from the i'm-here-to-justify-my-existence dept
In what is a hugely unsurprising move, Nathan Myhrvold of Intellectual Ventures
has written a column touting the pros of the patent system as a way to keep tech companies "honest." And why shouldn't he? After all, Intellectual Ventures does nearly all of its business
via settlement letters or courtroom appearances.
So, while Myhrvold's intentions are pure (as in, self-interestedly portraying patents as an "attempt to level the playing field"), his piece is a catastrophe of revisionist history and patent-troll whitewashing from word one:
Patents rarely make headlines, but they did this month when Nortel auctioned off its patent portfolio and drew an astonishing winning bid of $4.5 billion from a group of companies that includes both Apple and Microsoft.
Really? "Rarely make headlines?" I'm not sure what sort of rock (or cavern) Myhrvold has been living under/in, but recently patents have been making headlines left and right. Of course, they're usually the kind of headlines that Myhrvold would hate to publicly extol, what with the general gist of the stories being that non-practicing entities are very busy attempting to extract payments from actual innovators. (See also: Lodsys, Kootol, etc.)
From that point on, it goes from bad to worse to ridiculous to hilarious. First off, Myhrvold praises the Nortel auction as "a watershed in the maturity of intellectual property markets." He's right as far as a strict definition of "watershed" goes, but most appearances of this word are linked with positive steps forward, rather than an indication of the moment where things took a turn for the worse.
He takes a little time to offer up some backhanded praise for the innovators that often find themselves staring down the barrel of the troll-gun:
Most big tech companies inhabit winner-take-most markets, in which any company that gets out in front can develop an enormous lead... As a result, the tech world has seen a series of mad scrambles by companies wanting to be king of the hill. In the late 1980s, the battle was for dominance of spreadsheet and word-processing software. In the late 1990s, it was about e- commerce on the emerging Internet. The latest whatever-it-takes struggle has been over social networks, with enough drama to script a Hollywood movie.
In each case, the recipe for success was to bring to market, at a furious pace, products that incorporate new features. Along the way, inconvenient intellectual property rights were ignored.
In his haste to paint these innovators as the beneficiaries of the intellectual property of others, Myhrvold inadvertently throws himself (and other non-practicing entities) under the bus, as Glyn Moody points out:
I think he's absolutely spot on. In the 1980s and 1990s, companies successively carved out dominant shares in emerging markets, often becoming vastly profitable in the process. And how did they do that? Well, as Myhrvold says, "the recipe for success was to bring to market, at a furious pace, products that incorporate new features." Their rise and huge success was almost entirely down to the fact that they innovated at a "furious pace", which led to market success.
They did not, that is, innovate in order to gain patents, but in order to succeed. They did not even bother taking out patents, so busy were they innovating and succeeding. Indeed, Myhrvold himself says: "Along the way, inconvenient intellectual property rights were ignored." They were ignored by everyone, and the most innovative companies thrived as a direct result, because only innovation mattered.
But Nathan's not done being wrong yet. He also spends a little time bashing the innovators for their treatment of intellectual property, while inexplicably dragging copyright into the argument for all of two sentences:
Yes, copyright was almost religiously enforced. Copyrights are trivial to obtain (just type the "c" in a circle symbol), and software companies see them as essential to restraining piracy, which hurts revenue. Patents are a different story, however. It takes time for engineers to apply for patents and even more time if they diligently respect other people's patents. So technology companies typically did neither.
In fact, many tech companies forbid their engineers from checking whether their products incorporate others' patents. The practice amounts to an intellectual property version of "don't ask, don't tell." As tech giants commercialized ideas that had been pioneered by small companies and merged once-separate technologies into new products, they infringed other people's patents.
Yes, a copyright is easily obtained. (However, that "little c in a circle" hasn't been required for over three decades -- keep up, Nathan.) But for Myhrvold to pretend that enforcing it is somehow trivial compared to the patent "protection" process is completely ignorant. (And we'll just let the "piracy hurts revenue" line drift on by. Myhrvold is only using it as a bridge to what he really wants to talk about, rather than actually expressing concern for software companies.) Patent trolls, much like copyright trolls, exist only because the system has made it very easy for them to file massive lawsuits (often in friendly locations) and turn a settlement letter mass-mailing campaign into a viable business plan.
Not only that, but to insinuate that these patents (supposedly "pioneered by small companies") are being ignored by large tech companies is completely disingenuous. If there's a lack of due diligence on the part of tech companies, it's because the approved patents that tangle up tech innovators are rarely actual innovations. They often tend to be fairly obvious machinations that should never have been approved in the first place.
There's more:
The biggest companies, which have always touted their brilliant innovations to justify the billions of dollars in stock options they pay their executives, have been in the odd position of attacking the patent system and publicly deprecating the innovations of others. Patents attempt to create a level playing field, but the last thing an 800-pound gorilla of a company wants is a fair fight. After succeeding in part by stealing other people's inventions, they decry any inventors who have the temerity to ask for a share of the returns.
Myhrvold, you flatter yourself. Non-practicing entities aren't "inventors". They're like speed traps in the middle of a 20-degree downgrade. They don't make anything better and, quite often, make things incredibly worse.
And for all his concerns about "innovators" getting paid, there's little attention paid to the fact that all this patent activity (most of it taking place via lawsuits) does nothing to stimulate innovation. In fact, what has happened is that former innovators like Microsoft and Apple now seem to be equally as happy dispatching lawyers from place to place and eliminating competitors through legal attrition rather than through product innovation.
Apple, flush with the iPhone's success but understandably worried that it might wind up becoming the R&D outfit that prototyped ideas that made others rich, has recently sued HTC Corp., Samsung and others. Just last week, the company won a preliminary ruling from the International Trade Commission, which if upheld will prevent HTC from importing smart phones into the U.S., essentially wiping out its business here.
Wiping out a competitor through a lawsuit is "innovation?" How does that stimulate any sort of progress? What about all the "small companies" (like app developers) that saw the level playing field get yanked out from beneath them by Lodsys and Kootol? Who's protecting them?
And now that all this "watershedding" is done in regard to the Nortel patents, where do we, as the customers of these "tech giants" stand? Have things improved?
The result effectively retains the status quo. Google still has no strategic weapon to compensate for the patent liability inherent in Android, so the lawsuits will continue.
Wonderful. Status is still quo and "lawsuits will continue." I'm not sure how much more good news I can handle. Do go on:
More importantly, this sale validates the notion that patents will be a fundamental tool in the tech industry. They had been moving toward that position for years, but the magnitude of Nortel's sale shows that they have arrived.
Patents have been a tool for tech industries for years, Nathan. It's only recently that patent trolling has been a tool for tech industries, which is very disappointing.
Myhrvold has one final thought before he signs off:
What's next? The history of mergers and acquisitions suggests one possibility. Once upon a time in the clubby atmosphere of corporate America, hostile takeovers were rare; gentlemen just didn't do such things. Then, in the 1960s, the hostile takeovers came to be accepted as a legitimate business tool. Similarly, the strategic use of patents now appears to be accepted in the technology industry. If that's true, then Nortel is just the beginning.
And that's the sad truth. Formerly unacceptable business practices should never be welcomed this warmly. If the best business analogy you have for patent trolling is hostile takeovers, then your "business" is already the lowest common denominator. "Strategic use." What a laugh. What you're positing resembles a chess game where nearly every piece is a pawn and no one's allowed to move until the king ok's it.
Filed Under: innovation, nathan myhrvold, patents
Companies: intellectual ventures
