Woz Completely Changes Tune On Patent Trolling From Just Months Ago

from the is-that-the-same-woz? dept

We were really surprised a few months ago when Steve Wozniak spoke out in support of patent trolling. In particular, he was supporting Paul Allen's decision to sue a bunch of companies over some very questionable patents. At the time, he said:

I think this lawsuit represents the idea that hey, patents, individual inventors, they don't have the funds to go up against big companies. So he's sorta representing some original investors. And I'm not at all against the idea of patent trolls.... Every tech company is very aware that patents are really the heart of our innovation and invention system and (a) that you have to have your own patent position and you gotta be aware that there might be others.

Personally, I was a bit surprised that story didn't get more attention. Woz tends to be so beloved in the parts of Silicon Valley that don't like patents that I thought it would generate some discussion. However... now JJ points us to the news that Woz seems to have done a complete about face on Paul Allen's lawsuits and patent trolling in general, coming out pretty strongly against both. Oddly, neither he nor the reporter covering the story seems to note that just months ago, he was saying exactly the opposite. From the coverage at TheRegister:

"That patent-troll thing," Wozniak, said, introducing his first story. "The other night Paul Allen was speaking at the Computer History Museum and I had four tickets. And I decided at the last minute not to go, because I remembered he's suing all these companies like Apple and Google – but he's not suing Microsoft – because he bought all these patents."

From Wozniak's point of view, Allen's lawsuit will not help anyone except Allen and his lawyers. "Well heck," he said, "Paul Allen should be out there investing in companies that are doing something, making products, actually making a new future for the world, and not 'I'm ... going to sue people, and get in bed with the lawyers to make my money.' That's not the right way."

Elsewhere he said: "A lot of patents are pretty much not worth that much... In other words, any fifth-grader could come up with the same approach."

I certainly like this version of Woz better, but I'm sort of at a loss as to how to figure out which is the real Woz. So... what is it? Is Woz happy with patent trolls like Paul Allen, or so upset by them that he won't go see him speak? Will the real Woz please stand up?

Filed Under: patent trolls, patents, paul allen, steve wozniak

FTC Puts Patent Trolls On Notice

from the crackdown-time... dept

While the Senate moves forward on a patent reform bill that won't solve any of the significant problems with our patent system (and will make certain aspects worse) and the Patent Office itself has apparently decided to throw in the towel on improving patent quality, it looks like the FTC has finally realized that perhaps it needs to step up and try to fix at least part of our severely broken patent system. Paul Alan Levy points us to the news that the FTC has released a massive 300 page report (pdf and embedded below) about the patent system, in which it clearly comes out against the problem of patent trolls, which it euphemistically refers to as "patent assertion entities." The report chooses this term, rather than the more common "non-practicing entities" because it notes that some non-practicing entities can be good (i.e., universities), and the real problem tends to be with operations who are focused just on using patents to sue.

The report notes that such trolls are a serious problem in the marketplace, as they appear focused on hindering innovation from companies that have actually innovated, rather than on "developing and transferring technology." Even better, the FTC actually notes the key claim we've been making for years (and which almost everyone else in government has ignored), that the "invention" stage is only one part of the ongoing process of innovation:

Increasing activity by patent assertion entities (PAEs) in the information technology (IT) industry has amplified concerns about the effects of ex post patent transactions on innovation and competition. The business model of PAEs focuses on purchasing and asserting patents against manufacturers already using the technology, rather than developing and transferring technology. Some argue that PAEs encourage innovation by compensating inventors, but this argument ignores the fact that invention is only the first step in a long process of innovation. Even if PAEs arguably encourage invention, they can deter innovation by raising costs and risks without making a technological contribution

The key point that the FTC makes is that one of the key problems here is that patents are (often on purpose) written to be quite vague, meaning that they totally fail to serve their purpose as giving notice for what they cover (and for actually teaching anything). Part of the report appears to be heavily influenced by the research of Bessen and Meurer, which went into great detail on the notice problem with patents, and just how costly it has become to various industries.

The key suggestion, then, from the FTC is for the US Patent Office to get rid of vague patents, by raising the bar on rejecting "indefinite" claims. Currently, like so much of the USPTO, the bar used to determine if a patent claim is indefinite is quite low. The FTC is hoping that the USPTO will raise the bar. Along those lines, the FTC is urging patent examiners to make sure that what a patent actually covers is really much more explicit, including establishing a clear record in the proceedings while reviewing the patent to establish what it actually covers, rather than allowing vague and indefinite language through. In fact, the report seems to suggest that the USPTO would be better off focusing on eliminating indefinite claims even more than judging nonobviousness.

On top of that, the FTC asks the courts to be much more aggressive in limiting ridiculous damages awards for patent trolls, especially condemning the widespread use of questionable "expert witnesses" who come up with unrealistic "rules" for how much a company should have to pay for infringing a patent.

I was also happy to see that the FTC clearly spent time exploring the fact that so much patent infringement has absolutely nothing to do with anyone "copying" the inventions of someone else, but rather independent invention. While it does not come down in favor of an independent invention defense yet, it does seem open to it, if some of the other recommendations in the report do not succeed in cutting down on the problems of the patent system. Its main worry appears to be that changing the liability for "inadvertent" infringers would create a dramatically different patent system, for which there's not enough economic evidence to know what will happen. Of course, we could point out in response that all of the changes put in place that massively increased the scope of the patent system were done with a similar lack of economic knowledge. However, I am pleased to see that the report at least calls for more research to see how such changes might impact the market.

On the whole, I definitely don't think the report goes far enough in its recommendations, but at this point, that's a pretty small quibble. This is one of the few times that we've seen a government agency really research and acknowledge many of the key problems with the patent system, and then suggest real changes to fix those problems. The FTC clearly spent a lot of time on this, and spoke with many of the top experts in the field, citing some fantastic research on the subject.

Of course, the big question is will it matter? There are lots of recommendations for improving the system -- with many directed at the PTO and the courts. But what if they're totally ignored (as seems likely)? Would the FTC take a stronger stand in going up against patent abusers? That would be quite a step, and would generate plenty of attention, but given where the system stands today, it seems like it might be necessary. Kudos to the FTC for actually pulling this report together, rather than going with the typical bland assertions about how patents automatically increase innovation and therefore more patents are, without question, better. There's a lot more in the report, but on the whole, it really does seem to recognize the massive problems inherent in the patent system.

Filed Under: ftc, idefiniteness, notice, obviousness, patent trolls, patents

MIT's Tech Review Comes Out In Favor Of Patent Trolls

from the sad-day-for-MIT dept

Reader David Carter sends in this bizarrely uninformed column by Christopher Mims at the MIT Tech review, praising patent trolls and calling them "the secret heroes of the tech world." Carter notes that when he first read the article he thought it was satire. I can see why he thought that as well, but it appears to be serious. Basically, the article focuses on one Finnish company, JoikuSoft (which, I have to admit, kept making me think of Jukt Micronics), which claims to be the first company to figure out how to turn mobile phones into WiFi hotspots. Yet, now, the company complains, everyone is out there using its technology, making mobile phones that can create WiFi hotspots, and no one's willing to pay Joiku. The "issue," according to Mims, is that JoikuSoft is still waiting on the dastardly US Patent Office to issue its patent so it can go and sue folks. And, even then, it's so damn expensive to sue -- and thus "patent trolls," who will buy up Joiku's eventual patent and sue the likes of Google for it, help "save" JoikuSoft. This sentence is indicative of the article:

Until the U.S. Patent Office grants JoikuSoft a patent on its technology, it doesn't own it and can't demand a licensing fee from anyone who builds their own version of it.

Scary, huh? Of course, this version of the story leaves out all sorts of important details. For example, the idea of turning mobile phones into hotspots was hardly an original or non-obvious idea. Lots of companies had been working on this, and the idea that only this one small Finnish company figured it out is laughably inaccurate. Second, it leaves out the fact that all these other companies, who are offering phones with the technology, are actually bringing new innovations to market, unlike JoikuSoft, who seems to be sitting around waiting for a patent to threaten people with it. That's not innovation that helps the market, that's a tax on innovation. It's a sad statement that a magazine like MIT's Tech Review would resort to such blatantly anti-innovation propaganda.

Filed Under: mit tech review, patent trolls, patents

Say It Ain't So, Woz: Steve Wozniak Says Patent Trolls Are Okay

from the too-bad dept

Via Joe Mullin, we learn the rather unfortunate news that, when asked about Paul Allen's decision to sue lots of big tech companies over questionable patents, Wozniak comes out in favor of "patent trolls" and patent holders suing companies who actually innovate. For someone so beloved by the tech community, these statements seem really unfortunate. He starts out by repeating the myth that patents somehow help out the small guy (ignoring that we're talking about Paul Allen, one of the richest guys on the planet):

I think this lawsuit represents the idea that hey, patents, individual inventors, they don't have the funds to go up against big companies. So he's sorta representing some original investors. And I'm not at all against the idea of patent trolls.

The interviewer, from Bloomberg TV, pushes back pretty quickly, pointing out that Paul Allen is not the inventor and there's no indication that the inventors on these patents would actually get any of the money should Allen succeed. Woz's response is again disappointing, saying that Allen "represents inventors." Nearly everything that Woz talks about comes off as really uninformed about the patent world today. For example, the interviewer notes that dealing with patents has become a "cost of doing business" and Woz seems to think that's a good thing:

Every tech company is very aware that patents are really the heart of our innovation and invention system and (a) that you have to have your own patent position and you gotta be aware that there might be others. And, yes, you might be infringing. It's very awkward, because some patents are so general. It's hard to say how they'll be interpreted. There's a lot of ambiguity in the system.

So, wait, patents are the heart of the system, but there's a ton of ambiguity. Can someone ship Woz a copy of Bessen and Meurer's Patent Failure quickly, so he can learn about the stacks upon stacks of research that have shown that "ambiguity in the system" now costs society a hell of a lot more than any innovation created by it?

Of course, back in Wozniak's autobiography, he talked about how much of a success Apple was without relying patents at the very beginning. Too bad he's now forgotten that.

Filed Under: innovation, patent trolls, patents, paul allen, steve wozniak

Other Legal Work Slow? Start A Practice To Help Patent Trolling

from the not-good dept

The economy still isn't doing so great, and that impacts everyone -- even lawyers. So what are they to do in weak times? Eric Goldman points out that in the past, they'd become bankruptcy lawyers, but this time around, it looks like some are realizing a more lucrative strategy is to get involved in patent trolling -- though they prefer to call it "IP monetization." This is, of course, just a continuation of the whole ridiculous focus on squeezing cash from unused or ignored patents, following the publication of the book Rembrandts in the Attic, which kicked off this effort.

From an economic standpoint, this activity is a pure dead weight loss on economic activity. There is nothing good that comes from it. You basically have companies that have ignored a patent they got for whatever reason, suddenly rediscovering it and using it to go after totally unrelated companies who actually innovated and brought products to market (almost always with no knowledge whatsoever of the questionable patent in the first place). And suddenly the actual innovators have to pay up to a company that did absolutely nothing with the invention.

Filed Under: business, lawyers, patent trolls

Unconditionally Bad Patent Results

from the the-troll-scenario dept

While plenty of folks who dislike the patent system are fans of the term "patent trolls," I tend to avoid it unless it absolutely fits. Since, by it's very nature, it's derogatory, it tends to shut off conversation rather than encourage it. However, there's an interesting post over at Patently-O (which normally tends to be pretty pro-patent) from a law professor trying to define what are "troll patents" (rather than patent trolls). He makes a pretty sensible argument: if you have a scenario in which the patent clearly contributes nothing to society, it should be considered a problem patent. That is, it's a scenario where the "invention" in question would have happened at the same pace even in the absence of the patent in question. Here are his conditions to make that determination:

1. Is owned by someone that does not practice the invention.
2. Is infringed by, and asserted against, non-copiers exclusively or almost exclusively. By copying I mean any kind of derivation, not just slavish replication.
3. Has no licensees practicing the particular patented invention except for defendants in (2) who took licenses as settlement.
4. Is asserted against a large industry that is, based on (2), composed of non-copiers.

If those four conditions are met, then it means that the product on the market would have occurred either way, and the only thing the patent serves to do is transfer money from the company making the product to whoever holds the patent. Considering the very purpose of the patent system is to "promote the progress," it's quite clear that the conditions above mean that no progress has been promoted -- and, in fact, the opposite has occurred.

Of course, if we actually had an independent invention defense against patent infringement, this whole debate wouldn't matter nearly as much.

Filed Under: net loss, patent trolls

Venture Capitalist Explains How Patents Can Be A Tax On Innovation

from the not-all-vcs-demand-them dept

Whenever we get into discussions on the massive downsides associated with patents, someone has to chime in with some ridiculousness about how "venture capitalists won't invest in companies without patents." There are a few easy responses to that -- including, if the VC you're talking to demands patents to invest, he or she is probably so clueless you're better off going elsewhere. That may sound flippant, but it's not. Patents have so little impact on the success of a startup that anyone focused on patents before investing has probably never helped lead a brand new startup to success. If they had, they'd know that it's execution that matters significantly more than any "patents."

Besides, over the years, we've seen more and more venture capitalists come to the realization that in many cases, patents do a lot more harm than good. We've written about a few venture capitalists who have come out about problems with patents -- and over the weekend Union Square Ventures' Fred Wilson (a friend, and Techdirt reader), wrote about just how much damage patents have done towards innovation -- specifically with some of his portfolio companies. Specifically, he's talking about having those companies sued by non-practicing entities (he uses the term "trolls" which we like to avoid). He also mentions -- in the comments -- how USV doesn't require companies to have patents, and he's invested in plenty of companies without patents.

At one point, Wilson writes:

I'm a fan of allowing market forces to work in most cases, but not in the area of patents.

But, of course, patents are not a proper market mechanism. They're the opposite of one. They're about the gov't creating monopolies. That's not "letting markets work." It's declaring that the first company to claim an invention gets to control the market, rather than letting the actual market decide which company can best execute in delivering the product to the market. A supporter of free markets shouldn't support the patent system. It's not a free market at all.

From there, though, Wilson kicks off a good discussion on how to deal with such things. He points out that it's often cheaper just to pay off the patent holders (and most companies do that), but that just encourages them to continue creating a "tax on innovation." So, instead, he wants to discuss what reforms can be put in place, with two initial suggestions:

1. If you sue someone for infringement and lose, you pay the defendants' legal costs.
2. "Use it or lose it." If you're not putting the patent into practice, you don't get to use it.

There are problems with both of these, unfortunately. The first is utterly dependent on the already screwed up judicial process for patent lawsuits (hello East Texas!). There are plenty of awful patent lawsuits where the patent holder wins. So, I'm not against this proposal as a way of making patent holders think twice about totally bogus lawsuits, but it's not going to stop a lot of suits. In fact, it may just encourage more suits in the hopes that hitting one "big one" pays for all the bad ones.

The second one is also a little troubling, because if a patent is valid (a huge if), you could potentially see a situation where it makes sense for the company to license it rather than develop it. Instead, however, I'd offer an alternative: if the patent holder is not developing a product based on the patent, then (a) the courts cannot issue any kind of injunction to stop the production of the product by others (which is the direction we're moving in thanks to the MercExchange decision) and (b) any damages should be greatly limited to the cost of a reasonable license plus a small penalty.

However, if Wilson is serious about looking for ways to fix the patent system, he should look to support an independent invention defense that would invalidate the patent. This one change would solve so many of the problems with the patent system. Since the patent system was designed to encourage independent invention, it shouldn't be discouraging it and denying those inventors who came up with an idea on their own the ability to commercialize their inventions. Furthermore, since patents are only supposed to be granted on inventions that are non-obvious to a person skilled in the art, the fact that multiple individuals came up with the same idea should be proof enough that the idea doesn't pass that test.

It's no secret that I'm not a fan of the patent system at all. There is so much evidence out there that patents do nothing to increase innovation and plenty of evidence to show how they actually stifle innovation, that I think the patent system actively works against its stated purpose ("to promote the progress of science and the useful arts"). However, if we must have such a system, then put in place an independent invention defense which also invalidates the patent, and we'd be a lot further towards a reasonable system -- especially since it's so rare to find patent infringement lawsuits that involve any actual copying.

Filed Under: fred wilson, independent invention, innovation, patent trolls, patents, tax

Exposing The Patent Troll Playbook... And How To (Almost) Beat It

from the this-is-innovation? dept

We've written about patent hoarding firm RTI before, back when it sued Google. At the time, we pointed to Rich Tehrani's fantastic article about the company and how it was basically one guy who claimed his rather narrow patents covered pretty much everything having to do with VoIP. Pretty much any company of any substantial size that had anything to do with VoIP had been on the receiving end of threats and/or lawsuits from RTI.

Now, Joe Mullin points us to an absolutely fantastic description from the CEO of Fonality exposing RTI's patent badgering techniques -- and how Fonality fought back and (almost) won. The "almost" part is the sad part. In the end, they still paid the guy a little bit of money, though it was significantly less than what he had been asking for (and what he had sued them for). And, tragically, this plays into RTI's game plan as well -- as part of his initial pitch is sending over a list of all the other companies who have settled over these patents, which makes plenty of companies feel that since those other companies "settled" then it wasn't worth fighting and they might as well settle too. This is unfortunate.

But at least the post describes how to push back on his various claims. Here's a short excerpt, but it's worth reading the whole thing:

It was then that Jimmy enacted the second part of the classic troll playbook. Peer pressure. Jimmy started to list (and provide documentation to support) literally hundreds of other "big" companies that had already settled with him over this same patent. Heck, it seemed like everyone from AT&T to Cisco was on this list. A sustained bout of queasiness settled over me. Yikes, if they couldn't beat this guy, what chance did I have? He even told us how he had sued the mighty Google for $5B!...

But, then a funny thing happened. When we asked him *how* much he had settled for, he wouldn't tell us. Nor did asking "the Google" (you know, that series of interconnected pipes) help us much. There just seemed to be a dearth of information on either settlement amounts or terms. Did they settle for a million dollars? A billion? A free iPod? An agreement not to mention that they settled for zero? Well, heck, if nobody was writing about it, and Jimmy wasn't boasting about it, it probably wasn't much to boast about anyway. So, when my lawyers called and asked us if we were ready to settle, I did what every strong leader does in a moment of crisis. I put the call on speakerphone, crawled under my desk, and cowered with hands over head. It was from that towering position of omniscience that I gave the proud warrior cry to "fight on!"

Hopefully more folks will start exposing some of the sneakier tactics used in patent infringement lawsuits -- and how to fight back as well.

Filed Under: patent trolls, patents, responding
Companies: fonality, rti

Admitted Patent Troll Finds The Phrase 'Shell Entity' Offensive

from the oh-really? dept

You may recall last year that we wrote about a patent lawsuit where the judge banned the use of the word "patent troll." That seemed reasonable enough, since it's clearly a negatively loaded phrase. However, it looks like some patent attorneys are trying to go even further with that concept. Ray Niro, in defending Scott Harris (who, you may recall, licensed his own patents to be used in lawsuits against his own firms' clients), is demanding that the phrase "shell entities" not be used either, claiming that they, too, are used negatively. That's because, like so many patent holders these days, Harris used shell companies to hold the patents and to sue companies. Of course, "shell entities" is a descriptive term, not one that is clearly designed as an insult like "patent troll."

Besides, this seems quite rich, coming in defense of Harris, who used to own the website ImAPatentTroll.com. And, indeed, the lawyers on the other side of the case wasted no time in pointing this out:

Additionally, the Motion to Strike asserts that the term 'shell entity' is synonymous, in this context, with the term "patent troll." Significantly, Mr. Harris, even while at Fish & Richardson, sponsored a website, imapatenttroll.com, in which he proudly and openly referred to himself as a "patent troll." Truth is an absolute defense.

Separately, it is also rather amusing to see patent system defenders get upset about the phrase "patent trolls" when they're so quick to refer to any sort of patent reform as "patent deform", companies in favor of patent reform "The Piracy Coalition," while, of course, insisting that any individual in favor of patent reform a "shill."

Filed Under: lawsuits, offensive words, patent trolls, patents, ray niro, scott harris, shell entity

Maybe Patent Trolls Wouldn't Be So Hated If We Called Them Patent Elves

from the presto-chango dept

I'm not a huge fan of the term "patent troll" which I agree can be unfairly negative, and without a clear definition often leads to problems. Recently, it seems that the term is most often applied to "non-practicing entities" making some people think that the patent system is mainly abused by those operations. That's a bit of misdirection. There's just as much, if not more, abuse of the patent system done by large companies. If there were actual proof (still waiting!) that the patent system actually did lead to more innovation, then I can easily understand why a non-practicing entity that just licensed its works could make sense. Unfortunately, most of the evidence suggests that patents don't actually lead to more innovation. In those cases, the only thing that non-practicing entities end up doing is hindering innovation.

However, Joe Mullin points us to a rather odd paper, suggesting that non-practicing entities are a good thing and should be called "patent elves" rather than "patent trolls." Part of what makes this paper so odd, is that one of the writers works for that law firm that recently advertised that it wouldn't work with patent trolls. Meanwhile, I guess it wants to let those "patent elves" in the back door.

As for the actual paper, it's really not all that different from earlier papers that try to present non-practicing entities as a boon to competition and innovation. They're all based on a few faulty assumptions, however. This latest one is basically a massive broken windows fallacy. That is, it basically states "if specialization is good, more specialization is better" in that it creates more economic activity. What it fails to do, however, is take into account how the market is distorted by that greater economic activity. Just as the broken window fallacy doesn't take into account the hidden costs of what kind of economic activity would take place in the absence of the broken window, this paper fails to take into account the innovation that occurs in the absence of the patent-holding non-practicing entity -- and simply assumes (falsely) that the patent holder is the key component in driving the innovation forward. Instead, it's much more likely that the patent holder represents the broken window -- a cost that detracts from more efficient economic activity, such as actually bringing a product to market where real innovation occurs.

Filed Under: innovation, patent elves, patent trolls, patents