Top Venture Capitalists Demand Real Patent Reform, Put To Rest Myth That VCs Love Patents

from the stupid-myth dept

One of the more annoying patent myths that makes the rounds is that startup entrepreneurs "need" patents, and that it's one of the key things that many venture capitalists "require" before they invest. This is a myth that we've been trying to debunk for quite some time, showing how many of the best, most successful venture capitalists out there have explained that patents are not important to them and, in fact, that patents tend to hold back and hinder innovation. Two new bits of information should make this point even clearer.

First up, the App Developer's Alliance, EFF and Engine Advocacy have teamed up to send a letter to Congress from many of the most well-respected, successful venture capitalists out there, urging significant patent reform to stop patent trolls and patent abuse. Included in the list of signatories (among many others) are investors like Fred Wilson, Brad Burnham, Mark Cuban, Reid Hoffman, John Lilly, Bijan Sabet, Brad Feld, Ron Conway, Bill Gurley, Jeff Clavier and Paul Graham. The list is like a who's who of the investors that startups these days put on their wishlists. The idea that patents are what drive investments definitely does not appear to be the case.

The related bit of information is a new research study, done by Robin Feldman, looking at the view of patents from the venture capital perspective, surveying around 200 venture capitalists and their portfolio companies about their views on patents -- which are decidedly negative:

Both the companies and the venture capitalists overwhelming believe that patent demands have a negative impact on the venture-backed community, with all or most of those assertions coming from entities whose core activity involves licensing or litigating patents. These impacts are described in terms of the specific costs expended by the companies and by the distraction to management, engineers, and other employees. Most important, participants described the human toll that patent demands have had on entrepreneurs. In addition, when making funding decisions, the vast majority of venture capitalists do not consider the potential for selling to assertion entities if the company fails. On the flip side, 100% of venture capitalists indicated that if a company had an existing patent demand against it, it could potentially be a major deterrent in deciding whether to invest.

In other words: having patents does not significantly impact the decision to invest, but being the target of patent trolls has significant consequences for entrepreneurs, and makes investors less willing to invest in important innovations.

So, can we put to rest this myth that the major funders of innovation require patents?

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This post is sponsored by the Application Developers Alliance. Find more info on patents and other issues that affect developers at DevsBuild.It

Filed Under: patent reform, patents, venture capitalists

Microsoft Front Group Struggles To Find App Developers To Sign Letter Against Ditching Bad Patents

from the nice-try,-act dept

A few months back, we wrote about how two different groups had sent letters concerning a key part of Rep. Bob Goodlatte's proposed patent reform bill: the "covered business methods" program (CBM), which allows for a much faster process for challenging and rejecting bad patents. A very narrow version of this program was introduced in the 2011 America Invents Act, but only for financial services patents. One of the ideas that many people support is expanding this program to software and other business method patents. It's difficult to think of a reason to be against this unless you have a ton of really bad patents. As we noted in that original article, the App Developer's Alliance -- a trade group representing an awful lot of app developers (and, it should be noted, a sponsor of our site), sent a letter signed by hundreds of app developers asking Congress to expand this program. On the flip side, there was a bunch of old stodgy companies that have seen their innovative days disappear into the past: Microsoft, IBM, Qualcomm. Companies that have become reliant on abusing the patent system to keep out competition, rather than continuing to innovate.

That letter was actually put together by the BSA (the "Business Software Alliance"), a trade group that pretends it represents "the business software industry," but which everyone knows takes its marching orders from Microsoft. In a recent interview with a BSA official, Tim Lee at the Washington Post pointed out that Microsoft seems very opposed to the expansion of CBM, and suggests that Microsoft is driving the BSA's position against this. He also points out that there's an obvious reason for this: Microsoft has a ton of low-quality patents that it doesn't want to lose. The BSA official tries to tap dance around the whole thing, but doesn't make much sense. Basically, they don't like CBM because there are other ways to deal with bad patents -- even though those aren't working.

Of course, Microsoft is not exactly known for attacking on a single front. Another well-known Microsoft front group is a group called ACT, the Association for Competitive Technology, which calls itself a "grassroots advocacy organization" representing "small and mid-size app developers," despite the fact that the organization only seems to reflect Microsoft's interests. ACT has also set up a related organization specifically for app developers, called "ACT 4 APPS" which looks like it's trying to be what the App Developer's Alliance actually is, but without actually caring what actual app developers want. For example, last week, it sent a letter to Goodlatte arguing against CBM, just like the BSA, but in complete contrast to the App Developer's Alliance. The App Developer's Alliance has hundreds of names signed onto their letter in favor of expanding CBM and being able to knock out bad patents quickly.

In contrast, ACT 4 APPS' letter could only turn up 14 signatures. And almost all of them appear to have some sort of close connection to... (you guessed it)... Microsoft. One of the signatures is from a former ACT employee, who appears to have just left a few months ago. And with at least ten of the other signatures, they appear to be Microsoft partners. Hell, the CEO of District Computers is involved in so many Microsoft efforts it's tough to keep track of them all:

Steve is currently is one of Microsoft's 21 Worldwide SMB Partner Area Leads (PAL); one of the three in the North American Region, representing the United States. He sits on the Microsoft US Small Business Specialist Community Partner Advisory Council (PAC). Also Steve is active on the U.S. Board of the International Association of Microsoft Channel Partners (IAMCP), while maintainting the role of the president of the DC Chapter of the same organization.

Also, most of the companies on the list appear to be IT shops, helping companies set up (of course) Microsoft software and systems, rather than what most people think of as actual "app developers." And many of them are based in DC, rather than around the country. Real "grassroots."

When you look at the letters from the BSA and from ACT, it seems pretty clear that Microsoft is deathly afraid of this accelerated review of crappy patents, and it's getting various groups to "front" that effort with letters to Congress. But when you dig deeper into those letters and look, it's pretty clear this is just Microsoft knowing that an awful lot of its patents are likely to be of very low quality, and easily challenged under such a program. Next time, perhaps Microsoft should focus on actually innovating, rather than betting so much of its strategy on shaking down companies with weak patents.

Filed Under: app developers, covered business methods, patent reform, patents, startups
Companies: act, act 4 apps, app developer's alliance, bsa, microsoft

New Anti-Patent Trolling Bill Released

from the a-good-start dept

Earlier this year, about half a dozen different bills were introduced in Congress trying to tame the patent troll problem. Now, Rep. Bob Goodlatte has basically strung together a bunch of the different ideas from those earlier proposed bills to create The Innovation Act of 2013, which includes a bunch of ideas to limit patent trolls. It's a good bill that will definitely do plenty to stop some of the most egregious forms of patent trolling, though it doesn't go nearly far enough in terms of stopping bad patents from being issued in the first place, or allowing all kinds of companies (trolls or not) to attack other innovators. The bill is definitely a step in the right direction -- and it's impressive that Congress really did realize that patent trolling was such a problem, after pretending that it had solved all of the patent system ills a couple years ago with the America Invents Act, which was close to useless.

Among the good things in this bill: (1) in cases of really egregious behavior, the bill will allow for awarding attorneys' fees to the prevailing party. So in cases where a patent troll files a bogus lawsuit as part of the shakedown, the defendant can get attorneys' fees. That's helpful, but it will still require years of fighting and expenses to get to that point. (2) In the lawsuit, suing companies actually have to explain what was infringed and how. I know, it seems crazy that this wasn't a requirement before, but welcome to the insanity that is our patent system. (3) Limiting the discovery process. Discovery can be incredibly expensive, and trolls have leveraged that to burden innovative companies that they're suing. This bill tries to limit the power to abuse discovery, though there are always loopholes. (4) "Transparency of ownership." Basically, patent trolls won't be able to hide behind shell companies as easily as before. (5) It tries to (somewhat) limit the ability of patent trolls to go after end consumers of products (such as the troll claiming it could sue all WiFi users) or the troll going after anyone using a networked printer/scanner. All it really does here is allow the consumers to continue using the products while other stuff gets resolved if the troll has also sued the manufacturer. This means, if it's more lucrative, trolls will just avoid suing the manufacturer and go after the users. Again, this protection is not complete, but it's a step forward.

All of these are useful and positive steps, but won't stop trolling. It will, hopefully, limit the most egregious cases, but we've certainly seen that trolls can get creative in how they troll, so I imagine that, if this becomes law, we'll start to see new methods pop up quickly. That said, it's still a long way from actually passing. The fact that the bill is being introduced with a wide variety of powerful backers -- Reps. Bob Goodlatte, Pete DeFazio, Zoe Lofgren, Jason Chaffetz, Howard Coble, Anna Eshoo, Lamar Smith, Tom Marino and George Holding -- means that the bill actually has a better chance than most of actually getting to the floor and passing. But there will be others fighting against it, and a similar bill needs to get through the Senate as well, though that seems likely. If it can get through Congress, it seems like that the administration will support it, but that's not definite.

Honestly, the best thing about this is that, contrary to our expectations after the America Invents Act passed, patent trolling behavior became so egregious that Congress was actually willing to step back into this issue. That suggests that if the activity does continue, Congress will actually address it at some point. That's a good thing, and as EFF notes, we have the patent trolls to thank for that.

Filed Under: bob goodlatte, discovery, fee shifting, patent reform, patent trolls, patents, shell companies

Innovators & Patent Trolls Go Head-To-Head In Washington

from the free-event-and-live-stream dept

As part of our sponsorship program with the Application Developers Alliance, we're pleased to promote an upcoming event that should prove very interesting to Techdirt readers. Next Tuesday at 6:00pm ET, the Alliance is pitting innovators against patent trolls in a head-to-head panel in Washington, DC and streaming it live online.

The DC Developer Patent Summit will feature two discussion panels: one looking at the problems with the patent system, and one discussing ideas for reform. In addition to a wide range of innovators and policy-makers, the latter panel includes the Chief Policy Council for Intellectual Ventures, on hand to defend the status quo. My guess is that you can expect some sparks to fly. We've often been shocked by the tenacity with which Intellectual Ventures defends its practices, so it will be interesting (to say the least) to see what arguments it brings to the table against the very innovators who are threatened by it.

It's free to attend the event or to watch the live stream, but both require signup in advance. Check out the full event details that follow, then register on DevsBuild.It or use the registration widget embedded below.

DC Developer Patent Summit | #DevPatents

DATE: September 17, 2013
LOCATION: 1776 | 1133 15th Street NW, 12th Floor | Washington, DC 20005

AGENDA (times are ET):
6:00pm - Registration, drinks, food, and mingling
6:30-7:20pm - The Broken System: Innovators at Risk
7:20-8:00pm - Finding the Solution: Time for Reform
8:00-9:00pm - Enjoy beer, wine and food, meet the speakers, and network

DISCUSSION LEADERS INCLUDE:

The Broken System: Innovators at Risk

• Moderator: Jon Pasky - Principal and CEO, Pasky IP
• Kate Endress - CEO and Cofounder, Ditto
• Todd Moore - Founder, TMSOFT
• Eddie Peloke - CEO, Blue Shoe Mobile
• Micah Siegel, Ph.D - Senior Advisor, Stack Exchange

Finding the Solution: Time for Reform

• Moderator: Jon Potter - President, Application Developers Alliance
• Van Lindberg - VP of Intellectual Property, Rackspace
• Kevin O'Connor - CEO, FindTheBest
• Steven M. Auvil - Partner, Squire Sanders
• Matt Levy - Patent Counsel, Computer & Communications Industry Association (CCIA)
• Russ Merbeth - Chief Policy Counsel, Intellectual Ventures

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This post is sponsored by the Application Developers Alliance. Find more info on patents and other issues that affect developers at DevsBuild.It

Filed Under: patent reform, patent trolls, sponsored post
Companies: intellectual ventures

Tell Congress That It's Time To Fight Patent Trolls And Support Open Innovation (Before They Get Distracted)

from the speak-out dept

As part of our sponsorship program with the Application Developers Alliance, we're highlighting some of their key initiatives that we think Techdirt readers might want to get involved in.

With patent reform getting more and more attention in Congress, and a lot of the focus falling on the problem of patent trolls, there's a real opportunity right now for people to have their voice heard. There's still a lot of discussion and revision that has to happen before we see anything close to finished legislation with a real chance of passing, and that means this is the time to make sure Congress stays clear on the real issues and crafts solutions that actually work.

To that end, the Application Developers Alliance is running two campaigns to help get the message to Washington. First is the Fight Patent Trolls initiative, which includes a tool for sending a letter to Senators and Representatives. As usual, we recommend customizing your letter, but the default text includes some good key action points:

• Create a cheaper, faster alternative to litigation by allowing the Patent Office to review challenges - when evidence justifies - of low quality business method patents. This would give start-ups a chance to fight against the bad quality patents that are trolls' main ammunition.
• Require the Patent Office to create public searchable demand letter databases so we can track the basis and volume of patent claims and quickly identify abusive trolls.
• Reduce litigation costs by requiring parties to pay if they demand more than "core" technology documents, which are generally all that is needed to know if a technology is infringing.
• Protect end-users of off-the-shelf hardware and software. Just as coffee shops should not be sued for providing wi-fi to customers, app developers should not be sued for using off-the-shelf APIs that infringe a patent.

The second campaign is Innovators Need Patent Reform, an open letter to Congress that makes the same key points along with a public list of signers.

As both letters note, there are already proposals in both the House and the Senate, plus recommendations from the President, that contain some of the all-important protections that the victims of patent trolls need. Though the future of these specific bills is uncertain, the building blocks are beginning to fall into place, and it's time to run with that momentum.

You can sign the open letter or send your own on the Application Developers Alliance website.

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This post is sponsored by the Application Developers Alliance. Find more info on patents and other issues that affect developers at DevsBuild.It

Filed Under: congress, patent reform, patent trolls, patents, sponsored post

Gaining Momentum Against Patent Trolls: A 2013 Timeline

from the the-snowball-effect dept

The term "patent troll" has been kicking around for about 20 years now (at least according to Wikipedia's etymology), and that's about how long it's taken for the problem to really start getting attention in the broader political world. Progress is, of course, a little slow: tech startups and lots of other companies still face frivolous patent litigation as a major threat and, in many sectors, an inevitable "tax on success." But at the same time, the big picture of 2013 is one of significant progress and growing awareness on multiple fronts:

February: Obama Makes Unexpected Overtures & SHIELD Is Re-Introduced
During a Google Plus "Fireside Hangout" early this year, the president was asked about patent reform, and gave gave a somewhat surprising answer that would turn out to be an overture for bigger things to come. It was the first clear statement from the administration acknowledging that patent trolls are a problem.

Meanwhile, as expected, the SHIELD Act (allowing the victims of patent trolls to seek legal fees) was re-introduced — and again it turns out this wasn't the last we'd be hearing on that front.

April: Rackspace Takes On Erich Spangenberg
Calling him "the most notorious patent troll in America," Rackspace hit back against a lawsuit from Spangenberg by catching him in his own tangled web of agreements. Every year, companies prove increasingly less willing to roll over and settle when the patent trolls come a-knocking, and that pattern alone could be enough to make the whole scam more trouble than it's worth.

May: Legislation, Legislation Everywhere
At the beginning of May, Senator Chuck Schumer introduced a bill that would make it cheaper and easier to get tech patents reviewed by the USPTO. Then, later in the month, Rep. Ted Deutch introduced a bill that would take an important tool away from patent trolls by preventing them from hiding behind shell companies. Then Senator John Cornyn introduced the Patent Abuse Reduction Act with more troll-busting measures, and Rep. Bob Goodlatte released a patent discussion draft.

In the end, four different pieces patent-related legislation were proposed in May, making five so far in 2013. As usual, there were good and bad aspects to most of them — but the important thing was the amount of attention and discussion being given to the issue as a whole. (Also, while all that was happening, the state of Vermont quietly passed a new law targeting patent trolls, and promptly sued one under it.)

June: The White House Doubles Down
Following up on the hints dropped in February, the Obama administration got serious about patent trolls. Obama released a multi-part plan utilizing executive actions (as well as requests to Congress) to start tackling the problem. At the same time, the White House released a report about the broken patent system, with some data showing just how big the troll problem has become.

More In June: The Chief Patent Judge Chimes In
The CAFC, which handles appeals on all patent cases, doesn't always seem aware of just what's going on with the patent system. So it was a little unexpected when CAFC chief judge Randall Rader wrote an NY Times op-ed highlighting the patent troll problem. As we noted at the time, it would be nice to see this realization expressed in the court through better rulings and precedents — but for now, the recognition is an encouraging first step.

Still More In June: The FTC's Gloves Come Off
A June Supreme Court ruling that focused on pharmaceutical pay-for-delay deals had an important side effect: it allowed the FTC to go after patent trolls — and it didn't take long for the FTC to exercise that ability. Later the same week, the FTC announced a sweeping investigation of patent trolls and their business practices. Though patent trolls are often adept at manipulating the courts, they are less prepared for an attack from that angle, and it's going to be very interesting to see what the FTC does.

July: One More Bill Appears In Congress
Finally, just a couple of weeks ago, Reps. Darrell Issa and Judy Chu introduced the STOP Act, which would extend the USPTO's power to aggressively review business method patents. The legislation is closely related to Schumer's bill from May, and brings the total number of anti-patent-troll bills introduced in 2013 to six.

All told, 2013 is looking like the year when the walls are starting to seriously close in on patent trolls. Of course, like most people who game the legal system, they have a tendency for tenacity, but they're also driven by the desire for easy money. There's no need to make patent trolling impossible, just unprofitable — and it's encouraging to see companies, congress, the courts, the administration and agencies like the FTC all making steps in that direction.

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This post is sponsored by The Hartford.

Filed Under: ftc, patent reform, patent trolls, patents, sponsored post

Even More Patent Reform Bills Being Floated In Congress

from the it-would-appear-there's-some-appetite dept

Another day, another proposal for patent reform in Congress, once again targeting patent trolls (in part). Already this year, we've seen Rep. DeFazio push for fee shifting to make trolls pay legal expenses for bogus lawsuits, Rep. Deutch introduce a bill to force patent trolls to stop hiding anonymously behind shell companies, Senator Schumer seek to make it easier to quickly dump bad patents and Senator Cornyn put a bunch of these ideas together in a bigger anti-troll bill. Most of these have been introduced in the last month or so. We can now add a new proposal from Rep. Bob Goodlatte, head of the House Judiciary Committee, who has released a patent "discussion draft" that includes a number of issues it's trying to fix.

Goodlatte's proposal, like many of the others, has some good things in it, but is pretty weak overall, trying to skirt around the overall troll problems. The bill would certainly be a step in the right direction, but hardly a decisive one. Like Deutch's bill, this one would make it harder for trolls to hide behind shells, and then would do a bunch of things to try to decrease the costs for those who are sued. This would definitely be helpful, because it's the cost of fighting back, even if a company is sure it doesn't infringe, that leads many companies to just pay up to settle. The general estimate we hear is at least $1 million for just the district court case.

The good news is that it is increasingly clear that massive patent reform is back on the table, even with the last comprehensive patent reform bill, the America Invents Act, passing less than two years ago. At the time, we pointed out that the bill did nothing to deal with the troll problem, and it seems clear that many in Congress recognize patent trolling is a problem that needs to be dealt with quickly. Having five bills introduced -- four within the last few weeks -- and many by prominent members of Congress who have the ability to push a bill through, suggests that there really is an appetite in Congress to take on the trolling issue.

The bad news is that the existing proposals could go much, much further, and don't. There's nothing like an independent invention defense (or independent development as evidence of obviousness), or any effort to seek out peer review of patent proposals -- both of which would cut down on many bad patent trolling shakedowns. Furthermore, having watched the messy debate over the America Invents Act, which went on for about seven years (possibly more, depending on how you count), we saw some good ideas in initial drafts watered down more and more year after year, until the final AIA was effectively useless. If we're already starting with relatively weak proposals, once they go through the ringer and the pharmaceutical companies (mainly) strip out the parts they don't like, we may be in for another toothless bill. Hopefully, this is a sequel with a twist ending, and something real and effective can actually become law.

Filed Under: bob goodlatte, congress, patent reform, patent trolls, patents

President Obama Admits That Patent Trolls Just Try To 'Extort' Money; Reform Needed

from the didn't-expect-that dept

As we noted yesterday, President Obama is holding a "Fireside Hangout" via Google Plus today. In a bit of a surprise turn, he took a question about patents and patent reforms, with a specific question about software patents. And, his response was surprising. He admitted that there was a problem, and that there were some companies who were clearly not doing anything other than trying to "extort" money from others. Furthermore, while he pointed to the patent reform bill that passed in 2011, he also admitted that it really only went "halfway" towards reforming the patent system as far as it needed to go. If you click on the video, this takes place around 43:30 in the video. He also used the question to address a few broader issues, including innovation, privacy, the internet and the rapid change of technology.

Question: High tech startups are an important engine of the American economy. When I go around and talk to other enterpreneurs, what I hear is that they're afraid that if they become successful, they're going to be targeted by patent trolls... What are you planning to do to limit the abuse of software patents?...

Obama: A couple years ago we began a process of patent reform. We actually passed some legislation that made progress on some of these issues. But it hasn't captured all the problems.

The folks that you're talking about are a classic example. They don't actually produce anything themselves. They're just trying to essentially leverage and hijack somebody else's idea and see if they can extort some money out of them. Sometimes these things are challenging. Because we also want to make sure that patents are long enough, and that people's intellectual property is protected. We've got to balance that with making sure that they're not so long that innovation is reduced.

But I do think that our efforts at patent reform only went about halfway to where we need to go. What we need to do is pull together additional stakeholders and see if we can build some additional consensus on smarter patent laws.

This is true, by the way, across the board, when it comes to high tech issues. The technology is changing so fast, we want to protect privacy, we want to protect people's civil liberties. We want to make sure the internet stays open. I'm an ardent believer that what's powerful about the internet is its openness and the capacity for people to get out there and introduce a new idea with low barriers to entry. We also want to make sure that people's intellectual property is protected. Whether it's how we're dealing with copyright, how we're dealing with patents, how we're dealing with piracy issues. What we've tried to do is be an honest broker between the various stakeholders and to continue to refine it -- hopefully keeping up with the technology -- which doesn't mean that there won't be some problems that we still haven't identified and that we have to keep working on.

Some will reasonably be less impressed by the hedging at the end, but this is the first statement we've really seen that the administration believes that patent trolling is a problem (even to the point of referring to it as extortion). It's also the first we've heard from the administration that they only consider the last patent reform bill (the AIA) a "halfway" solution. To date, the administration had acted as if passing that was fixing everything.

Filed Under: patent reform, patent trolls, patents, president obama, software patents