VC Explains How Damaging Software Patents Can Be

from the thank-you dept

Tue, Feb 23rd 2010 9:09am — Mike Masnick

Despite claims that no VCs would ever invest in companies without patents, we've been seeing more and more VCs moving over to the side of recognizing that patents are more often hindering their portfolio companies rather than helping them -- and these are some of the most respected VCs around these days. Brad Burnham, who has already called for an independent invention defense for patents has responded to Nathan Myhrvold's ongoing campaign to legitimize patent shakedowns. Burnham has written up a detailed post on how and why software patents are so damaging. It comes back to the same point that we've been making for years: truly inventive people don't need a patent as incentive to invent: they just need a need in the marketplace and they go and create. And, when there's a need, plenty of people are probably coming up with similar solutions -- but why do we limit the market to just one?

Burnham talks about the experiences with his portfolio companies. First, in explaining why the software industry took off, he points out that Myhrvold is wrong in suggesting that it was intellectual property protection that resulted in software becoming an industry:

The real reason the independent software industry emerged is that operating systems and APIs made it possible for independent software vendors to develop applications independently. They no longer had to ask permission of the hardware vendors. This same characteristic of permissionless innovation led to the explosion of independently created services on the internet. The rampant abuse of the patent system has created the opposite condition for the creators of software and web services today.

Not only is it becoming impossible to invent new services on the web without the permission of a patent holder who claims to own the intellectual property embodied in your invention, it is impossible to know who you need to ask permission of.

From there, he puts to rest the myth put forth by our favorite patent supporters in the comments that every tech company should just do a simple patent search and they'll be "safe" by pointing out how unrealistic that is. An entrepreneur, who Burnham knows, gave this example:

I hired several firms to search for patents that our service might infringe. Each of them came back with completely different patents and each time I sent them back to do it again, they came back with still more different patents. When I searched myself in the patent database, each time I entered the same search query, it would return different results. None of these patents seemed to cover what we did, so I eventually gave up.

But the real issue here is the total myth that tech companies infringing on patents are "stealing" ideas from others. Time and time again, the actual details of lawsuits have shown that it's almost never the case that a company accused of infringing ever actually knew about the original patent. Instead, it's almost always an independent invention. And yet, Myhrvold persists with the myth that techies are going out and "stealing" the ideas of others. Burnham points out how rare this seems to be:

I have been investing in software and web services since 1993 and have worked in venture backed startups since 1985. I have never met the people Nathan is describing here. I have never been a party to a discussion about ignoring someone's intellectual property rights for the sake of market share or to free up expansion capital. If anyone can point me to the clear cut abuses that Nathan is describing, I'd be grateful. My experience has been the opposite. As I described in this post, the companies I work with invest a huge amount of time and energy creating a service from scratch only to find after they have launched and become successful that a patent holder they have never heard of, operating (if they operate at all) in an entirely different market claims that our company has stolen their property.

Indeed. This is the key sticking point. Patent system supporters love to create this false imagery of the independent inventor who had his "idea stolen" by some big company. And, there's no doubt that there are very rarely stories of some company copying an idea from someone else -- but it's pretty rare -- and usually it just happens in the course of traditional competition. When McDonald's launches chicken nuggets, should that mean that Burger King cannot do the same? That's the nature of competition and it's what leads to greater and greater innovation. What Myhrvold is pushing does not lead to greater innovation at all, but to the hoarding of information and to the limitation on the necessary process of experimentation and competition that result in real, and necessary, innovation.

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Filed Under: brad burnham, innovation, patents, software patents

35 Comments

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Anonymous Coward, 23 Feb 2010 @ 9:23am

Damn nugget pirates
Stop stealing our chicken!
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Kirk (profile), 23 Feb 2010 @ 9:23am

3-2-1
Release the Trolls!!!
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Chill, 23 Feb 2010 @ 9:29am

Re: 3-2-1
You don't want to incur the wrath of our favorite guy on the web, Ronald J. Riley.
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Anonymous Coward, 23 Feb 2010 @ 9:31am

Re: 3-2-1
*hounds
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Chill, 23 Feb 2010 @ 9:33am

What Myhrvold is pushing does not lead to greater innovation at all, but to the hoarding of information and to the limitation on the necessary process of experimentation and competition that result in real, and necessary, innovation.

That doesn't matter. his company will be the controller, so he can have a monopoly on his patent, so then his company will make money and litigate anyone else who dares defy his company's monopoly.

It isn't about this idealistic goal of constantly improving technology and humanity's knowledge; it's all about the money. Money is the sole motivator.

[/devil's-advocate]
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hank mitchell, 23 Feb 2010 @ 9:52am

Good point at the end, especially since recipes and ingredient lists are not copyrightable or patentable. And "execution in the marketplace" like mike likes to refer to, is the difference between let's say, soft drink manufacturers. It proves the point that the recipe for a particular brand of soda is actually worthless, even though many people assume that it's the company's greatest asset. Software code should be treated as ingredient lists, sure it's important, but it's just information that can't be thought of as a scarce asset.
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Richard Corsale (profile), 23 Feb 2010 @ 9:54am

On Idea patents...
Anyone that insinuates that patents were ever intended to cover technique is being disingenuous. I've been in the software industry since the early 90's, both as an engineer and as an independent software vendor. I have seen this nightmare unfold as the collective intellectual body of developers looked on with jaws agape. Software patents have been, since their inception, the single most encumbering element to technical advancement the industry has ever seen. When MS applauds the existence of these patents, it's not hard to see my point. WE developed the Internet, THEY took it from us.. Our ability to innovate and advance concepts that have been in place since punch cards. Then they placed it in the hands of the corporate gatekeeper. Oddly the companies that utilize these "vehicles of intellectual capitol" wind up in the hands of the major players. It truly is impossible to write any application thats of any use at all without opening your self up to vast liability.. I had hope for an explosion of technological advancement when I was young.. now I understand that the powers that be, can't have that. Disruptive technology undermines the enterprise by exploiting its biggest weakness - It's inability to react.
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taoareyou (profile), 23 Feb 2010 @ 10:02am

Held For Moderation?
I posted a comment on the metered Internet thread and it never made it through the "held for moderation" stage. When did this start happening?
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The Infamous Joe (profile), 23 Feb 2010 @ 10:04am

Re:
It isn't about this idealistic goal of constantly improving technology and humanity's knowledge; it's all about the money.

Remind me again what the sole purpose of patents is?
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Anonymous Coward, 23 Feb 2010 @ 10:11am

Re: On Idea patents...
This may be the first time the words "intellectual" and "capitol" were placed in the same sentence, even if it's just an accident.

Great post otherwise -- very much in agreement with you.
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Edward Costello (profile), 23 Feb 2010 @ 10:31am

I had a neat idea for a business about five years ago. Pulled together a business plan, started writing code, put together a demo. Potential investor sees it and points to several patents and asks how I'm going to get around the patents. After checking the patents and confirming that they did potentially cover the product, I killed it entirely. The patent holder refused to license the patents, and since I know "knew" of the patents, I'd be potentially liable for the treble damages. It wasn't worth my time or money to develop the product further just so the patent holder could appear later on and paint me as some sort of thief and grab whatever profits the product had earned.

To date the patent holder (who wasn’t the inventor of record, just the current “owner” of the “intellectual property”) hasn’t released a product or service implementing the patent.

This wasn’t some sort of life–saving device. No one is going to miss another advertising platform. I’ve moved on, though the investor contacts me once a year to ask if I am still working on that product. The patent holder has lost whatever income he could have received had he licensed the patent.

I’m not entirely anti–patent, but patent–holders should be required to provide a reference implementation, and required to license the patent, especially if they’re not actually implementing the process it describes. The current system is such a nightmare that 1) I can't risk searching the patent database to actually learn anything even if I wanted to legitimately license the patent because 2) patent holders are far more interested in litigation than licensing and 3) it’s far too easy to get patents on obvious software processes because the USPTO doesn’t have the skills to do a Google search.
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Richard Corsale (profile), 23 Feb 2010 @ 10:34am

Re: Re: On Idea patents...
Yeah, I noticed that after I posted.. I've been up for about 20 hours "inventing" new software :)
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Werner Van Belle, 23 Feb 2010 @ 10:35am

Patents, Universities and Idiocracy
I'm also highly frustrated about software patents. Although they are not recognized in Europe, nor in Norway, most companies just go ahead as if they were recognized.

I once worked for a Norwegian company that tried to patent the idea of 'correlation' and further claim it as 'prediction'. It was impossible to explain to the idiots involved that correlation is not the same as prediction and that correlation should have been patented by the old Greek. The patent agency we worked with at that time (Frank B. Dehn), also saw no problem in claiming that we invented correlation. It was just amazing. For those interested in 'proof' of this stuff: http://werner.yellowcouch.org/Papers/patent/index.html Claim 16 goes even further and claims that we invented 'rank' based correlation, which oddly enough already has a name: Spearman rank order. This became after a while such a bad employer-employee relation that I left (good riddance).

Another observation I can make over the past few years is that even universities try to patent 'inventions', which is exceedingly odd, because they take money from the citizen to do research. Why does 'the citizen' need to pay a 2nd time when something valuable comes out ?
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Hosermage (profile), 23 Feb 2010 @ 10:45am

two sides to an argument
The down side of not having software patents is that any successful software can be out done by a bigger corporation and offer it for free just for the sake of killing your company and retain marketshare (remember microsoft?).

I agree independent invention is very likely in the software world, but the real trick is how do you separate them from just copycats?
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Richard Corsale (profile), 23 Feb 2010 @ 10:53am

Re:
There are no good process patents. Regardless of how you slice it, they're patents on concepts, not implementations. Dictating how something is done was never the intent of patents. They were intended to protect very specific implementations of physical devices. not what those devices do. Software implementation is already covered by ridiculously powerful international copyright laws.

Funny Software patents have been a shake since the 80's and when the .com boom of late 90's came about.. all sorts of irrational things started happening, Software patents are an artifact of the erroneous "idea economy".

in 98... we got screwed..
http://www.bitlaw.com/source/cases/patent/State_Street_Bank.html
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Chill, 23 Feb 2010 @ 10:54am

Re: Re:
um... inproving humanity's... bottom line?
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Richard Corsale (profile), 23 Feb 2010 @ 11:01am

Re: Patents, Universities and Idiocracy
I'm pretty sure they are recognized throughout the EU?

here are just a few examples of EU issued patents
________________________________________________________
1. Webshop: Selling things over a network using a server, client and payment processor, or using a client and a server - EP803105, EP738446, EP1016014

2. Order by cell phone: Selling over a mobile phone network - EP1090494

3. Shopping cart: Electronic shopping cart - EP807891

4. [CDs] [Films] [Books]: Tabbed palettes and restrict search - EP689133, EP1131752

5. Picture link: Preview window - EP537100

6. Get key via SMS: Sending key to decrypt bought data via mobile phone network - EP1374189

7. View film: Video streaming (segmented video on-demand) - EP633694

8. Copy protection: Encrypt file so it can only be played on authorised devices - EP1072143

9. Credit card: Pay with credit card on the Internet - EP779587

10. Adapt pages: Generate different web page depending on detected device - EP1320972
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Richard Corsale (profile), 23 Feb 2010 @ 11:08am

Re: Re: Patents, Universities and Idiocracy
My bad, I'm calling it a day for the posting... I did not RTFP before posting this :) Either way, just so you know, those referenced patents are enforceable through the WIPO courts, they could ban (though I dont know if they have yet) your software or site from all TRIPS participating / WTO / first world nations.
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Nate, 23 Feb 2010 @ 11:26am

Before reading Techdirt and becoming a little more familiar with how patent law actually worked, in practice, I had always believed software and its underlying code to be more of a "work" than an "invention," and that protecting your work was more akin to copyright and plagiarism than patent and infringement. I can write a book with a similar plotline as myriad others, with similar conclusion, without plagiarising them. So with software, I had thought. But in the the world of concept patents, it looks like they're doing the equivalent of copyrighting "boy meets girl."
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Anonymous Coward, 23 Feb 2010 @ 11:29am

Where's RJR?
He usually all over a story like this, spewing his usual untruths.
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Richard (profile), 23 Feb 2010 @ 11:43am

Re: Re: Patents, Universities and Idiocracy
"8. Copy protection: Encrypt file so it can only be played on authorised devices - EP1072143"

Wonderful - lets buy this one - whatever it costs it would be worth it then refuse to licence it to anyone and kill DRM!!
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Bruce Ediger (profile), 23 Feb 2010 @ 11:47am

Re: two sides to an argument
What you're saying is basically, since we can't separate independent invention from "just copycats", we absolutely must have software patents, and disallow "independent invention" as a defense.

Indeed, there are more than 2 sides to any argument. For policy decisions, one method of figuring out what to do is called a "prima facie" case. One of the factors of that case is "inherency", that is, does the proposed solution fix the stated problem. Another part is the cost/benefit analysis, because everything has a cost (opportunity cost, maybe, but still a cost).

All that I would ask is that changes to copyright/patent enforcement be subject to a "prima facie" analysis, complete with inherency and cost/benefit analyses. If such an analysis was ever produced, I think it would always come down on the "less enforcement" side of the balance.
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Adam (profile), 23 Feb 2010 @ 12:08pm

An article how software patents tangle video streaming.
Diary Of An x264 Developer A long article that keeps returning to the point that alternatives to Flash's domination of video streaming exist in a tangled web of patents. http://x264dev.multimedia.cx/?p=292
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R. Miles (profile), 23 Feb 2010 @ 12:11pm

Re: Where's RJR?
"He usually all over a story like this, spewing his usual untruths."
Having lunch with The Anti-Mike to discuss new ways to troll discussion boards.
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DrE, 23 Feb 2010 @ 12:17pm

Airplanes and patents
Think about all of the old movies of inventors trying to build different flying machines. We wouldn't have all of these funny movies if someone had patented the process of building a flying machine (e.g., air must flow over surfaces such that pressure on lower part is more than pressure on upper part of surface, must have devices to control pitch, etc.). Why not just patent the laws of physics and the formulas that help in the construction of things? Aren't these similar to software code? Some of you might find the essays by Michael Crichton on gene patenting interesting (link to NYT op ed: http://www.nytimes.com/2007/02/13/opinion/13crichton.html?_r=1).
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Werner Van Belle, 23 Feb 2010 @ 12:57pm

Re: Patents, Universities and Idiocracy
Well, that is interesting to see. As far as I know it was left to each individual country since 2006. Computer programs are mentioned here: http://www.epo.org/patents/law/legal-texts/html/epc/2000/e/ar52.html

In summary: The following in particular shall not be regarded as inventions ... c) ... programs for computers.
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Simple Mind, 23 Feb 2010 @ 2:32pm

Re: two sides to an argument
The down side of not having software patents is that any successful software can be out done by a bigger corporation and offer it for free just for the sake of killing your company and retain marketshare (remember microsoft?).

If your worries are true, why is it the big companies are the ones FOR software patents? They are the ones afraid of competition, afraid that something new might rock their boat. I have never met a software developer that was for patents, and I have met a lot of them. To the people actually writing the code, being able to patent software seems ridiculous and a hindrance.

I agree independent invention is very likely in the software world, but the real trick is how do you separate them from just copycats?

Why do you have to? We have copyright laws to cover blatant copying. We have anti-competition laws. Beyond blatant abuse, companies should have to compete on who puts out the better version of the same ap. What is wrong with that?
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Anonymous Coward, 23 Feb 2010 @ 4:45pm

Re: Patents, Universities and Idiocracy
It was impossible to explain to the idiots involved that correlation is not the same as prediction and that correlation should have been patented by the old Greek.

As I understand patent law outside of the U.S., patents are awarded on a first-to-file basis, not first-to-invent. So even if ancient Greeks had already invented it, if they didn't patent it then the patent was up for grabs by the first to file for it. I imagine the patent agency as well as your company understood this very well and were just going for a perfectly legal land grab.
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Richard Corsale (profile), 23 Feb 2010 @ 8:12pm

Re: Re: Patents, Universities and Idiocracy
Right, Software is not patentable here either, the process is patentable as in, what the software does or how you interact with it. This is far worse than if they just let you patent a specific piece of software. As you can see, ownership of entire branches of science are common. The thing with the EU is that one nation would allow it, and it becomes an EPO patent. They are trying right now, to get a single hearing for alleged infringement across the entire EU. I was going to submit this one to TC, but it's 20 days old. I just forgot ... that's poor activism on my part.

http://www.mondaq.com/article.asp?articleid=93174
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Anonymous Coward, 23 Feb 2010 @ 9:09pm

Re: Re: 3-2-1
Or his personal dead guy,
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Werner Van Belle, 23 Feb 2010 @ 11:00pm

Re: Re: Patents, Universities and Idiocracy
That understanding is wrong. If something (e.g. correlation) is known in the public domain and published somewhere before the filing date it is not patentable in Europe.
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Brain Marvin, 24 Feb 2010 @ 7:49am

yeah it is!!
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Anonymous Coward, 24 Feb 2010 @ 11:27am

Re: Re: Re: Patents, Universities and Idiocracy
That understanding is wrong. If something (e.g. correlation) is known in the public domain and published somewhere before the filing date it is not patentable in Europe.

So, if you're working on an invention in Europe and word leaks of it before you get a patent filed, then it's no longer patentable?
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Anonymous Coward, 25 Feb 2010 @ 12:28pm

Re: Re: Re: Re: Patents, Universities and Idiocracy
So, if you're working on an invention in Europe and word leaks of it before you get a patent filed, then it's no longer patentable?

No answer for that, huh?
Gee, I wonder why.
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Anonon, 4 Mar 2010 @ 7:11pm

To 34: Yes, if you publish, use in commerce, or sell your patented invention before filing the patent in Europe you cannot get a patent.

Re software patents being recent, IBM obtained software patents starting in the late 60s. They are neither new, nor particularly different. Anything you can implement in hardware I can implement in software. How do you separate the two? Or are you against patents as a whole?
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