Posturing Over Patent Reform Shows How Young Companies Innovate While Old Companies Litigate

from the same-as-it-always-was dept

It's hardly a surprise, but the latest draft bill, put forth by Rep. Bob Goodlatte, head of the House Judiciary Committee, has many really good things included, but is unfortunately weak in other areas. While it does include changes like requiring disclosures for those who sue over patent infringement (to get past the problem of shell companies), and a few other useful reforms, it really misses out on some big useful changes. For example, it doesn't include a provision that will make it easier to invalidate bad patents, which would be a huge step forward.

Of course, as you might expect, there's something of a "split" within the tech sector over whether or not there's support for Goodlatte's latest bill. On the one hand, you've got over 200 startups asking for that accelerated review process for questionable patents. At the same time, you've got a coalition of about 100 more stodgy old line businesses (some of whom are in the tech world) arguing that such a review would "undermine many valid patents." Frankly, that's hogwash, as we'll discuss in a bit.

It's really not difficult to see how this all breaks down. As we've explained for years, the general rule of thumb in the tech industry is that when you're young you innovate, and when you're old you litigate (with patents). Entrepreneurs and startups generally don't think or worry too much about patents. They're kind of a distraction more than anything else. The focus is actually on building an awesome product and disrupting the legacy players. It's only the bigger old stodgy companies who freak out at the possibility of being disrupted, and who suddenly start suing the upstarts (and, well, any competitor they can find) when they realize that it's more difficult for them to keep pace with the startups, and that it's more cost effective to shut down innovation from others, rather than compete.

Given that, it's not difficult to pick randomly from signatories of the two letters and figure out who signed onto which list. Automattic, FindTheBest, StackExchange, TechStars and FireBase? Yeah, they're on the innovators letter. 3M, Adobe, IBM, Microsoft? Yup. On the old stodgy companies letter, arguing against accelerated review of patents. And yet, laughingly, they claim to be the "innovators." Yes, maybe decades ago, but all those companies are now way behind the true innovators of today. Also, it's telling that pharmaceutical giant Eli Lilly is on that letter as well. The big pharma companies were the ones who spent most of the last decade stifling any kind of patent reform, which was being fought for by many of the same tech companies that are now trying to block new patent reform. The innovators got old and now they're trying to stifle competition, rather than innovate. It's sad. Looking down that list, it's difficult to find any that you could legitimately call innovative today, even if some were in the past.

Furthermore, the claims made in that letter (which apparently was written by the BSA under the new leadership of the White House's former IP czar), that this would somehow undermine valid patents doesn't pass the laugh test. As Matt Levy over at Patent Progress notes, the arguments in the letter make no sense at all:

Suppose a company has an innovative product and asserts a related patent against a competitor. If the competitor requests [an accelerated] review of the patent and wins, the original company still has an innovative product; the difference is that now it might have a competitor in the marketplace.

That’s actually a good thing. Now we have two companies with innovative products instead of just one. And the competitor is allowed to keep making its product, which might be even better than the original company’s.

But a company with a patent, even an invalid one, can stop an innovative product from coming to market or add significantly to the product’s cost. That’s because fighting patent infringement is incredibly expensive.

Nothing in an accelerated review process could possibly harm actual innovation. The only thing it does is ensure that old, stodgy, slow companies will have to keep pace with more entrepreneurial entities, and compete by continuing to innovate. That's a good thing, but you can see why those legacy players are scared. They know they can't keep up any more.

Filed Under: bob goodlatte, innovation, patent reform, patent review, patents

All It Takes Is Two Words To Wipe Away One Of The Pillars Of Free Speech Online

from the don't-let-it-happen dept

We've written a few times about the efforts of most states' attorneys general to seriously hinder innovation online by effectively gutting Section 230 of the Communications Decency Act, by saying that it doesn't apply to state crime laws. As we've discussed, the change may look simple -- it merely adds two words to Section 230: "or state" -- but the impact would be tremendous. As Derek Khanna has recently pointed out in two separate articles, Section 230 can quite reasonably be credited with enabling much of the internet innovation we all enjoy today, and the inclusion of just those two tiny words could bring a lot of internet innovation to a screeching halt.

And, even worse, those two little words could have a massive impact on free speech online.

A quick explanation may be helpful. The basic idea behind Section 230 is that it provides safe harbors to internet services, noting that they are not liable for things their users do online (with intellectual property infringement exempted). It is most often used in defamation cases, but applies in other situations as well. The concept is important even if it's a simple one: we don't blame the tool provider when the tool is abused. We don't blame AT&T when a phone is used in a crime, just like we don't blame Ford because one of its cars was used in a drive-by shooting. Unfortunately, on the internet, some people just love to blame the service providers for breaking laws, rather than the actual users. What Section 230 does is make it quite easy to do a course correction on such lawsuits, allowing the service provider to dump the lawsuit quickly, and effectively tell the suing party: "hey, focus on who actually broke the law, not us."

Why is that so important? Because if service providers are potentially liable for the actions of their users, they're a lot less willing to provide platforms and services that the public can use. The liability risks become too high, too fast. Even the cost of defending bogus litigation can wipe out a small company. What Section 230 does is let companies being sued get rid of those lawsuits much more quickly and cheaply than they'd otherwise be able to. And that, in turn, is essential for enabling free speech online. Because service providers can build their platforms and services to allow for free speech, safe and secure in the knowledge that if someone abuses those speech privileges, the site owners won't be held liable. Without Section 230, for example, it would be very, very risky for sites like this one to have a comments section. Or any newspaper or blog site. Or Twitter. Or Facebook. Or YouTube. These tools that have become essential to enabling public speech likely wouldn't be around.

And nearly every state's attorneys general wants to kill it off.

Why? So that they can grandstand against websites they don't like online, because some of their users do bad things. Rather than using those sites as a tool to find the people doing bad things, it gets a lot more press attention for the various attorneys general to just go after the company itself. The end result, though, would be many fewer online services, much less internet innovation and a massive dampening of free speech online.

Because of two little words.

Section 230 has been an astounding success in enabling tremendous new platforms that have, in turn, encouraged all kinds of valuable expression. We shouldn't wipe that out with two little words designed to help some politicians blame companies for the things their users do.

Update: A few people have reasonably complained that we didn't fully explain the change in the law, so we'll add in the details here. Sorry about that. Basically, as the law stands, it exempts federal criminal activities from the bill, which isn't a huge issue, because it's rare that activities by users on a site reach the level of federal criminal law in a manner that would turn focus on the site itself. What the states AGs want to do is exempt state laws as well, which would be a much bigger deal. The law, after the change, would read as follows, with the bolded portion being the two new words:

Nothing in this section shall be construed to impair the enforcement of section 223 or 231 of this title, chapter 71 (relating to obscenity) or 110 (relating to sexual exploitation of children) of Title 18, or any other Federal or State criminal statute.

This makes a huge difference because the state AGs are much more likely to use various laws to target sites for the actions of their users -- and in fact have made it a habit to threaten sites who are clearly protected by Section 230, because it makes headlines. In recent years, we've seen AGs accuse sites like Google, Craigslist, Topix and more of breaking laws, when it was really their users doing so.

Filed Under: free speech, innovation, secondary liability, section 230