Does Patent Licensing by Patent Trolls - Or Anyone - Serve A Useful Purpose?
from the nope,-not-really dept
Patent trolls -- sometimes known more politely as "Non-Practising Entities" (NPEs) -- probably have few fans among Techdirt readers, but there are some who try to justify their activities. Here's how the argument usually goes:
Defenders of patent trolls ... argue that they serve as business intermediaries between inventors and commercializers. While the traditional theory of the patent system is that patents encourage innovation by allowing inventors to exclude competitors from the market and therefore earn supracompetitive returns, a number of scholars have argued that the patent system can encourage commercialization of inventions once they are made by allowing the inventor to control who can develop the technology.
That comes from an interesting new paper from Robin Feldman and Mark A. Lemley, which explores whether patent trolls really do fulfill this theoretical function in practice. It's long and detailed, but its results are pretty clear-cut:
Based on our preliminary evidence, the theory that NPEs facilitate innovation either through the creation of new products or by delivering actual technical know-how from inventors to implementers doesn’t hold water. NPEs almost never actually provide any valuable information to their licensees, and they rarely, if ever, prompt the development of any new products. Licensees are paying for freedom to operate -- the right not to be sued for implementing technology they developed on their own but which someone has asserted will fit within their patent rights. Thus,
the
study
does not support the efficient middleman hypothesis for characterizing the role of NPEs.
That's a valuable contribution to the debate about patent trolls, but the paper offers other insights. For example, it finds that not only do patent trolls not bring about much technology transfer with their patent licensing, neither does anyone else, either:
That doesn’t mean technology transfer doesn’t happen; it does. But it may mean that technology transfer happens early in the life of a technology, and that secrets, collaborations, and informal know-how, not patents, are the primary focus of real technology licensing agreements.
That's an important point. The paper also provides yet more evidence that the 1980 Bayh-Dole Act, designed to encourage the commercialization of research results through licensing, actually turns universities into patent trolls -- something that Techdirt has discussed before. Although the authors suggest that further research is needed to confirm their results, it already seems pretty clear that both patent trolls and Bayh-Dole need to go.
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Filed Under: innovation, licensing, patent licensing, patent trolls, patents, tech transfer
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I'd say the current intellectual property system as a whole needs to go...
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One of the most extreme examples--and yet one of the most useful--is steel. How old do you think it is? Modern steelmaking techniques were first developed as part of the Industrial Revolution, but of course that wasn't the beginning of it; the iconic imagery of the knight in steel armor with a steel sword is centuries older than that. But steel was old even in Medieval times; the oldest known samples date back to the 14th century BC!
It wasn't until the 19th century that it began to be created in great quantities, which proved the catalyst for the Industrial Revolution that laid the foundation for modern life. But why?
The actual answer is basic greed. Steel is difficult to get right, and throughout the ages, whenever some smith would stumble on the formula, they would keep it as a closely-guarded secret, generally to get lots of money from the local royalty supplying weapons and armor to the army. Which is a nice job if you can get it, but then a funny thing happens a few decades later: the smith ends up dying one way or another, and unless he's passed on the secret to an apprentice or another smith... no more steel.
This happened over and over and over for more than 3000 years, to the point where you have to wonder if the real question isn't "why did it not happen that way again in the 19th century?" And the answer is patents.
The British government, fed up with the way society kept losing valuable knowledge to trade secrets, set up a patent system that provided an incentive to publish the details of new inventions rather than keep them secret... and it worked. When steelmaking patents expired and the techniques entered the public domain, anyone with the requisite technical expertise and a bit of capital could set up a Bessemer Converter. The price of steel plummeted almost tenfold, making it readily available as a structural material, people started building machines out of it, and the rest is history. Turns out valueless steel is far more valuable than valuable steel, from a societal perspective at least. (Interesting note: The patent on the Bessemer Converter expired in 1870. In 1873, Karl Benz produced his first gasoline engine, and then went on to invent the automobile.)
Without the patent system, the Industrial Revolution might never have happened, and we would still be stuck at an early-19th-century standard of living. If that sounds unrealistic, keep in mind that trade secrets on steel had already held the progress of civilization back by over 3000 years, so what's another couple centuries?
Still want to get rid of patents?
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In the case of treating steel, it is not possible to accurately describe processes accurately when for instance; temperature is determined by the color showing on the metal; but it is relatively easy to show someone else the color to use, at least once they have the basics of working steel.
Trade secrets became a problem when industrialization allowed a concentration of production, and where an investment in plant was their to be protected.
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That's the problem that patents solve.
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Well, you know what they say about extraordinary claims requiring extraordinary evidence.
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Thank goodness there is one problem that they solve.
Except that it is a 1000 year old problem that, in today's world, would not be a problem (we can do an analysis on steel to determine what it is comprised of). Then, let's just look carefully at the fact that the "differing qualities of steel" solution has been applied to things like computer software in a way that does not remotely ensure that software quality is better.
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The problem isn't "what is it comprised of?" The problem is "how do you make it?", and the answer is non-obvious.
Everyone knows (today, at least) that steel is made of an alloy of iron and carbon. Even if you knew how much of each to mix, there's the tricky question of how to get them to alloy properly when the ignition temperature of most common forms of free carbon is well below the melting point of iron! And the tolerances are pretty narrow, too. Not enough carbon, and you get iron that's slightly harder than usual. Too much, and you end up with pig iron, which is hard but so brittle as to be almost useless. There's a very narrow "sweet spot" in between that produces steel.
What the Bessmer Converter did was take pig iron (which had too much carbon in it), melt it down, and blow air over it in a controlled manner to slowly burn off the excess carbon until they got it down to the right percentage, and then let it solidify again. That's not a trick that analysis of what the steel is composed of is going to reveal; that's a genuine new invention that someone has to think of and publish before it becomes generally available.
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I am personally aware of both situations, where metal working processes are covered by trade secrets because the processor is fairly certain that no one else knows how to do what they are doing, and where metal working processes that would have been covered by trade secret are covered by patents. Whether a process is covered by one or the other is often by the culture of the company. I find it humorous when people say "patents aren't needed for progress," because I know of several companies who process metals and have few, if any, patents, but a huge number of trade secrets. Go figure.
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Which means that patents are not preventing trade secrets, not that they are necessary for progress.
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On the other hand, multiple studies have found that patents are the overwhelming source of new knowledge in certain areas (e.g., chemistry) because that knowledge would not be otherwise published. Furthermore, those same studies have found that people in those industries regularly read and analyze patents specifically to learn what other companies are doing; i.e., they are necessary for progress in at least those industries.
Furthermore, patent searching and analysis has become a cottage industry employing thousands of people whose full-time job is to help companies understand their competitor's technology and how they can use that knowledge in their own business. Seems to me that such endeavors are related to patent-driven progress.
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That's one of the problems they're intended to solve, but in the US at least they generally do not. Patent applications are now strictly legal documents, and are not useful at all in describing how to reproduce the invention. There are cases (I would guess it's very common) where the person who made the invention doesn't recognize or understand the patent application.
So if you look at what Ninja said: "I'd say the current intellectual property system as a whole needs to go..." it makes perfect sense.
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Yeah, and constitutionally the patent system is required to promote the progress of science and the useful arts, but that isn't happening either.
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As for inventors allegedly not understanding the application, then that is an easy win in a lawsuit for a respondent. However, while that does happen, it is very rare, so it seems like inventors apparently do understand the applications filed that describe their inventions.
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http://seegras.discordia.ch/Blog/voices-against-the-patent-system-the-economist-1851/
And a lot of the patents (like Watts) actually DELAYED the industrial revolution.
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Re Patents
And for all that, Bayh-Dole, part of federal patent law, requires that the patent system be used *to promote the utilization* of inventions made with federal support (35 USC 200). Not to troll industry with a threat to *prevent* utilization or to make people *design around* (and so not use) a subject invention. If trolling were perfectly acceptable, there would be no point to 35 USC 200. If the patent publication was all there was to it, again, no reason for 35 USC 200. It would just state: "use the patent system." But there *is* a point to 35 USC 200. Trolling is not a property right available for patents on subject inventions. See 35 USC 261.
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Yes it does
If a small time inventor isn't likely to see return, they are less likely to do it.
Allowing them to sell their patents lets the little guy profit in world geared way to heavily to the big guy.
That said, how you allow the sale to *only* 'big guys' who actually intend to produce the patented invention is the crux of the problem.
IP laws need reform in many ways, but lets also not let the perfect be the enemy of the good.
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Re: Yes it does
You going to fight a 1+ million dollar patent lawsuit on your own against a big company?
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Re: Yes it does
They'd be hard-pressed to design a system more rigged against the mythical "poor, lonely inventor".
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I hold a patent on that.
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Re: Re: Yes it does
Have you ever heard of him? Most people haven't, which is a bit surprising considering his enormous impact on modern culture: He's the guy who invented television! He really ought to be a household name, alongside Thomas Edison, Henry Ford and Alexander Graham Bell, but a funny thing happened on the way to the history books: RCA started producing his invention.
It's not that Farnsworth's television wasn't worthy of patent protection. It was a truly novel and revolutionary invention, a genuine American success story. There were lots of people working on "the television problem" at about the same time, but most of them were trying (unsuccessfully) to build something based on the principle of some sort of rotating device. That was the obvious way to do it, right? Afterall, that's how movie projectors work!
Farnsworth had the brilliant idea of abandoning the "projector" paradigm entirely and setting up a grid of pixels that would be selectively activated by a completely stationary electron gun, and he was essentially the only one who went that route. And it worked! He did everything right, took out a patent, and started producing and selling televisions.
And then the RCA company started producing them too. There's really no room for doubt or interpretation here; Farnsworth had a valid patent, and RCA was ripping him off. He tried to take them to court, but he was one guy and they were a giant company with tons of lawyers, and... long story short, Philo Farnsworth died in poverty.
The basic idea of the patent system is a good one, but it's in serious need of reform and has been for at least that long.
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Re: Yes it does
It doesn't take much reading to disprove this line and your entire argument. Patents are very recent so basically you are saying that most of historic progress wouldn't be possible. And there are fields where patents don't apply that are still receiving tons of attention.
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At the same time you should realize that you are attacking a strawman since he precisely stipulates it only covers "a small time inventor". A better connected and resourced person or company would still have an incentive which arguably has been the case historically since substinance forced most small timers to spend their time on more urgent needs.
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Re: Yes it does
As a counter example I offer Free and Opensource Software, which is the basis for the very Internet you are using now.
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Re: Yes it does
There are two implicit assumptions in that, neither of which hold up under much scrutiny.
Implicit assumption #1: That raising capital for an idea is impossible for small players. If an idea is truly interesting, there are lots of ways to raise capital for it, and you don't need patents to do that (despite what some claim).
Implicit assumption #2: The selling of the patent actually transfers something useful towards the actual innovation. As others have noted, there is rarely much in the patent itself that actually helps the innovation move forward. Most of the useful "know how" is entirely unrelated to what's in the patent.
If a small time inventor isn't likely to see return, they are less likely to do it.
And yet, you almost never see cases of someone selling a patent to encourage development of some new technology. It's almost all about giving control to some party to either sue others over it, or to prevent being sued. It's not actual knowledge transfer.
That's the point of the study.
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Implicit assumption #2: The selling of the patent actually transfers something useful towards the actual innovation
The innovation itself is entirely separate from the patent. One is real, the other is an entirely made up legal construct - so no the patent isn't going to do anything to the actual innovation. Except encourage people to innovate because there is some possible 'reasonable' return on their effort; which is the point no?
And yet, you almost never see cases of someone selling a patent to encourage development of some new technology
Never said that. Being small enough that you can't adequately bring it to market is an entirely valid reason for selling the patent. Some people are 'idea people' who are better suited to coming up with new innovative ideas but aren't good at bringing it to market. They should be given protection shouldn't they?
If they want to try and fail to bring something to market...that's up to them, but selling their patents to someone who can would seem to be a way to encourage yet more innovation.
It's a reasonable argument whether this is truly *needed* anymore, but it does encourage innovation. As to whether the existence of patent trolls negates that encouragement...perhaps, but simply throwing out the patent system entirely wouldn't be a great thing either.
The 'knowledge transfer' also likely doesn't happen if someone figures something out in the garage but doesn't take it further because they won't see any return from the effort.
The internet and modern connectivity are certainly helping people transfer vast amounts of knowledge without the patent system, but I would disagree that it isn't still a useful tool to be used.
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A continual irrational political obsession with the increasingly flawed logic of more patents = more innovation and the natural judicial erosion of standards for innovasion hight in a biased opinion space are reducing the connection between innovasion and patents even further.
What we are seeing in some open source driven environments is a movement from focus on patents to far more focus on the innovator and the skills needed to implement the innovasion which is arguably a stronger advantage for the small innovator since it will provide him with opportunities and connections he can use far better than the larger legal persons (speaking engagements, teaching opportunities, jobs in general etc.).
All in all the value in the open source knowledge transfer cycle for the garage inventor can easily be better than taking the economic risk of patenting and protecting the idea for 20 years in the hope of some return or selling the pantent to an NPE with no other incentive than enforcing it aggressively and/or brokering it at a profit!
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If coming up with ideas is hard (or a rare ability) and developing them into usefulness is easy, yes. I rather suspect it's the other way around though.
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I think a lot of that is the direct result of the lack of clear information in a patent. It's all legalese, generalized, and almost useless for actually building something.
It's always the details that matter, not the 100 ft view that patents describe so they can cast the widest net possible. You rarely learn anything by reading patents.
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Do George Soros or Warren Buffet deserve millions PER DAY?
The "analysis" being criticized and the criticism aren't exactly wrong, just useless weenie-ing over very minor problems of predatory capitalism that's become completely skewed to acquisition of money rather than making goods.
That's what needs changed. Tax the hell out of unearned income, but ZERO tax on wages. Cures this automatically. -- It's not a new idea: the country prospered when upper incomes were taxed at 90 percent -- that's NINETY -- and the last 30 years prove that lowering taxes on high incomes does NOT result in general prosperity, only makes the rich richer. But the myth lingers; it's taught in Ivy League schools and promulgated by trust fund kids.
IF were an economist at Techdirt who knew about actual production (either industrial or intellectual), rather than devising schemes to re-distribute (such as greasy blob Kim Dotcom getting millions from content he had no part of making and not paying a cent to those who created it), then... well, for anyone honest, I don't even need to complete that sentence. Masnick isn't devising or advising on ways for creators to prosper (other than the loony notion of giving "your stuff" away), and now definitely only promotes schemes enriching already rich NEW gatekeepers such as Spotify and Apple.
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Re: Do George Soros or Warren Buffet deserve millions PER DAY?
That some people are good at taking contexts out of reality and generalize lack of evidence to concoct ad hominem is pretty creative. You may become a good author.
Just to avoid relying on too heavy double standards:
https://www.techdirt.com/blog/casestudies/
Has a pretty good library on cases where emphasis is on alternative monetization schemes. To critisize it as shameless promotion of Spotify and Apple seems to be quite an airball...
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Patents don't help with complicated things either. Although changing just one step in a patent makes it unique from another, having to pay legal costs to prove it's uniqueness makes it worthwhile to settle. Massive legal costs can't help any progress be made, defer money that could be invested into progress, and can ONLY harm an entity that doesn't consider millions of dollars trivial pocket change.
Can patents help simple things? Maybe but they aren't when they are being used to harm the people actually advancing technology. Even then, throw more steps in and the price of inefficiency could be well worth the cost of licensing, so it's easy to counter that helpfulness.
What is needed is patent protection. Relinquish all patents for the entirety of an organization or person, and that organization or person is freed from patent laws. If they want to change their mind later, they can't claim what they gave up, but they can jump back into the patent game with the big boys with new patents. This lets inventors invent without worry until it becomes necessary, and even then it's a choice they have. The better ecosystem will survive, or it might just make a crazy balance between the two. Either way at least progress is being promoted again.
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Good luck with that
The devil will keep crapping on the largest heap.
You don't raise a Moloch and then get to decide to stop feeding it. Just because patents have turned into a hilarious perversion of what they were intended to be for (but take a look at where copyright went) you don't get to decide to make them go away.
As long as the politicians are free to line their pockets from the cream of the pests, being a bad idea will never be a limitation for anything that has consumed enough money.
Consider the politicians to be ants protecting aphids because of those crapping out sugary goo while damaging plants.
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Re: Good luck with that
So good luck for the study about the damage patent trolls cause to make an impact.
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Interesting parallel
Example: DevExpress. I know, I know. I hate their controls too, but you can't argue with the fact that they are at least somewhat commercially successful, and they sell technology that's not an end product, but a platform meant to be used to enable faster software development. At the end of the day they are transferring technology for monetary gain. And it's a system that is completely outside of the patent process.
And in the software world, they are not a rare or one-off example of this business model.
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Mason Wheeler said it best
The purpose of patents is to SHARE trade secrets. It is NOT to squirrel away technology nor to charge people who did not use YOUR PARTICULAR trade secret.
Monetizing patents and NPEs aren't "doing a service" to the inventor, the world, or anyone other than their pockets.
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Sharing trade secrets
No. That's the IDEA of patents. However, they DON'T work this way, apart from the field of chemistry/pharmaceuticals.
Please go read up http://www.dklevine.com/general/intellectual/againstnew.htm particularly chapters 8+, where the authors detail that in EVERY FIELD except chemistry/pharmaceuticals, legal costs are always higher than license income. Which makes it quite clear the patent system does not work according to how its supposed to work.
(It can be argued that the patent system is detrimental to the interests of society regarding chemistry/pharmaceuticals, but within itself, it's working as expected.).
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I'm thinking of Kodak inventing the digital camera (and presumably getting patents) in the early 1970s, when the company enjoyed a lucrative monopoly on photographic film products, a business model that would have been destroyed (and eventually was) by digital photography.
Or conceivably, if the MAFIAA had patented file compression and file sharing technologies, not to license it or use it themselves, but for the sole purpose of extending their plastic-disk business model.
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but they are absolutely useless an harmful in a
an area like software .
See all countrys outside the usa ,
wheres all the poor inventors ,programmers crying out for
software patent protection.
there are none.
An the whole internet is built on open source software ,
common standards ,protocols,
patent trolls are buying patents off old companys that
cant compete ,
or else filing for broad wide ranging patents
that can be used to attack startups or demand money,
if a company wants to protect ip,
they can copywrite the code of the programs they write ,no patents are needed to do that.
I think programmers are not allowed to look at patents
in case they maybe accused of copying idea,s ,
in future lawsuits ,
so where s the advancement of science there ?
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In other news...
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Abolish Patents
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Patents need to die.
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Re: Patents need to die.
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Re: Patents need to die.
While some people seem to think that Congress could prevent any one state from having its own system, it would take years and many lawsuits, and the Supreme Court has found on previous occasions that when the federal government does not do what it is authorized to do, it is okay for the states to take that responsibility.
So, abolish the federal patent system, and it is likely that individual states will create their own, for the first time in 230 years. The states that would likely be among the first to create their own patent system would be California and Texas, followed by Arizona, Michigan, Illinois, and Pennsylvania.
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Re: Patents need to die.
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