The Noisy Channel

 

Software Patents: A Personal Story

October 3rd, 2009 · 60 Comments · General

Given the radioactive nature of this post’s subject matter, I feel the need to remind readers that this is not a corporate blog, and that the opinions expressed within are my personal opinions, not those of my employer. Also, please understand that I cannot comment on any intellectual property issues specifically related to my employer.

With that preamble out of the way, let me tell you a true story. The other day, I received a phone call from a friend who has been building a kick-ass startup. That friend had been contacted by a much larger competitor with what amounted to an ultimatum: shut down and come work for us, or we’ll crush you with a patent infringement suit. My friend’s startup didn’t cave in–in fact, my friend even went through the trouble of sharing a pile of incontrovertible prior art with the competitor. The competitor was unimpressed, and my friend’s startup is now facing a potentially ruinous lawsuit.

If you know any of the characters in this story, I beg you to keep that information to yourself–at least for now. I’d like my friend to have a chance of getting his company out of this predicament, and premature publicity might hurt his case.

But back to the case: let me give you an idea of how a story like this can play out. At a high level, the startup can choose to fight or not fight.

Not fighting means the entrepreneurs writing off their startup, but it allows them to move on and try something new. It might be the best career move for the entrepreneurs, but it means that the world loses a promising startup, and the surrender rewards bad behavior, reinforcing a regime where innovators can’t afford to compete with more established players.

Fighting means  mounting a non-infringement defense, an invalidation defense, or both.

A non-infringement argument asserts that, regardless of the validity of the patent, its claims don’t cover what the startup is doing. Since patents carry a presumption of validity, the non-infringement route is appealing–there’s no need to slog through the much longer invalidation process. Leaving a bad patent alive may be a worse outcome for the rest of the world, but entrepreneurs don’t have the luxury of taking the weight of the world onto their own shoulders.

Unfortunately, the very characteristics of a bad patent make it hard for an accused infringer to succeed in a non-infringement argument. If a patent is overly broad, then it’s more likely that the infringement argument will be valid (but not sound, since the patent itself is–or should be–invalid). Vaguely worded claims are also a problem–while a patent examiner may have granted a patent based on one interpretation of the claim language, the patent holder may now be asserting infringement under a different (and typically broader) interpretation of that same language.

As a result, a non-infringement argument often depends almost entirely on the result of a Markman hearing, more formally known as a claim construction hearing. In such a hearing, a judge decides how to interpret any language in the claim whose meaning is contested by the opposing parties in the suit. Such a hearing is often a crap shoot for the accused infringer. An unfavorable result which supports the infringement accusation may ultimately help invalidate the patent, but the results are likely to come too late–justice delayed for a startup is often an extreme case of justice denied.

Which brings us to the invalidation route. In theory, invalidation is the right approach to take when confronted with an invalid patent. Ideally, the accused infringer presents prior art to the patent office to reexamine the patent, resulting in the patent either being invalidated or rewritten to have a much narrower scope. In practice, however, this approach requires significant effort, time,  money–especially if you depend on lawyers to do the heavy lifting–and luck. The best hope is to rapidly request and obtain a reexamination, and then to request and obtain a stay of the infringement suit pending reexamination. Needless to say, the patent holder will fight tooth and nail to avoid this outcome.

I don’t know how my friend’s story will end. But, as the above analysis should make clear, he’s between a rock and a hard place. Whether or not you believe that there should be software patents–and there is room for reasonable people to debate this question–I hope you agree that the situation my friend is facing amounts to legalized extortion. I understand that no system is perfect, and that our legal system requires compromises that have inevitable casualties.

Nonetheless, my friend’s story does not feel like an isolated incident, but rather evidence of a systemic problem. There are a lot of software patents floating around right now of dubious validity, many of them granted to companies that have since folded and have unloaded their assets in fire sales. It would be sad for this supply of ersatz intellectual property to impede the real innovation that the patent system was intended to protect.

Update: this post has been picked up by Y Combinator’s Hacker News.

60 responses so far ↓

  • 1 Milan Merhar // Oct 3, 2009 at 1:51 pm

    The other issue with reexamination is time. The US Patent office does its best to provide a speedy decision as to whether the materials presented justify a re-exam, but then the re-examination proceeds at the same pace as a regular patent examination, and can then be followed by a lengthy appeal process.

    In other words, an ongoing distraction to a focused startup, and one more thing to be explained to potential customers and investors.

  • 2 Daniel Tunkelang // Oct 3, 2009 at 1:55 pm

    Good point. That makes it critical to obtain a stay from the judge pending the reexamination. And even then the situation isn’t ideal: the infringement suit hangs over the startup indefinitely, causing distraction and potentially jeopardizing funding.

  • 3 jeremy // Oct 3, 2009 at 3:19 pm

    At the risk of exposing my naivete in such matters, I’ll bite:

    In such a hearing, a judge decides how to interpret any language in the claim whose meaning is contested by the opposing parties in the suit. Such a hearing is often a crap shoot for the accused infringer.

    It seems to be that the interpretation of any language in a claim is not independent of whether or not there exists prior art. For example, if a claim is interpreted one way, there might be prior art for that interpretation, but not for a different interpretation.

    It seems to me that the strongest position you might have is if you already have prior art for all of the 4-5 different ways that a judge might be able to interpret the language. Is it then not possible to go in, get the “official” interpretation certified/verified by one court, and then have the prior art ready to show invalidation in the next? Can’t you do the two courts sequentially? Doesn’t it even make the case stronger if you do the two courts sequentially?

    If the startup is completely confident that any possible interpretation of the language does have prior art, then it seems to me that would be the way to go. (IANAL of course.)

    And then can’t the startup counter sue for damages/fees, for basically predatorily trying to drive the startup out of business via spurious lawsuits?

    It might be a painful process, but at the end of it, if they haven’t lost any money because of the countersuit, it might be worth it. Again, IFF they’re confident that prior art does exist for all possible interpretations of the language. Do they think that it does?

  • 4 Mark H // Oct 3, 2009 at 4:24 pm

    What I find really objectionable is the notion that in granting a patent, someone somewhere has just denied any possibility that anyone else in the world could independently arrive at the same idea.

    I have had many situations where I have created an algorithm or data structure to solve a problem and only later discovered that it has a name and prior use. It therefore seems very likely that at some stage in my career I could have created code that could have infringed a patent somewhere.
    If challenged, then the law is effectively questioning both my intelligence (assuming I could not possibly have conceived the idea independently) and my honesty (assuming that I stole the idea rather than conceived it). Forget the financial concerns – I find this default legal assumption a wholly offensive accusation and one which cannot be defended.

    I’d like to think the field of computer science was an open landscape to explore but it seems to be littered with landmines in the form of patents.

  • 5 Jonathan A. Marshall // Oct 3, 2009 at 5:16 pm

    > “Fighting means mounting a non-infringement defense, an invalidation defense, or both.”

    Another tactic is to out the bully publicly. Depending on the facts, the parties, and the PR, this might convince the bully that pursuing the startup isn’t worth the bad publicity.

    Your friend might also find help from Peer-to-Patent (http://www.peertopatent.org/ http://cairns.typepad.com/peertopatent/ ), OSAPA (http://www.linuxfoundation.org/programs/legal/osapa ), or other groups that investigate patent validity.

  • 6 Daniel Tunkelang // Oct 3, 2009 at 5:36 pm

    First, I should add the additional disclaimer than I’m not a lawyer. Though I’ll add that legal issues are often too important to be left to the lawyers!

    Jeremy, you’re right that part of a defensive strategy is to map out all of the likely claim interpretations and have strategies for them. For example, there might be one contentious term (e.g., “user”) where a narrow interpretation (e.g., users have to be people) supports a non-infringement argument, while a broad interpretation (e.g., one broad enough to include software applications accessing a system via an API) support an invalidation argument because it now is broad enough to encompass prior art. In that case, you have a point that it may be optimal to first push for the narrow interpretation in order to maximize the probability of a non-infringement victory, and then, only as a plan B, to push for the broadest interpretation to support an invalidation argument. In practice, however, time is on the side of the patent holder. That’s why it often makes sense for the accused infringer to mount both the non-infringement and invalidation defenses in parallel. I think your advice only works for companies that can afford to sustain the time, distraction, and external costs of its duration. That’s often not the case for a startup. And, in general, I think it’s rare that countersuing someone in response to a predatory lawsuit succeeds–the burden to prove that the suit was predatory is too high. Again, IANAL.

    Mark, I understand your objection regarding independent invention, and it applies to all patents, not just software patents. We could have a deep separate discussion about whether patent law should be amended to allow for independent invention. I think the near-impossibility of proving independent invention means that allowing for it would probably mean discarding the patent system entirely. And, for patents in general (and not just software patents in particular), there are reasons we might not want to get rid of them, even through the system is imperfect.

  • 7 Daniel Tunkelang // Oct 3, 2009 at 5:38 pm

    Jonathan, that was actually something I suggested to my friend. Unfortunately, it doesn’t seem likely to have any effect–the accuser apparently has a reputation for litigation and is unlikely to care about the bad publicity.

  • 8 jeremy // Oct 3, 2009 at 6:49 pm

    And, in general, I think it’s rare that countersuing someone in response to a predatory lawsuit succeeds–the burden to prove that the suit was predatory is too high.

    My point is that once you do the analysis, if it becomes laughingly clear that no matter which of the k possible interpretations a court might eventually settle on, there exists prior art for each one, then (ianal also) who in their right mind would sue?

    If this is coming from someone with a competing product (you did say that, yes?) rather than from a patent troll holding company, then it seems even more clear than they’re just trying to stifle innovation.

  • 9 Daniel Tunkelang // Oct 3, 2009 at 7:00 pm

    Yes, this is coming from someone with a competing product, and it’s clear to me that the goal is to knock out an upstart competitor, rather than to extract royalties.

    As far as hedging across different claim interpretations goes, you’re arguing for ways to maximize the chance of a successful invalidation argument. And my point is that, even if an invalidation argument is crystal clear, presumption of validity still favors the patent holder. Look at NTP vs. RIM to see how this plays out on a larger scale.

  • 10 Panos Ipeirotis // Oct 3, 2009 at 7:34 pm

    Mark, the patent law is not structured to question the intelligence of subsequent independent inventors.

    It is mainly structured to reward efficiency and give incentives for people to invest in the development of an idea AND make the idea public. (Do not forget the second part.)

    Pharmaceutical companies are actually the best examples: nobody is going to invest millions and billions of dollars in a drug if they are not protected against copycats. Once the drug is produced and approved, it is trivial for other companies to piggyback, and develop generics by free-riding on the effort of the big pharmaceutical company’s R&D.

    If there was no patent law, then the pharma companies were going to keep as a trade secret the recipe for the drugs, trying to make the chemical composition impossible to reverse engineer, etc. Definitely better to give them 20 year protection compared to the case of not having access to the generated knowledge at all.

    In other words, there is the tension between copycats and independent discoveries. You want to err on having copycats, allowing independent discoveries. The other extreme is to give eternal rights to the first discoverer. The law gets somewhere in the middle, giving 20 years of protection to the patent holder.

    Now, for software patents the problem is that many of the granted patents are obviously non-novel, in a sense that they would never pass the litmus test of peer-reviewing in an academic conference. But patent examiners simply do not have the resources to carefully judge every case. So, we get many false positives, which generate the landmine that we see today.

    Perhaps requiring an open source implementation for each granted software patent would make it less ridiculous. To prove violation of the patent, the victim should be able to show that the violating party has reused pieces of the code, or re-implemented without sufficient additional creativity the patented algorithms.

  • 11 jeremy // Oct 3, 2009 at 10:14 pm

    As far as hedging across different claim interpretations goes, you’re arguing for ways to maximize the chance of a successful invalidation argument. And my point is that, even if an invalidation argument is crystal clear, presumption of validity still favors the patent holder. Look at NTP vs. RIM to see how this plays out on a larger scale.

    Daniel: Hmm, interesting. After reading the link you sent, it sounds to me like the defense invalidated one of the patent’s claims, but not all of the patent’s claims. Patents are written in a way such that if one claim is shown to be invalid, it does not invalidate the patent as a whole. The non-invalid claims still hold. That could have been what happened, in the RIM case, maybe?

    Is your friend 100% sure that prior art (a) invalidates all the patents claims, or (b) only invalidates claims that completely cover what the startup is doing? Could it be that the startup has some technologies that are prior-art defensible, and some that are not? Patents aren’t monolithic, and shouldn’t be read that way. Just a pointer.

    Now, for software patents the problem is that many of the granted patents are obviously non-novel, in a sense that they would never pass the litmus test of peer-reviewing in an academic conference.

    Panos: The issue of novelty has nothing to do with peer-review. A patent could be novel, but still be not worthy of conference or journal acceptance.

  • 12 Jacques Mattheij // Oct 3, 2009 at 10:25 pm

    The ‘shut down and come work for us’ pretty much makes any other issue moot, of course he had no obligation to come and work for them, so clearly the patent is just used as a means of extortion. If your friend has a half decent lawyer that should help a great deal. What would help even more is if he has it documented.

  • 13 Daniel Tunkelang // Oct 3, 2009 at 10:39 pm

    Panos, I think part of the problem with software is the lack of expertise at the U.S. Patent Office on the subject. I’ve found, for example, that European patent examiners tend to have more domain expertise–and that’s independent of the Europeans being generally more skeptical of software patents.

    Jeremy, maybe NTP vs. RIM isn’t the best example–I’m not familiar with all of the claims RIM allegedly infringed. My point was that RIM could not get a stay pending reexamination, and thus was forced to settle even while awaiting its results. RIM probably could have taken a better strategy overall, but my point is that they faced a choice between settling and having their service shut down while they waited for an answer from the patent office. Just imagine what that choice is like for a startup.

    Jacques, the ultimatum wasn’t explicit–while the approach is pretty transparent (a cease and desist letter, then a “shut down and come work for us” offer, then a lawsuit after the offer was turned down), I don’t think there’s enough evidence to back an extortion case. And my friend doesn’t have deep pockets to pay lawyers–that’s why this situation is so tough.

  • 14 dinesh vadhia // Oct 4, 2009 at 4:57 am

    Definitely a radioactive post! If your friend believes they have a strong case but don’t have the finances for litigation then they should try finding an IP lawyer to work pro-bono (unlikely) or on a fee-on-win basis (likely).

    It might be prudent initially to spend a thousand dollars for a couple of hours advice from a top flight IP attorney.

  • 15 Mark H // Oct 4, 2009 at 5:35 am

    Hi Panos,
    Yes, patents for Pharma and the millions they invest in research, clinical trials etc makes sense.

    In the field of software I don’t generally see the same level of blood, sweat and tears in most creations. E.g. Multimap’s patent for the notion of displaying pins on a map seems in stark contrast.

  • 16 Chen Sun // Oct 4, 2009 at 11:55 am

    The initial example somewhat distorts what patents are about. Patents were historically developed to protect inventors and to encourage them to publicly publish an invention for copycats to license to produce more of, so that society as a whole benefit.

    The people wanting patent protection were the small guys, because, for thousands of years, large, well-funded companies would copy the small guy’s invention, and trash the small guy’s new company. After then a couple hundred years of legislations and judicial reviews, patent rights were created–to protect the small inventors.

    At start of the invention protection laws, most inventions were mechanical, and nowadays, there are complaints about software patents. But, the business situation remains same in software as in mechanical. Without the software patents, the big companies would simply take the small startups invention and completely wipe them out, very quickly. This still happens all the time.

    So, the initial example of the patent as a bully club against startups, should be reversed– it is also the same, and sometimes the only possible, club the startup uses against the bullies.

    Doesn’t sound like a very impressive startup if the only thing it could come up with is a copycat idea. There are unlimited numbers of ideas—let the startup work on something more productive or license the invention.

    So the “bully” here wants to use the legal system. There’s a couple of other options the startup can do. It could ask to pay a license, which sounds very fair. Or it could simply breach the patent and see what the legal “bully” would do. The “bully” now has a problem. It costs starting a million dollars to launch a patent suit, and, if its patent is weak, it can easily lose the suit and pay the opposing sides attorney as well.

    If it wins the suit against the startup, it still will likely lose millions due to that it can’t collect. So, most likely, the “bully” is threatening rather than fully intending to go through with this.

    Suppose the patent is justified or the bully’s legal actions win, and subsequently, the startup is successful….

    Microsoft lost a few patent lawsuits recently. One, it clearly infringed on a University of California patent and paid $700 million plus. The second, it infringed on a small company’s calendar function used Outlook. The judgment was initially as a percentage of Outlook, but this was overturned, as Microsoft pointed out that the calendar function was only a small part of Outlook. Even Microsoft as the infringer appreciates that the patent doesn’t destroy the product, and that Microsoft is willing to pay a “license-penalty” fee for the patent’s direct contribution.

    Microsoft is a good example of a bully who ran over small companies, subsequently got sued, by those with patents, lost a few big ones and got tied up in the courts too long, and subsequently, Microsoft is a lot easier to deal with by the small companies with patents.

    So, as I see it, another option is to counter-threat with trying to invalidate the patent, and if the “bully” proceeds with legal action, then minimize legal costs (e.g. plead no contest), and ask the Judge to quickly decide and set a license fee.

    In summary, patents are legal clubs either way, and actually protect the smaller companies and startups better than harm them.

  • 17 Chen Sun // Oct 4, 2009 at 12:16 pm

    Additional information,

    My recollection is that court-ordered patent royalties are typically 2 to 5% of their contribution to sales. This means, if a software feature contributed $100,000 in sales, the royalty is $2,000 to $5,000, not significant enough to destroy a product.

    I’m not a lawyer and am writing based on what I recall.

  • 18 Daniel Tunkelang // Oct 4, 2009 at 2:04 pm

    Chen, I understand the theory and intention of patents. And, while I’m not a lawyer either, I’ve had a fair amount of experience with patent prosecution and litigation in practice. What I hope my story makes clear is that there’s something lost in the translation from theory to practice.

    Let me address your specific points.

    Patent rights do seem like a way to protect smaller companies from seeing their fledgling innovations copied by deeper-pocketed larger companies. That’s the theory. In practice, patent litigation is too expensive for most smaller companies to use without litigation becoming a primary focus–at the expense of product or service delivery. In fact, much of the litigation against larger companies is carried out either by law firms acting on contingency or so-called patent trolls that typically purchase patents at asset sales when companies go out of business. While this process does represent an aspect of free-market capitalism, it’s a bit of a stretch to say it benefits small companies in practice.

    In contrast, larger companies are in a better position to bear the costs of patent litigation but even they tend to exercise that ability prudently–at least in the software space. My personal opinion is that most software companies find more cost-effective ways to compete than by attempting to enforce patent rights–perhaps because the track record on software patent infringement suits is fraught with high costs and uncertainty.

    As for your assertion that the startup being sued has a “copycat idea”, I don’t know how you jumped to that conclusion. The patent being asserted against them is itself so broad as to be covered by prior art in the academic literature, and the company has built novel technology that nonetheless may be covered by the patent’s overly broad claim language. If I correctly follow your reasoning, almost any innovation would be a copycat idea if someone could dig up a sufficiently general class of ideas and write a broad patent to cover it–prior art notwithstanding.

    As for the startup’s options, I don’t believe licensing is one of them. The larger company doesn’t want royalties; rather, it wants to eliminate a competitor. Moreover, it does not cost a million dollars to launch a patent suit–the costs accrue over time. I believe the larger company is playing a shrewd and cynical game of chicken, knowing that the startup will have to give up before the costs get anywhere near that high. And it’s very hard to recoup costs for being sued–the standard there is extremely high. Moreover, there’s the issue of timing: time plays to the larger company’s advantage–by the time the startup could win such a suit, it will have already bled to death.

    In summary, I agree with you that patents–software patents in particular–are intended to protect smaller companies and startups rather than to harm them. But sometimes the road to hell is paved with the best of intentions. The current system really is broken–in practice, if not in theory.

  • 19 Jonathan A. Marshall // Oct 4, 2009 at 2:21 pm

    Can your friend open-source the software (removing it from the startup as a target for litigation) — and then shift to a compatible business model (e.g., support rather than shrinkwrap)?

  • 20 Daniel Tunkelang // Oct 4, 2009 at 2:25 pm

    That’s a fascinating suggestion–I’ll propose it to him if he hasn’t read it here already.

  • 21 Milan Merhar // Oct 4, 2009 at 3:51 pm

    Chen, I think that there have been a couple of significant changes over the years that affect your argument. First, the rate of technological progress is greater than in the era of mechanical devices; 100 years ago the 17 year duration of a patent was a fraction of the useful lifetime of the element it protected. Second, the scale of systems was smaller.

    Taken together, any one mechanical product drew upon a greater percentage of unencumbered (i.e. old) precedents, and was at risk from a very few (and probably well known) competitively protected innovations, which could be licensed or designed around.

    Contrast that with today’s situation — the half-life of leading edge technology is a few years, but the scope of patent protection is 20 years. And, it has been said that the average new software product incorporates hundreds if not thousands of elements, each potentially patentable. The risk profile is significantly different.

    There are historical precedents: the US aviation industry was pretty much frozen by the Wright patents until WWI, when the US Government basically waived patent infringement enforcement for anything associated with the war effort. The early radio industry was also a battleground of lawsuits and counter-suits; the solution that arose was a patent syndicate — an excellent solution for its members, although one guaranteed to stifle outsiders and IMHO of little value in promoting overall innovation.

    Jonathan, depending on how the patent claims in question were drafted, it could be possible to infringe them merely through use. The support company might thus find their customers being sued, even though the direct heat was no longer directed at them.

  • 22 Neal // Oct 4, 2009 at 4:24 pm

    Unfortunately fighting with lawyers here is likely to end the same way for the startup, death.

    Startups are as a rule not profitable, or are in a growth phase such that profits are reinvested. A pending lawsuit will scare away investors, cutting off funding options.. meaning death.

    All the remedies are too slow and the aggressor can file motions to delay the process and simply wait until the cash dries up. Actually getting to trial may take $1M in lawyer costs. Lawyers generally don’t work pro-bono for businesses.

    Newer startups also don’t have patents of their own in most cases.. software patents take years to even get examined.. so a counter suit using your own patents as a sword is not avail.

    It seems that the best course of action may have been to attempt to negotiate a reasonable buyout to at least get money back to investors or reclaim some upside. Might be too late for that.

    I’m an optimist generally.. yet this looks very bad. If only there were some quick way to get prior art looked at.. but that’s what the trial is for.. catch-22.

  • 23 Jerome Pesenti // Oct 5, 2009 at 12:46 pm

    There is a simple solution to the overall problem and I had heard that the USPTO was planning to implement it (though it was years ago and nothing has happened yet so I am afraid it was just a rumor): when someone applies for a patent, make the application easily accessible for a fixed period of time in a wiki/forum style framework and allow anybody to comment on it and submit what they think constitutes prior art. The patent reviewer can then use that material to make an informed decision.

    This would save tax payer money and would lead to much more accurate process as competitors would have an incentive to do free work for the reviewer.

  • 24 Jonathan A. Marshall // Oct 5, 2009 at 1:37 pm

    Jerome, Thanks — yes, this is Peer-to-Patent:

    * http://www.peertopatent.org/
    * http://dotank.nyls.edu/communitypatent/
    * http://cairns.typepad.com/peertopatent/
    * http://www.uspto.gov/web/patents/peerpriorartpilot/

    USPTO is now evaluating the results of the Peer-to-Patent pilot program.

  • 25 Chen Sun // Oct 5, 2009 at 1:57 pm

    Speaking of 20 year patents, let’s also talk about 99 year copyrights and unlimited time trademarks. I’m really disappointed at that there are individuals here who want to remove patents that protect individuals and small companies.

    If a developer doesn’t like software patents, the best thing he can do is to upload all his code with complete explanations to the web. This way, anyone trying to patent will run into an enormous wall of software developers’ prior art.

    And, it seems only fair, if inventors can’t have software patent rights, developers shouldn’t have software copyrights either. And no software trademark rights, which means, anyone downloading the code should be able to put his name on it, and sell it. And no open source licensing copyright. I should be able to copy your code, call it my own.

    I would guarantee to sell your code for a lower price such that it better benefits the public and other coders at a lower price. And revealing its clever programming for less costs would spur innovations too, following up on the logic of the postings here, as subsequently, more developers would better be able to utilize your code. Wouldn’t it?

    If the developer has employees, as for example Google, and the employee makes a copy of their code, I guess he owns another Google. (Goldman-Sachs just caught a developer stealing their financial market timing code—I guess that’s OK, according to the logic of the postings here, because they shouldn’t have any copyrights either.)

    Programming skills are becoming cheaper, especially with international outsourcing. Your ideas, patents, copyrights, and trademarks may benefit you someday. Patents, copyrights, and trademarks are usually designed to help the smaller guys. Because they are rights, they can be used by larger firms too.

    But, the way some developers talk about them, they want to destroy the very few rights that individuals and smaller firms can use to fight against the larger firms.

  • 26 Bob Carpenter // Oct 5, 2009 at 3:38 pm

    I liked Chris Dixon’s post, Software patents should be abolished. And I’ll push my own blog post on rediscovery of ideas through the scientific zeitgeist.

    When I worked at Bell Labs, Lucent told us to patent everything we could to create an “intellectual property minefield” that would “blow up” anyone “moving into” the “speech and language processing space”.

    Like many large companies, Lucent shared patents with other large companies and was mainly on the defensive against patent trolls.

    Most of these patents are silly. Even a non-specialist is unlikely to find anything remarkable in any of the 28 claims in Roberto Pieraccini et al.’s patent on connecting a speech recognition system to a database. This wasn’t just Roberto (he’s intellectually honest and quite reasonable); we all generated simple patents, and even got cash bonuses and pats on the head for doing so.

    The basic ideas behind startups are so simple and obvious that venture capitalists don’t (usually) sign NDAs. I don’t like to sign NDAs because every time I do, someone tells me something I already know as if it’s a big secret.

    At the NYC-Bio startup meetups, biotech companies talk about “rescuing” patents by patenting slight variant uses or minor chemical variants. They then market directly to get health care providers and patients to request the “latest version”.

  • 27 Daniel Tunkelang // Oct 5, 2009 at 6:30 pm

    Neal: unfortunately I agree with you that this looks bad for the startup. Out of principle, I want them to fight. But I don’t want my friend to sacrifice his career for that principle.

    Jerome, Jonathan: I’m a big fan of the idea of peer-to-patent. But I was under the impression that it only applied to new patent applications, and that it was opt-in for those applying. That doesn’t seem likely to help much unless there’s a really strong incentive, e.g., that the patents are granted more quickly or given more favorable treatment.

    Chen: I think we’re talking past each other. I agree with you that patents are intended to protect individuals and small companies, but my experience is that it doesn’t necessarily work that way in the real world. And patent and copyright are very different beasts–that’s a subject for another post, at least. In any case, I don’t follow your argument that “if inventors can’t have software patent rights, developers shouldn’t have software copyrights”. Can you can elaborate? Finally, your suggestion that anti-patent software developers open source all of their code and waive all rights to it still doesn’t address the problem that there is a proliferation of bogus patents that cause real damage.

    Bob: while I see a theoretical justification for software patents, I do feel that they cause more harm than good in practice–at least given the current realities. A little bit of reform might go a long way–indeed, I hope that the prospect of software patents being abolished will energize those who are proposing meaningful reforms.

  • 28 Jerome Pesenti // Oct 5, 2009 at 6:38 pm

    Daniel, I agree the peer-to-patent won’t help your friend. But had it been in place when the large company submitted its own patent your friend (or someone else) could have pointed to the prior work and make it much harder for them to actually get the patent in the first place…. That won’t solve everything but would be a definite improvement over the current state of things…

  • 29 Chen Sun // Oct 6, 2009 at 12:34 pm

    Hi Daniel,

    Again, these are just my non-lawyer views.

    Copyrights and patents are both forms of intellectual property—the result of someone making an intellectual investment to create something. I guess people here still believe in hard work and contribution should result in reward? Whether one puts one’s work effort Again, these are just my non-lawyer views.

    Copyrights and patents are both forms of intellectual property—the result of someone making an investment to create something. I guess people here still believe in hard work and contribution should result in reward? Whether one puts one’s work effort down in craft or mental efforts and then on paper, as in a patent, or on code, as in a software copyrights, both are work efforts.

    Most if not all ownerships are actually rights—a right to possess something. A person doesn’t really own a car until the State grants the right from others infringing on the car’s possession. Copyrights, trademarks, and patents all belong to intellectual property rights. They are very similar in that the ethical underpinnings are that these are the result of intellectual work efforts. The State is basically saying—to motivate your work efforts, we’ll give you certain rights. Very similar work-ethics-reward rights.

    Hence, if the argument is made that patent work efforts are worthless, by fair-work-reward logic, it follows that copyright work efforts should also be worthless. Both are simply abstract rights of intellectual property efforts. There is no more tangible “theft” involved in copying code (no one took anything) than in copying idea (no one took anything).

    Patents have extended power of the idea; but so do copyrights. For example, a movie script based on a book doesn’t use the same words (and indeed a silent movie can use no words), yet must pay royalties to the author. And copyrights do restrict innovations. For example, my recollection is that Gone with the Wind has never had a sequel, because the copyright holder refuses; and even printings of sequels were suppressed, if I recall. Also, it’s my understanding that copyrights are used in look-touch-and-feel litigation, even though codes may be quite different.

    Fundamentally, both copyrights and patents are State’s motivation rewards for intellectual efforts and both have extended rights. So, if banish patents, it follows logically from ethics of work efforts and rewards, why not also banish copyrights?

    Regarding the core of the argument here—do patents harm or help individuals and small companies, in practice….

    Let’s first decide whether patents are DESIGNED to help individuals and small companies or not. I believe Daniel and I are saying they are designed this way. If we agree on this point, we can then discuss how why in practice they work for or against small companies.

    P.S. I won’t be able to post as frequently because of pressing projects.
    on paper, as in a patent, or on code, as in a software copyrights, both are work efforts.

  • 30 Chen Sun // Oct 6, 2009 at 12:40 pm

    No edit function after post. Sorry about unnecessary text somehow added above.

    “Let’s first decide whether patents are DESIGNED to help individuals and small companies or not? I believe Daniel and I are saying they are designed this way. If we agree on this point, we can then discuss how why in practice they work for or against small companies.”

    This question is addressed to everyone here. No sense in talking about this until we first have a consensus on what the law is suppose to do.

  • 31 Bob Carpenter // Oct 6, 2009 at 2:25 pm

    In case I gave the wrong impression, I’m all in favor of software patent reform — the current system is ridiculous.

    Ironically, patents don’t actually give you a right to produce what you patent. It only gives you a right to stop other people from producing it. The reason is that construction of your patented item may depend on a previous patent you don’t own.

    For instance, I can patent an extension of your product. Then whichever of us wanted to produce the extended product would need permission from the other, because both patent rights are required.

    A difference between patent and copyright is that you don’t actually have to produce the thing you’ve patented. And unlike actual written works under copyright, patents can be vague. I think a useful analogy would be if you could patent plot devices for fiction, such as the surprise ending, or perhaps a particular surprise ending, like “it was all a dream”.

  • 32 Daniel Tunkelang // Oct 7, 2009 at 12:56 am

    Chen, I’m not a lawyer either, but I’ve seen enough software patent prosecution and litigation to have informed opinions about the theory and practice. The principle that “hard work and contribution should result in reward” is a nice ideal, but the law at best approximates that principle–and often makes a complete mockery of it. I do think that patents were originally intended to help the little guy. There were also intended to protect high-risk investments. I’m not persuaded that either holds true for software patents today–at least in general.

    Bob, you’re right that patents are negative rights. But that makes sense–I can’t imagine a meaningful framework otherwise. And there is a requirement of reduction to practice, which usually translates into building a prototype, but certainly no requirement beyond that. But the problem of vaguely worded patents is what really damns the system–particularly in the world of software patents. Markman hearings can yield shocking results.

  • 33 Chen Sun // Oct 8, 2009 at 11:23 am

    Since few are objecting to that patents are DESIGNED to help individuals and small firms, I’d like to present some facts. Studies have shown that only 2% of patents issued recover their investment, and only 1% make significant returns. Yes indeed, 98% of all patents lose money.

    I have no idea why people here are so concerned about software patents. Hundreds of years of patent laws cover a lot of judicial principles.

    1. A user can license.
    2. A software developer can write around the patent (smart!)
    3. A user can ask the judge to set a license fee.
    4. As patent fight costs start at $1 million each side, in the unlikely event it sues, the patent holder will likely lose money (98% do!)
    5. The award in the event of a judgment against is generally related to the revenue the infringer made as a result of using the patent. It’s the attorneys’ fees that are costly—the rest is unearned profits anyhow.
    6. A user should do a patent search prior to avoid these problems.

    Yes indeed hundreds of years of patent laws cover a lot of principles. In understanding that it is very costly and money-losing for the patent holder to sue, your friend should realize it is mostly likely a threat first—more likely even a bluff.

    http://www.adweek.com/aw/content_display/news/digital/e3i0d52172227325f28145910049b7db900?pn=1 This article describes patent litigation, but notice… “Firstborn (the defendant) escaped unscathed after hiring a law firm that threatened to fight the suit, which subsequently did not materialize.”

    If the litigant knows they don’t have a strong patent, they may threaten or even unlikely sue, but if sue will settle quickly. Against a startup, I’ll bet they won’t even bother suing.

  • 34 Daniel Tunkelang // Oct 8, 2009 at 2:38 pm

    Chen, I’d love to see the citations to back up those statistics–and I suspect that they gloss over some of the harder to quantify aspects of how people monetize intellectual property. For example, how do you quantify the ability to deter a competitor and thus demand a higher price point or valuation?

    Regardless, I think you’re missing a larger point. Suing a smaller company with a bogus patent is no bluff. A large company–or even a law firm working on contingency–can afford such a fight far more than a startup. Taking your own numbers at face value: what happens if the patent holder has $10M in the bank and the startup is struggling to raise a $1M seed round? Even if the patent holder ultimately loses the suit, the startup is unlikely to survive long enough to celebrate its Pyrrhic victory.

    I’m not arguing that all software patents are invalid or that software shouldn’t be patentable. There are arguments to be made about whether software should be patentable, but I’m making the narrower point that the current system incents bad behavior. I speak from personal experience.

  • 35 “Software Patents: A Personal Story” // Oct 9, 2009 at 1:00 am

    [...] story of startups and legal “leverage”, told by Daniel Tunkelang at Noisy Channel (via Pete [...]

  • 36 Rebecca // Oct 9, 2009 at 1:10 pm

    Hi Daniel,

    I want to thank you for writing this post, I will probably read it, and all the comments, several times. I appreciate the view from a non-lawyer regarding patents, and intellectual property in general, as well as the point of view of the startup.

    My own experience involves a significantly different product (bubble gum) and a somehwhat different point of view (we are the litigants), but the moral is the same. What does it take for a startup to stand up against a much larger bully, and does the USPTO support inventiveness and new business or ultimately… squash it.

    Your friend might want to read our story @ http://heresagem.blogspot.com/ to get an idea of what he could be in for. I’m all about standing up for one’s rights and an enthusiastic entrepreneur, but I tell our story so that others can learn from OUR mistakes – learn what to look out for.

    We are currently handling several lawsuits without an attorney, and while it is not something I recommend, it is possible, for the right person, to stand their ground with limited recources. One of our cases is a patent case, and although it is a relatively simple design patent, the process for patent lawsuits drives me batty. The patent case is probably the least valuable (monetarily speaking) but terribly important to win to support our other cases and ultimately, what is “right”.

    Our intellectual properties were acquired to protect our startup. A non-compete/NDA did not stop a bigger company from ripping us off, destroying our product, and delvier a “next to market” blow that we were too small to recover from.

    Our only hope is the Justice system and that, quite frankly, is scary.

    Our story could give your friend some strategic ideas… as your post has for me. Thanks!

  • 37 Chen Sun // Oct 9, 2009 at 1:28 pm

    Before returning to patents, let’s talk about intellectual property rights.

    Let’s talk about Facebook.com. My knowledge is that a couple of Harvard guys came up with the idea, didn’t protect it with patents or non-disclosure, revealed it to the founder of Facebook who took it. The rest is history.

    Now, let me ask, do the initial Harvard guys deserve anything?

    Let’s talk about Scabulous (sp). The copyright owner of Scrabble didn’t even have a single line of code, when a couple of Indian programmers came out with this hit.

    The question is… does Scrabble have copyright and trademark rights, when it hadn’t written a single line of online code, and actually deterred those who did?

  • 38 Daniel Tunkelang // Oct 9, 2009 at 3:48 pm

    Rebecca, I obviously don’t have a complete picture of your case (any more than you have of my friend’s), but I agree that the legal processes involving intellectual property don’t do much to help those who can’t afford to pay for them. Yes, there are lawyers who work on contingency, but it’s not clear whether they make things better or worse. I am sorry if you were screwed over by an unscrupulous competitor.

    Chen: the Facebook story varies according to whom you ask. I don’t know enough to cast judgment on whether Zuck acted ethically or legally. As for Scrabulous, I think it was a pretty clear instance of copyright violation under U.S. law–though there’s a wrinkle there too. The only reason Scrabble is still under copyright is because of the Copyright Act of 1976 and the Sonny Bono Act. According to Duncan Riley,”under current law, Scrabble will be protected under copyright until 2063. And yet, if Scrabble was treated under the copyright law it was initially published under, it would have come out of copyright in 1994.” You see, things aren’t always black and white.

  • 39 Rebecca // Oct 9, 2009 at 4:41 pm

    Daniel, do you think the legal process regarding intellectual property rights does much to help those who can pay for them? It seems that is a bit of the issue in this post. It is funny that you mention whether contingency lawyers actually help or hurt as we are ironically engaged in a legal mapractice case regarding the intellectual property issue. However, our attorney was a former partner of Fish & Richardson (top IP firm), so we got top legal advice for two years before she fell off the face of the earth. Point is, we are pro se, but not neccessarily fumbling around in the dark.

    What I identify with here is the challenge your friend faces in standing up to a giant. What I am learning is the importance of keeping a case about the merits – and this post has some great ideas about doing exactly that in a patent case. I encourage your friend to find a way to stand his ground. I think it is possible to do with a lot of creativity, a lot of energy, and a little money – it all depends on how much he believes in his startup. I suppose I’d be preaching to the choir to say every startup needs to be able to sustain some crippling blows!

  • 40 Daniel Tunkelang // Oct 9, 2009 at 5:06 pm

    Rebecca, I think the legal processes around intellectual property–or at least around software patents where I can speak from experience–are inefficient for all parties. But that inefficiency can translate into a competitive advantage for a large company that will fare better in a war of attrition with a smaller one. It sounds like that applies at much to your case as to my friend’s, even if the roles of plaintiff and accused are reversed.

    Anyway, my friend is trying to defend himself creatively and greatly appreciates the support of readers here (including those who have been linking here from places like Hacker News and Overlawyered. I personally appreciate the opportunity to have a civil discussion, even with folks here who are predisposed to defend the current system.

  • 41 Rebecca // Oct 9, 2009 at 6:37 pm

    Daniel, I hope I didn’t come across offended, because I am not. Obviously, I have a few issues with our justice system and spend a lot of time, effort and money doing the best I can with it. I’d like to make a positive impact for little guys like your friend, and so many others like him.

    I loved this post and I applaud you for challenging the current system and having civil discussions with those who choose to defend it.

    And now I will graciously exit so that you can remain on topic! ;)

  • 42 dinesh vadhia // Oct 9, 2009 at 6:49 pm

    @ Daniel
    Two issues are being discussed in this thread:
    i. the pluses and minuses of today’s IP landscape
    ii. your friend options

    I believe that Rebecca is addressing ii) and what I alluded to earlier which is that if you have a strong legal case then you can win against the big guys without spending huge amounts on litigation costs. It would be best to spend a thousand dollars on a top tier IP attorney to establish whether or not a strong legal case exists in the first place.

  • 43 Chen Sun // Oct 9, 2009 at 7:27 pm

    http://www.bizine.com/patents.htm

    Here’s an article about how little money patents make. My recollection is that a study by USPTO says only 2% of patents recover their investment.

    This is not to say patents cannot make money, which I may have time to explain later.

  • 44 Chen Sun // Oct 9, 2009 at 7:39 pm

    http://www.inventionstatistics.com/Innovation_Risk_Taking_Inventors.html

    Here are some more dismal statistics of how little money patents usually make. Makes an inventor’s stomach turn.

  • 45 Chen Sun // Oct 9, 2009 at 8:31 pm

    http://www.inventionstatistics.com/Innovation_Risk_Taking_Inventors.html

    “25% win rate. Patent owner long-term contested win rate. “The long-term contested win rate for patent owners varies around 25 percent.” (LegalMetric press release, “LegalMetric Data Of KSR Effect On Patent Owner Win Rates,” eWorldwire, September 12, 2007)”

    If the threatening party has overbroad claims, the odds of their success in long term litigation is close to null. Your friend is being threatened by a bully, stand up, and the bully may fall.

  • 46 Daniel Tunkelang // Oct 9, 2009 at 9:28 pm

    Rebecca, I appreciate your input and am glad I didn’t offend you. I’m sympathetic to your situation–just recognizing that I don’t know the details to support you with the passion with which I’m supporting my friend. Though I recognize the irony that you’ve published those details, while I’m holding off on my friend’s (though hopefully not for long).

    Dinesh, my friend may not have much money, but he does have strong connections. I feel he has gotten sound legal advice–not just about the patent litigation process, but more generally about strategic options when facing a predatory lawsuit.

    Chen, thanks for the links and stats. As the first link points out, 80% of the patent claims brought before the court are overturned or held invalid. But that doesn’t happen instantly. So claims that will ultimately be invalidated are still potent weapons. Indeed, the 25% long-term contested win rate avoids the issue of how much those suits cost to the party who is sued–and what specifically happens when that party can’t sustain the costs of long-term litigation. From that same article: “The long-term overall win rate for patent owners varies slightly, around 60 percent.” I laud your passionate idealism, but reality can be ugly.

  • 47 Chen Sun // Oct 9, 2009 at 9:34 pm

    You don’t understand. If you know the opponent is bluffing, one takes an entirely different set of tactics. One may be able to get out of the lawsuit, or minimize his damages if involved.

    The problem isn’t yet of software patents– it is the problems of legal litigation.

  • 48 Daniel Tunkelang // Oct 9, 2009 at 9:40 pm

    Point taken–this problem isn’t unique to software patents. But it isn’t a bluff. The opponent can afford to spend a lot of money and ultimately lose the suit. My friend can’t afford to sustain the fight. The opponent wants to deliver a knockout blow and thus isn’t interested in a meaningful settlement. Yes, there are tactics for situations like this, but the odds are stacked against the little guy.

    And what I think is specific to software patents here is that there are so many invalid ones out there, and thus great fodder for this sort of predatory litigation. Perhaps it’s just as bad with other areas of the law, but I haven’t seen anything like this personally.

  • 49 Chen Sun // Oct 11, 2009 at 4:29 pm

    I’m taking too long to get to the point I’m trying to get to, so I’ll say it now briefly.

    The practice of law in the United States is capitalistic; that is, whoever has more capital has more advantages. Legislation tends to be eventually distorted toward whoever can influence the legislators the most—so frequently it tends to be more capitalistic as well. Patent laws are less capitalistic than many if not most other commerce laws. The same startup person who complains about some laws suppressing him will be the suppressor when he ages and acquires capital. To change software patent laws “in practice”, ultimately means changing these societal-law characteristics, as I was eventually going to lead to with the examples on copyrights and trademarks.

    A patent doesn’t stop anyone from making a product or service. A programmer can program all he wants. What the patent does is to stop the programmer from making money on the programming. The art of making money is the art of business. Just because someone has programming or inventing skills doesn’t mean he should “deserve” money. As you can see, the inventor has less than a 2% chance of making money.

    Having said these, simply recognize that your friend is faced with a business problem, not a legislative or legalistic problem. The business problem is simply that a bully wants to use the law to beat him up. Assuming you are correct in the assessment that the bully-bluffer’s claims are overbroad or had prior-art—and neither you or I are lawyers–the solution is to stand up to the bully somehow. Of course, we need to be fair to both parties. Maybe the bully does have a point of view and of his numerous claims, some have merit.

    The point is that he remains a business bully—and needs to dealt with in a business bully response way–in order that your friend becomes a better business person in order to reap the business benefits of money. The answers here are all kinds of non-obvious negotiations methods in dealing with bullies (maybe we can patent these? :) ). If your friend’s team can’t come up with solutions here, his startup won’t be a “kickass” anyhow, because there will be much tougher business problems coming up.

    It’s unfortunate he’s a little unlucky and ran into an unusual business problem. But to be a successful business person, he should come up with a successful business answer. Additionally, did he do any prior art research before venturing?

  • 50 Chen Sun // Oct 11, 2009 at 4:54 pm

    To further clarify….

    The patent itself doesn’t really even stop someone from making money on an invention. What it does is take a percentage of the profit made.

    The legal costs can stop certain types of businesses.

  • 51 Chen Sun // Oct 11, 2009 at 5:19 pm

    Another example, when Microsoft lost a billion dollar lawsuit against University of California, what did it do?

    Appeal, of course. The next thing it did was to reprogram to work around the patent. Then, somehow it had to distribute the update to hundreds of millions of users, so that penalties don’t keep continuing.

    In case of your friend, he should be actively working to work around the patent, such that in the unlikely event if he loses, the penalties will be small. As a startup, the alleged invention infringement probably hasn’t earned much revenue yet–work around it.

  • 52 Chen Sun // Oct 11, 2009 at 5:27 pm

    Also, your friend can counterthreat. He should figure out how, or he can pay an advisor.

  • 53 Rebecca // Oct 11, 2009 at 6:43 pm

    Hi Daniel, I said I’d go away, ;) , but I had a thought to share.

    If the threatening company is in another state, travel expenses could add up as well. There is a strategic move your friend could make here. There is something he can file with HIS local court (federal is it crosses state lines) to claim jurisdiction in his state. Off the top of my head, I do not know what the filing is called, but it might be something for your friend to look into. It could send a message to the larger company that he intends to hold his ground – and add to their litigation costs if they have to travel to his state to fight. Just a thought…

  • 54 Daniel Tunkelang // Oct 11, 2009 at 9:08 pm

    Chen, you are right that the practice of law is skewed toward those who can afford the best lawyers, and it’s a fair point that, at least in theory, patent law is less skewed in this regard than law in general. I’m not sure that is the case for software patents in particular. But I concede your point that I might be overattributing my friend’s problem to the practice of software patent law, when the problem is much broader.

    In defense of my friend, he has clear invalidating art for the patent–that the patent was granted reflects the well-documented failure of the patent office to prosecute software patents competently. He also feels that he’s not actually infringing on the patent, but anything can happen at a Markman hearing, and he can’t assume a narrow reading of claims that, as written, cover all possible approaches to the problem space (as opposed to a particular class of solutions). In my experience, this is a common problem with software patents. But consider that treating invalid patents as barrier would prevent anyone from starting a company. Software companies that don’t think there are infringing on overly broad patents probably haven’t taken the time to look for them.

    And yes, there are lots of business problems on the road to success, so perhaps it’s good for a startup to run into bullies early on. But litigation at this early a stage is unusual and much harder to fight than the usual rough and tumble of capitalism. Moreover, there’s something very uncapitalist about using the state this way–it reminds me of the recent issues involving use of eminent domain. The state isn’t supposed to make it easier for the big guy to abuse the little guy. But that does go back to your earlier point.

    In any case, my friend isn’t giving up quietly. He is getting legal and business advice, and I hope that leads to an approach that lets him move forward–and that causes the bully some pain. I’ll share more details when I’m at liberty to do so. I do hope this story has a happy ending.

    Rebecca, thanks for the advice. The lawsuit is actually in the same state (both companies are in California), but your advice is very relevant for other situations. Others have noted that East Texas is a popular venue for patent trolls, and counter-suing is a good way to at least level the playing field geographically.

  • 55 Dan Weinreb // Oct 14, 2009 at 9:41 am

    Daniel, I’d like to understand exactly what it is about this story that you interpret as “extortion”. Suppose Alice invents something useful, patents it, and go into business selling it, and then Bob appears, selling an essentially equivalent thing, and Alice notifies Bob of the patent and threatens a lawsuit. Does that, in and of itself, constitute extortion, or is there something more specific about this particular circumstance that makes it extortion?

    Please don’t assume that I’m implying anything here; I’m just asking a narrow question about what you meant.

  • 56 Daniel Tunkelang // Oct 14, 2009 at 11:05 am

    Dan, no implications assumed. And your example is not extortion. If Alice believes in good faith that the patent is valid, then she has every right to enforce her patent–that’s what patents are for. Moreover, if Bob believes in good faith that the patent is valid, then he is at least negligent for not having done his homework. And, if he deliberately copied what Alice is doing, he certainly should have looked to see if she held any patents on it. If he knowingly infringed on a patent he believed to be valid, then I have no sympathy for him.

    But in this case Alice’s patent–or at least the claim interpretation she is asserting–is much broader than anything she’s invented. Bob has pointed this out, and indeed believes in good faith that what he’s built is a very different approach to address the problem Alice is addressing. He has sought out independent corroboration of his analysis and has shared all this with Alice. Alice knows, however, that the threat of litigation is deadly serious to Bob, while being an affordable business expense to Alice–even if Bob would ultimately win if he could afford to bankroll his side of the suit. Moreover, Alice offered Bob “protection” in the form of an offer to have Bob abandon the company (or sell it to Alice for nothing) and come work for Alice.

    I doubt that fits the legal definition of extortion–any more than bullying is (at least until recently) considered a criminal offense. Hence my saying that Alice’s strategy “amounts to legalized extortion.”

  • 57 Lorindal Hempen Carrville // Mar 5, 2010 at 3:35 pm

    Wow! I clicked through on Chen’s links on how much money inventors make and was blown away by the statistics. The numbers become even more of a head shaker when you look at what has happened to the patent office. See http://www.inventorinsights.com/Patent_Office_Problems.html A question I have is what is the opportunity cost of a one- or two- or three-year delay in approving a patent for the next transformational technology breakthrough? Say for a carbon sequestration technology to mitigate global warming? Has anyone seen any calculations on this?
    Carrville
    http://www.t3-line-cost.com/

  • 58 Daniel Tunkelang // Mar 5, 2010 at 3:45 pm

    One to three years? Try five or six, at least based on my own experience and what I’ve heard from others. Go to the USPTO site and look at recently granted patents–you’ll find that few were filed after 2005. In software, that’s practically a lifetime, even assuming everything else about the process is perfect.

    I haven’t ever known someone to wait on launching a product until their patents are granted. Folks who do pursue patents will file first, of course, but will then launch with pending applications. Given that inventors can pursue back-date royalties based on published applications, the delay doesn’t strike me as such a big deal. The bigger problem in my view, is that the current system incents the wrong behavior, such as in the story I describe here (which has an unhappy ending) .

  • 59 K9 Ventures » The investment that didn’t happen // Apr 27, 2011 at 11:58 pm

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  • 60 Foo for Thought // Jun 18, 2011 at 1:29 pm

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