Patent Attorney Highlights How Intellectual Ventures Syphons Money Away From Innovation
from the it's-not-about-innovation-at-all dept
It's amazing how many patent attorneys, when you talk to them, will actively volunteer how screwed up the patent system is. While there are still some who make so much money abusing the system that they don't care, those who actually got into the business because they believe in promoting actual innovation are increasingly admitting that the system is a disaster and widely abused, and rarely instrumental in actual innovation. Venture capitalist Brad Feld has convinced one such patent attorney -- who has decided to appear pseudonymously -- to write his response to the recent Nathan Myhrvold profile in the NY Times that, yet again, plays up Intellectual Ventures in a very one-sided manner. Feld's friend, who is writing as "Sawyer" rips the concept of Intellectual Ventures to shreds. The reasoning likely is familiar to our regular readers, as it's exactly what we've been saying for a decade, but it's nice to see a patent attorney speaking up.First, he notes the lack of any evidence that patents promote innovation (he suggests there's an exception in biotech, but the studies there are actually quite mixed). From there, he notes that Myhrvold's goal has nothing to do with actual innovation or promoting progress, but about building a system that just gets him more money via patents:
Perhaps Mr. Myrhvold recognizes this, because in the article he says "I'm trying to get inventions that kind of respect as an economic entity." (Emphasis added). IV apparently incentivizes innovation on...inventions? "Inventions" are actually a term of art in patent law, they are the things for which one can legally be granted patent rights. IV, therefore, seems to admit that it wants to enforce patent rights so that we can...have more patents. Mr. Myhrvold wants to create an entire economic category based on payments to entitles that don't build, produce, sell, etc, any products, or create anything of value (i.e., that don't innovate, at least in any useful way that advances human progress), in exchange for not being sued on exclusionary patent rights.This is a huge problem if the point of the patent system is to create incentives for actual innovation, as the Constitution requires. But what's the impact of a system that encourages patents for the sake of encouraging more patents? Well, it drives money away from actual innovation:
Let's internalize that for a second. IV has collected over a billion dollars so that it can get more patents. They make no products. They apparently don't funnel ideas to anyone else who makes products.
Now think about where this money would go otherwise. Microsoft, Apple, and Google, not to mention other large technology companies, have sizable legal departments with teams of attorneys focused full-time on managing the 50+ software patent cases they each are a defendant on. My guess is that they individually spend hundreds of millions of dollars defending and settling such suits per year. Most of the suits are backed by investment funds through shell entities. Many of these funds are backed (with no transparency) by traditional investment banks and hedge funds. What we have, then, is a net outflow, on a yearly basis, of at least several hundred million dollars, from technology companies who "make stuff" and unquestionably innovate, to speculators and investors who don't. I don't think that baseline fact is something anyone would question. IV dresses that up in the clothing of "invention," but they're really just out to capitalize on a broken patent system like every other non-practicing entity ("NPE" as we call them -- they hate being called trolls). What kinds of cool products and technologies would that money be used to develop? We'll never know, I suppose. At the very least we can presume that the pace of innovation in technology is being slowed by this net outflow of capital to non-innovating parties.And, despite what the regular peanut gallery of patent system supporters will claim in the comments, these lawsuits aren't just focused on big companies, but the really innovative startups that are being strangled by patent lawsuits:
One thing I haven't mentioned is that it isn't just big companies who get sued. Startups, especially in software, are constantly targetted by patent suits, especially by pseudo-competitors who want to kill more innovative upstarts. How many great companies have been sunk by the costs of patent litigation? Think about it this way -- if Facebook had been sued on a social networking patent within a year of its existence, would it be around today? It's doubtful.Sawyer also points out that, contrary to claims of the system's supporters, that "having a patent doesn't mean that you really invented anything, or that the person you're suing would actually infringe in a rational world." Some of you may have seen some of the regular commenters here claim that there the only way to prove you've invented something is if you get a patent on it -- and that anyone accused of infringing has clearly "stolen" the idea. Neither of those things are true. What Sawyer is pointing out is that getting a patent is just a sign that you were able to convince the USPTO (through a "pseudo-adversarial administrative procedure") that you deserved such a monopoly privilege. It doesn't mean you actually invented anything -- and it certainly doesn't mean you've done anything to promote the progress or innovation in general.
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Filed Under: innovation, nathan myhrvold, patents
Companies: intellectual ventures
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Side comment on NPE's and missed question.
Do they create products? NoPE
Do they innovate? NoPE
Do they advance the progress of science? NoPE
Cutting down from three syllables to one makes it even better... (en pee ee => nope)
And since I'm a nice guy, I won't complain or ask for money if it catches on... :-)
As for the article itself, I think "Sawyer" missed a question. How many inventors have a truly innovative idea, but don't even try to start because of the patent thicket out there?
I'm a software developer for a large firm, but in my off-hours I like to "tinker". I've had dozens of ideas for apps (some useful, most not) that even once written, never go anywhere other than to my wife and kids because I don't have the resources to fight a lawsuit. I'd hate to have the next app I write go viral and end up with me in an East Texas courthouse.
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Re: Side comment on NPE's and missed question.
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The consumer
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"Myhrvold's goal has nothing to do with actual"
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Re:
"Myhrvold's goal has nothing to do with actual"
Yes, fixed. Thanks!
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Fox guarding the chicken coop...
Which brings me to my latest work in progress Helmet Decree: A quota system in the legislative houses of govt. based on prior vocation. Lawyers deal with the law, so it makes sense that they should play a relatively larger role in our government. How does 50% grab you guys? No more than 50% of the House and/or Senate is allowed to have practiced law. 10% had to be involved in law enforcement. 10% in education. 10% had to practice finance of some kind. 10% in some kind of industrial production. 5% in education. 5% in technology. 5% in medicine. And, of course, 5% to my own handpicked candidates.
I have no idea how to handle the quota logistics in vetting candidates, but I think more diversity in our legislative bodies would work wonders on reforming existing laws....
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Re: Fox guarding the chicken coop...
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Re: Re: Fox guarding the chicken coop...
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This is not an idle question. Beginning in the late 80's patents (and more generally intellectual property as a whole) was discovered by general practice litigation law firms as a potentially lucrative source of income. Prior to then the practice was typically associated with what are known as "botique" firms, i.e., firms whose practice was limited entirely to the practice of patent, trademark, copyright, unfair competition and closely related areas of law pertinent to the forgoing...such a certain aspects of antitrust, tax. Litigation was the exception. Patent applications and issued patents were closely allied with what was actually invented, and not pie-in-the-sky broad claims far, far broader than the actual invention(s). The list of crucial differences goes on and on.
At the same time it was also well recognized that the patent system was a quid pro quo system. A detailed description of an invention and claims directed to the actual invention were recognized, in return for the disclosure of which a patent would be granted assuming that all statutory requirements were met. The purpose underlying this was the general belief that the system did provide incentives for inventors to proceed diligently to present enabling disclosures before the public in as expeditious a manner as possible. These disclosures were published weekly in a publication by the US Printing Office titled the Official Gazzette ("OG"), and it was indeed a foolish lawyer who did not read it to identify potentially relevant publications.
As I note, there are aspects of the commentary that only a fool would disagree with, but there are other aspects that in my view suggest the commentator may be involved in a very limited subset of what constitutes our patent system, and such limited involvement may explain his/her largely negative views.
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Prove it
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Re: Prove it
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Re: Re: Prove it
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Similarities...
Businesses have to spend billions of dollars a year on federal/state taxes that are mostly wasted on bureaucratic overhead, inefficient or downright corrupt boondoggles, wealth redistribution, fraud, cronyism, job "creation"(hey, patents create lots of jobs for lawyers and patent trolls!), etc. Not to mention that wasted on lobbying to ensure competitors don't get a political advantage, and on additional accountants to prepare tax returns.
Think how much more innovation there would be, how much more invested in productive ventures, how many more *productive* jobs would be created, if businesses could spend that money actually competing in the market(and a nice side benefit is that markets would actually be more competitive in the absence of political regulation and favoritism...)
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Re: Similarities...
That would seem to be an argument for reducing "bureaucratic overhead, inefficient or downright corrupt boondoggles, wealth redistribution, fraud, cronyism... etc." more than against business taxes. That's how I see it anyway. Of course, after getting rid of all those things (ideal world here), the taxes could be greatly reduced while still maintaining the same or better benefit to society.
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Re: Re: Similarities...
The only hope is that the tax revenue can be put to use on something else that is as helpful and conducive to the business as if they'd kept it(e.g. defense, courts, and law enforcement to provide a legitimate business environment). Anything else is taking money from productive businesses to spend almost always on nonproductive sectors. It's not possible for government to allocate those resources as efficiently as the business acting with its own funds in its own interests(the fatal conceit).
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Patents are Legal Title to Invention
The evidence that patents encourage innovation is overwhelming if you open your eyes. Those countries with the strongest patent laws have the fastest rates of innovation and diffusion of innovation. Those countries with weak or non-existent patent laws have the weakest patent laws. Before patent laws became widespread in the western world, the rate of innovation was slow enough that the per capita income of the west had not changed in centuries. Note that many of the other conditions of a free market, such as low taxes, property rights, etc existed for centuries before per capita income started to increase in Europe. If you believe this is just correlation, the burden is on you to prove it since all the evidence is against you.
Clearly, our patent system has problems. The average time it takes to obtain a patent is over three years. If it took three years to obtain title to your house or shares in a company you would assume you were living in a third world country. Patents need the equivalent of title insurance for real property. Before title insurance you had to pay an attorney a lot of money to do a title search to make sure you were going to obtain clear title to your house or land. In addition, you had to pay a surveyor to determine the boundaries of your land. The boundaries were not obvious at all and our ancestors were very litigious over the boundaries of their property.
Despite these problems, the US has strong economic growth when we have strong patent laws and systems and weak economic growth when we have weak patent laws. Antitrust laws were used to weaken our patent laws in the 1930s and 1970s and we had extended economic downturns. Our patent laws were strengthen in the 1980s and strong in the 1990s and we had strong economic growth. The only way to increase real per capita income is by increasing our level of technology. Patents clearly encourage advances in technology, which results in real economic growth.
Dale B. Halling, Author of the “Decline and Fall of the American Entrepreneur: How Little Known Laws and Regulations are Killing Innovation.” http://www.amazon.com/Decline-Fall-American-Entrepreneur-Regulations/dp/1439261369/ref=sr_1_1?ie=UTF 8&s=books&qid=1262124667&sr=8-1
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Re: Patents are Legal Title to Invention
Hi. I suggest going back to school and taking an introductory Statistics course. You know, the one where you have to learn that correlation != causation. If you're lucky, you might also learn that providing evidence is more useful than unsupported claims.
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Re: Re: Patents are Legal Title to Invention
If you believe this is just correlation, the burden is on you to prove it since all the evidence is against you.
Uhh, no. While you're taking your intro stats course, why not sign up for intro to logic or a beginner's debate class as well. Gotta watch those circular arguments.
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Re: Patents are Legal Title to Invention
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Re: Patents are Legal Title to Invention
By opening our eyes do you mean buying your book? I ask because you don't cite anything else to back up your claims about how patents have affected innovation.
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Mikey is a tool
Have a nice day, techdirt punks
Eat your daily portion of Mikey's propaganda
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Re: Mikey is a tool
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Mikey is a tool
Have a nice day, techdirt punks
Eat your daily portion of Mikey's propaganda
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//By Richard Corsale all rights forfeit
boolean rationalPatents = date //logic loop
do{
if(!rationalPatents){
println("the big IP grab of 98 snowballed and were left with a system that's universally understood to be broken.");
Litigation ++;
if(lawsAreMadeByThoseThatBenniFromBrokenSystem){ }
Innovation = (Innovation/Time)-Litigation;
}else{
print("only Grant monopolies on exceptional inventions"); Innovation ++;
}
}while(true);
//.. is an error, not a feature...
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Like too many legal things in the U.S.
However, too many cooks spoil the soup. I believe it's the 2nd law of thermodynamics that states that all things tend to go from a state of order to disorder.
Suggestions:
Go back to the way it was and thereby improve it...or
Scrap the whole system and start over. Maybe you could get a patent for it:)
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Informative, but again one-sided
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Re: Informative, but again one-sided
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Re: Re: Informative, but again one-sided
So IV is going to miss significant licenses every time? The holder of the exception is going to sue every time? First, you're attacking whether they're doing a good job at the business model without addressing whether the business model works in the first place. Besides, you should *not* be liable. It's a simple matter of contracting. If IV purports to license you a suite on which you can market an invention, then any smart contractor would include an indemnification or guarantee. You don't pay for a license and absorb the risk at the same time unless you're an idiot - the model wouldn't be economical if that were the case.
No one is saying the patent system isn't broken. But you're attacking IV for creating an economical, potentially innovation-enhancing, service based on the way the laws are structured today. I jest in saying your perspective stifles innovation (people shouldn't find away to work with the laws just because the laws aren't perfect?). But your problem is not with IV or other trolls or NPEs, your problem is with the structure of the system that enables them. Write to your senator.
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Re: Re: Re: Informative, but again one-sided
Companies don't pay IV because they see an opportunity to advance their technological base with IV's patents, or because they can guarantee they're in the clear legally; they pay because IV is more vicious and capable than anybody else with patent lawsuits, being that they make it their sole business, and so paying them off not to sue in court is the easiest course of action. It's called extortion, and I wouldn't praise the mob for creating an economical service by taking payment not to bomb somebody's store.
We agree that the problem is the system and not IV, but then how can you possibly claim that IV is encouraging innovation if the system of patent lawsuits is a problem? Licensing isn't cheap either, you know.
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Re: Re: Re: Re: Informative, but again one-sided
"Why companies pay IV / how can I claim that IV is encouraging innovation" - Whether or not you define it as extortion, it's simply a cost of doing business, and it's currently the law. Whether or not the law is broken, IV offers a more efficient & economical method to work within the legal system as it exists today. It encourages innovation because it will either reduce the cost or reduce the risk for an inventor to bring a product to market.
So yes IV as it stands today is not making things better for inventors than patent reform would. But as an inventor - whether you're an individual or a $1B company - you don't possess the power to change the patent system. To be innovative, you have to find the most economical way possible to conduct business within the existing system, and that's what it appears the IV business model attempts to do.
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Extraction
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Extraction
To me this atrocious behavior runs parallel to the monopolizing of artists in the music industry.
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Back again
here would we be if Dr. George Washington Carver had patented everything?
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What a patent really is, IV and hijinks for bored uberwealthy
IV understands this very well and is constantly attempting to impress via PR how big its resource is.
IV is also the holder of real technology that it is attempting to see developed via outside backing. In particular and recently a major investor in IV one William H. Gates III has declared in his best philanthropic voice at the TED conference (http://conferences.ted.com/TED2010/) that Terrapower (a new generation nuclear fission reactor) is the future! Terrapower is the property of IV. Of course Gates didn't mention his, and Microsofts investment in IV.
Gates wants your tax dollars to fund Terrapower and perhaps he has the clout to do it.
So understand this very well Gates has a strong hand in IV even though Myhrvold is the face shown to world.
Understand also that the effort to promote and build out Terrapower makes at least that project (and perhaps more I'm not aware of) a real innovation(whether you agree that it is desirable is a different subject) and therefor makes IV NOT an NPE but an active company no different then others that develop project ideas and then execute to see those ideas made real.
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Patents and the recession
I suggest you back to school and study logic. See Occam's razor and David Hume's rule that extraordinary claims require extraordinary evidence.
I am amazed that you can ignore the obvious evidence that patents promote innovation.
1) Stronger Patent System: You cannot find a single country whose economy has been hurt because they have too strong a patent system, but you can find numerous examples of countries whose economies have been hurt because of weak patent systems.
2) Feasibility: Land does not have boundaries and those boundaries are not obvious – just ask the American Indians. It is definitely feasible to determine if your product infringes someone else patents. You are either misinformed on this point or you do not want to take the time to determine if you are stealing someone else’s technology.
3) Innovation and Progress: Tools are not the end game either. Power plants are not the end game either. Adam Smith showed that division of labor is key to economic progress. Today many brilliant inventors are stifled. Instead of inventing these brilliant engineers are forced to be managers to get a pay raise or forced to study marketing, sales, finance, etc to get paid for their efforts. Our economy will prosper if we provide property rights for our inventors and allow them to do what they do best, which is invent.
4) Correlation: Occam’s razor says the simplest answer is probably right. Every bit of evidence shows that patents encourages innovation. You have not provided any contrary evidence. In addition, every property right has always encouraged improvement of the underlying property. Since you are suggesting the contrary, which is an extraordinary claim, you have to provide extraordinary evidence. See David Hume and Thomas Paine
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Re: Patents and the recession
1) You provide no evidence whatsoever, and you seem to be inferring that you pulled this conclusion out of your ass based on correlation between two variables, which is a fallacy.
2) Nice...you switch from "land" in your proof(a tangible entity) to patents in your conclusion(an imaginary construct made up by our legal system), which is also a logical fallacy. And even land ownership is often quite contested, if you haven't noticed.
3) I don't even know what you just said. You seem to be a strong example of the saying, "if you can't baffle them with brilliance, befuddle them with bullshit". Look, I just invented a hoverboard! Well, actually I just drew a picture of one on my notebook, but still...where's my patent?
4) Wow...you are so full of shit, and you have no idea what you're talking about
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Re: Patents and the recession
Uh, there's a ton of evidence showing the lack of innovation encouraged by patents. Must we list them all again?
You have shown that you do not know what you are talking about.
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Re: Patents and the recession
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don't kill the goose
The answer is simple: people will rely on trade secrets. This might work in some fields, but not in others. Bloom Energy came out of stealth mode today, and, without having looked at their patent applications, I'm willing to bet the best info on their technology can be found there. Is that good or not?
The patent system has some problems, which need to be fixed, but I see too many people automatically regurgitating cliches without thinking. The patent allowance rate went from ~65% in 2005 to ~40% today. Why is that? Is it really that easy to get a patent? There's really a lot of ignorance in this debate.
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Re: don't kill the goose
Good thing we don't have to just ask, but we have evidence. I've cited numerous studies that have looked at societies without patent protection (or with weaker patent protection) and they were found to be just as, if not more, innovative, often with greater economic growth (contrary to Dale's provably false assertions).
The answer is simple: people will rely on trade secrets.
In some cases, though not in others. A recent series of studies have actually showed that keeping core info secret can actually harm a company (and an industry) more than helping it.
This might work in some fields, but not in others. Bloom Energy came out of stealth mode today, and, without having looked at their patent applications, I'm willing to bet the best info on their technology can be found there. Is that good or not?
I'd argue pretty bad. I mean, such an important innovation, and the thing that's most important is to get more smart people working to improve it and innovate it. Patents would make that near impossible.
The patent system has some problems, which need to be fixed, but I see too many people automatically regurgitating cliches without thinking. The patent allowance rate went from ~65% in 2005 to ~40% today. Why is that? Is it really that easy to get a patent? There's really a lot of ignorance in this debate.
That happened, mainly, because of a series of smart Supreme Court decisions that pushed back on USPTO power, and this is very good thing. But it hasn't changed the fact that a ton of terrible patents are getting through and the system is being abused.
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Name just 10
name 10 other countries
whose economies and people are flourishing
thanks to the fact that
they don't have a working
patent system
Well?
We are still waiting for each Tech Dirtie here
to submit his/her list.
We know you can do it.
After all,
you are the "true" innovators.
This is hardly a hard task for "true" innovators.
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Mikey's anti-inventor and anti-patent propaganda
Dr. Joseph Goebbels
Keep reading Mikey's blog young fellas
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Re: Mikey's anti-inventor and anti-patent propaganda
Gotta give you kudos, though. That Goebbels quote is one of my favorites...
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another quote
Sounds all too familiar
scarce goodies, infinite goodies, patents/copyrigts are bad, inventors/writers are stupid greedy bastards etc.
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Determining infringement is not easy/feasible
It is nearly impossible to determine if you infringe on a patent. They're cumbersome to search, and written to be broad and say nothing specific. Even patent lawyers will give you different takes on whether you're in the clear. You go to 3 and are likely to get 3 different answers.
Take a simple cable as an example. You need to search for bonding processes, cable compositions, geometries, connectors, pin arrangements, and a host of other things you could be liable for. And that's just with a simple thing sitting on my desk. Try to do it for a complex system.
It's even worse with software patents. There are hundreds of (junk) patents for "database" look-ups alone. It's a core function of just about any moderately complex program.
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Patent Attorney Highlights ....
I am surprised, though, that nothing was said of the changes that caused the current mess.
At one time, and "invention" meant and idea and a concrete "reduction to practice" (those are still the WORDS used). So, a mere idea could not be patented, even an idea that could be shown to work could not be patented. It had to be reduced to practice.
Originally, that meant going into business, then it meant only a working model (which is where the system started breaking), then it became sort of "because" - no good reason.
Even so, the reason it was put into the Constitution was the older practice of stealing anything of value from people with less resources, and that was primarily things that later could be patented.
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Old article old argument old dirt, all from an old company
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BS
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patents
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