard to know the truth based on that article, but the article certainly makes it appear that OPTi was driven from the market because the other players infringed on its patents. If that's the case, and if their patents are actually good ones, then I can understand why they're embarking of the tactics they are.

That doesn't make them any less of a patent troll, though. Now, if they took the money they got in the lawsuits and used it to do something like, I dunno, rebuild their manufacturing business and once again become a useful part of society, I wouldn't thing of them as trolling at all. That doesn't appear to be the plan.
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Stirling Westrup (profile), 31 Dec 2009 @ 11:13am

A Novel Idea
I don't want to appear to be supporting patent trolls (indeed, I am rather vehemently anti-patent) but it suddenly occurred to me that there was an argument in favour of OPTi, and one that I've never seen in print.

The above article made it clear to me than one can view the marketplace of innovation in evolutionary terms. The failure of uncompetitive companies can be directly linked to the idea of "survival of the fittest", and companies like OPTi that live off the hard work of others can be viewed as parasites in the biological sense.

Now, a surprising finding of evolutionary theory is that parasites are good for a population. They force the population to be more fit on average and better able to withstand hardships as a whole, and they increase the rate at which members of the population evolve, by reducing the chance of population members ending up in evolutionary dead ends.

Of course 'parasite' is not generally a term of praise because no individual likes to be targeted by a parasite, but their mere existence in a population often causes globally beneficial behaviours that outweigh the harm they do.

Now, the real question is: do some analogous benefits accrue to the population of productive companies? Its not obvious that they do or don't. Companies aren't exactly like organisms and its unclear if they can be said to reproduce, pass on their genetic codes, and die in a sufficiently similar way for the findings of evolutionary biology to hold. Then again, most findings of evolution are surprisingly robust to changes of reproductive mechanism, so it would be best not to rule out the possibility.

I would love to see some scientific study done to see if this relationship between patent trolls and parasitology holds. If it does then attempts to curb patent trolls may actually do more harm than good.
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The Anti-Mike (profile), 31 Dec 2009 @ 12:22pm

Re: Re: Re: Huh???
I read, but I also understand a simple concept: If the competitors used OPTi code or methods to push OPTi out of the market, it doesn't matter what development they do, they are behind all the time. They paid the pricey initial development for a product, and the others appear to have just used the OPTi product as a basis for their own (if the lawsuit is correct).

OPTi has to charge enough to recoup their development costs, where as the competitors did not, as they have much of the work done already, on OPTi's dime.

So, would you care to explain what I missed?
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john spielman, 31 Dec 2009 @ 1:45pm

Or, how about...
How about actually doing patent research before you prototype a product? How about striking up a deal with a current patent holder if that technology is really important to the product you're building? If the current patent holder says "No way", or wants exhorbitant amounts of money for a deal, then perhaps new technology should be developed to make the new product work. Isn't that innovation too?
I'm certain that an inventor of a technology probably holds the work dear to his/her heart, almost like their child. To see such work be used by another company without compensation (or effort put forth to create it) is probably hard to swallow.
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The Anti-Mike (profile), 31 Dec 2009 @ 2:52pm

Re: Or, how about...
That is true innovation. Rather than just using what is already there, and adding a shiny new doo-dah or a fresh coat of paint, you actually come up with your own way to accomplish something AND make it better.

Mike doesn't consider that innovation. He thinks paint color advancement is innovation.
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nasch (profile), 2 Jan 2010 @ 11:32am

Re: Or, how about...
How about actually doing patent research before you prototype a product?

Because if you do get sued, and it can be shown that you knew about the patent, you can get hit with triple the damages. Willful infringement needs to go away, it's just an incentive for companies to not do patent research.
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Ed C., 2 Jan 2010 @ 12:23pm

Re: Re: Or, how about...
"He doesn't seem to understand that other companies were able to better OPTi in part because they didn't have to spend the money on R&D to get on an equal footing with OPTi, they just copied them."

And yet you incessantly use the assumption that making a similar product requires coping a patent when, as nasch pointed out, most companies don't even look at prior patents for fear of "willful infringement". I guess in your world, reverse engineering or even independent development is still "coping", even though neither is cheep or even requires any knowledge of the original patent to do so.
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Yuhong Bao, 3 Jan 2010 @ 1:16pm

Re: Re: Comments by The Anti-Mike
"OPTi rings a small bell back in the cavern of my memories. I think I remember seeing their name on PC components."
Yea, their 386/486 chipsets were very common, and they even made P5 chipsets, USB controllers, and some other stuff, I think. Some of the names of their last chipsets were Viper and FireStar, Google for these names and you will find more about them.
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Anonymous Coward, 7 Jan 2010 @ 9:50am

How did y'all miss this part?
In 2003, he and company CFO Michael Mazzoni agreed to take reduced compensation in exchange for getting a set percentage of legal awards, splitting 5 percent for the first $25 million and declining to 1 percent over time.

That right there tells me that this guy doesn't care about what the company does, as long as they keep winning legal awards.
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