Comments for Patent Crisis and The Age of Open Source Ideas

Patent Crisis and The Age of Open Source Ideas

2008-09-26T04:45:00Z

We live in an age when success of innovation is mixed with unprecedented failures. On one hand we're reinventing the web, fighting for a greener future and building genomix. On the other there are housing bubbles, credit crises and war.

The technology patent crisis is important to our future. For decades the patent law served its purpose. Inventors used copyrights, trademarks and patents to protect their work and launch their innovations. But today's technology intellectual property system is a failure - unable to keep up with the speed of innovation, it's fallen apart.

]]> The result? We live in an age of open source ideas. We freely borrow and build on each other's solutions. At first glance this may seem fine, but there are important consequences that may change the way we innovate. What happens when a big company copies a startup? What happens when dozens of startups copy each other?

In this post we work through these and other questions, in attempting to understand where intellectual property in technology is heading.

The Good Old Patents

The word patent comes from Latin and means to lay open. Patents were established as the means by which inventors disclose their products to the public. In a typical process the inventor would write down the steps, or the algorithm, for the creation and send it to the patent office for consideration.

Once granted, the patent serves as a protection for the invention. Legally, no one is allowed to copy the invention; instead, they're required to license it and typically pay royalties.

The patent is granted for a limited, usually lengthy, period of time. After the patent expires, the innovation becomes essentially public and now can be used by anyone. So the protection that inventors enjoy comes at a cost, for they eventually have to give up their invention.

Previously, when facing the choice between disclosing an invention or not, people did so more often than not. The reason: the time span the patent held was sufficient to make money because of the exclusivity guaranteed by the patent.

The system worked quite well when the world was slower, but the recent acceleration changed everything. With time to market being much shorter, the patent system instantly become ridiculous and obsolete.

The Patent Crisis

Here's a simple scenario. A startup produces an innovative idea and works with a patent lawyer to file a patent. This takes a considerable amount of time (a few months at least) and a substantial amount of money ($25K+). But the startup does it anyway and after the patent is filed, people feel comforted that their idea is safe.

Right? Of course not! Not even close. Any patent filed today will take 4-6 years to approve. In the current era where a week is a long time and a year is an eternity, the time to process a patent is unbearably long. Because of this gap, filing a patent appears useless. While you can threaten based on a pending patent, people are unlikely to take it seriously.

Litigating software patents in court is expensive and often unsuccessful. The problem is that with software you can do things slightly differently and the patent becomes unenforceble. This is because lawmakers ensure patent claims are as narrow as possible. For example, if someone implements just a piece of the whole system differently, the court is unlikely to rule in your favor.

The Age of Shameless Stealing

The problem is that while your patent is pending, competitors can copy your ideas and build on them. By the time your patent is granted, competitors can already win the market, be profitable, or even exit out of business.

The mismatch between the time it takes to get the patent and time it takes to copy the innovation encourages the copycats. Today's software industry is flooded with clones.

There are dozens of me too! startups for each major technology area. All the startups are borrowing ideas, UI elements and functionality from each other. And because of the powerful technology at our disposal copying is so easy. Someone said to me once: Oh we don't want to use your technology, my dev guys can whip out something like this in a couple of days.

Sadly, the age of open source ideas is actually the age of shameless stealing.

Who Wins?

Startups copy each other, but the problem doesn't stop there. It gets worse when web giants copy startups. Once your idea gets incorporated into a big company's offering, things get tough.

A recent example is new Google browser Chrome. No doubt, it's a spectacular piece of software - elegant, simple, probably the browser of the future. A lot of the ideas in Chrome are not original, but taken from other browsers and add-ons.

Is this fair? Not really. But in today's tech world, the word fair has been replaced with the phrase fair game. Luckily for startups, most big companies are not good at execution, so it isn't that easy for them to copy. But when and if a large company comes out with a clone, the match is unfair.

Resources and distribution certainly matter when it comes to tech adoption, so the patent situation is strongly in favor of big companies. They can observe the market, see what ideas take off, and cherry pick what they see as interesting.

Who Really Wins

Perhaps the biggest irony in this patent debacle is that it benefits customers. Previously a patent would create a lock, a barrier to entry, while today innovation occurs with greater speed.

Because patents are irrelevant, companies small and large relentlessly go after each other, raising the bar, coming up with better products. At the end of the day this benefits the users.

We're observing an evolutionary dynamic where companies are battling for viewers. This is a street fight where the gloves are off and big money is at stake. Companies are pushing each other to deliver better software faster. In the meantime, users are enjoying the new elegant tools as well as the fight itself.

The Future of Technology Innovation

Where is all this heading? What is the future of innovation and intellectual property around it?

The status quo doesn't make sense. The laws need to be useful, and current patent laws are obsolete and inadequate. Is there a middle ground between old patents and no laws at all? Brad Feld, who has written a lot on this topic over the past years, thinks the answer is no:

"After wrestling with software patents for 15 years, I've concluded there simply is no middle ground. If we continue on the path we're on, patents will increase in their overall expense to the system. Everyone will feel compelled to apply for as many (and as broad) patents as possible, if only for defensive reasons."

In a related post, Fred Wilson writes a cliche of the week: Patents are like nuclear bombs, you just got to have some. He continues:

"I have never seen patents make a business, but I have seen lack of patents hurt a business on many occasions. IP battles are like the cold war. Those who have patents can keep others honest because nobody wants to start a war that might end in everyone's destruction. But those who have no patents are sitting ducks and don't have the weapons to keep others honest. My advice to entrepreneurs is always file a bunch of patents. But don't expect they'll ever do more than keep others at bay."

It doesn't seem satisfactory either way. To not have patents at all means that at the end of the day big companies will always absorb all the best innovation for free. Filing patents just for the sake of having weapons that you're likely never to use seems costly and wasteful.

Is there a middle ground? What would you like to see happen in the future with software intellectual property?

Comment from P. K. on 2008-09-25

2008-09-26T05:41:39Z

I for one is a believer that there is genuinely no middle ground. I agree with you that the current patent system is broken, but I don't think the right solution is to "strike a balance".

It's worth pointing out that the patent system, by definition, favours the big corps over the small players -- all things being equal, it is always the big corps who can more easily afford the extra costs of filing a patent (legal fee, time and attention diverted away from doing the main thing, &c., &c.) and then hope/pray for the best. From the start it gives incentive to the more resourceful players (ie BigCos) to attempt an opportunistic land rush over whatever they can grasp.

This is especially true in the field of software patents, where what is patentable is essentially just "ideas". And these, as we have seen, can go way too absurd (cf. the patents over hyperlinks, world wide web &c.).

Alex wrote:

"To not have patents at all means that at the end of the day big companies will always absorb all the best innovation for free."

But this is the real picture already today. Startups can ill-afford to apply for patents. BigCos can wait and see when a good idea emerges, file a patent first, then sue the startup later on when the startup becomes a threat. Patents simply give the BigCos one more (and deadly) weapon to use against the startups.

Comment from vicaya on 2008-09-25

2008-09-26T06:18:45Z

"To not have patents at all means that at the end of the day big companies will always absorb all the best innovation for free."

You can substitute "big companies" with "everybody" and it's not a bad thing. I support hardware/drugs patents due to the high initial cost of innovations. Software innovation will not be stopped due to lack of software patents. It's in software developers' blood to innovate and the cost of software experiment is insignificant compared with that of drugs and hardware.

Abolish software patents, ASAP!

Comment from Felix Pleşoianu on 2008-09-26

2008-09-26T08:17:07Z

"A lot of the ideas in Chrome are not original, but taken from other browsers and add-ons.

Is this fair? Not really."

Uhhh... The Morse code was independently invented by two people at the same time. The only reason we call it that is because Mr. Morse got to the patent office first. How is *that* fair?

Face it, the best ideas build on each other. Building on the predecessors' work is the basis of science, and the only reason human civilisation has made it this far. It's only natural that people faced with the same problems, at the same time, and armed with the same prior art, will come up with similar solutions. Why should only one of them benefit?

Frankly, I think the patent system was broken right from the start. The modern world has only exacerbated its defects. It's time people stop fighting against the very nature of information (which is to replicate endlessly) and start going with the flow. We owe ourselves that much.

Comment from noone on 2008-09-26

2008-09-26T09:59:24Z

Ideas are not created in a vacuum. The concept that you can prevent other people from acting on their own ideas (that some one may come up with a similar idea as you) is criminal.

This nonsense concept of "first mover advantage" when it comes to ideas has to end. Companies should be rewarded for execution, not novelty. I dont care if Opera invented tabbed browsing first. This is such a important idea in the world of web browsers that it should be shared by all, with the lions share of the market going to the company who executes these ideas in the best manner. Same with any other improvements or insights.

Anything else is a waste of everyones time and effort.

Comment from Gubbi on 2008-09-26

2008-09-26T12:19:32Z

The pace of innovation depends on how easy the ideas are exchangeable and learnable. As I see it, the strength and effectiveness of Patent laws will have an inverse direct effect on the pace of innovation.

Also it is absurd to grant exclusive rights over an idea to one single entity when there are multiple sources coming up with similar ideas all the time. This is especially more so when the pace of innovation is faster.

Comment from Mojo Bone on 2008-09-26

2008-09-26T13:04:52Z

Intellectual property laws are what made this country wealthy. Perhaps instead of ditching them, we need to streamline the process and make it more user-friendly; maybe this a problem that could use some of that lightning fast innovation?

Comment from CoryS on 2008-09-26

2008-09-26T13:14:40Z

As a founder of a web start-up in the area of patent search + licensing connections site, I'll note an additional problem as big as the cost/time it takes to get a patent reviewed and issued: the inability to access rights.

Here are some thoughts on a middle ground:
1. Reduce the power of incremental, me-too derivative patents - the Supreme Court has chimed in when it forced the PTO's hand with the concept of obviousness. Incremental patents are now harder to get and enforce. Also, the work of concepts like Peer-to-Patent help increase awareness of prior art into the system.
2. Reduce application review time to under 12 months - Critical for the system to be valid in the market and easier to do if #1 knocks out a lot of garbage in the system. The PTO needs to get active, reject a lot of applications based on obviousness and have a mandate to be more responsive. If needed, raise fees to the point where applying for a patent equals its utility (PTO fees today are ~$1500).
3. Increase access to patent rights across firms - A free for all isn't the answer, but a means for increasing the fluidity of the market could be. Should automatic patent licensing be part of the system given the market's increasing interconnectivity (perhaps after X years)?
4. Patent license fees need to be proportionate to the idea's part in the product - Given many products have many patented technologies, value has to be tied to how the idea matches the value it creates.
5. Reward front end research discovery and sharing of that work - We need a rewards system that recognizes the thought leaders (and their investors) while not penalizing all consumers.

Comment from Dan on 2008-09-26

2008-09-26T13:21:07Z

The patent system was designed to protect innovations that required a lot of investment to develop. Without that protection, no one would invest billions (or even tens of thousands) of dollars developing something without the prospect of a return.

That's still true for things like aircraft engines, but web software innovations, as we now know, can develop quite rapidly and with far less investment.

One solution is to have a separate category of intellectual property for software, which has always had an ambiguous status governed somewhere between copyright law and patent law.

Comment from Jack on 2008-09-26

2008-09-26T13:42:21Z

This is all getting a bit old for me. There are serious problems with the system. However, there always have been (poor Eli Whitney). My problem is that these articles are always written by people that really don't know much and they say things like "current patent laws are obsolete and inadequate." How do they know, what is the context.

As to the USPTO, Clinton's guy was horrible -- he tried to have equal hiring for minorities and women (engineering schools are not stocked with women and African Americans). Not that Many AAs were hired but plenty of non English speaking people were hired. They could be good engineers, but patent law is a word puzzle and engineering game. It didn't seem possible, but Bush's guy was even worse. He wanted to reinvent all the systems and outsource everything. We have had all kinds of new rules, all raising the cost. They can't hire and train (people leave soon after hire because the place is a bad place). Their last set of rule changes was outrageous and shoved down our throats without the normal objection review process. After we all geared up for it a court enjoined it (we are still waiting to see). New rules cost big and like any system, changes lead to stray/ unexpected results...

The patent laws are not obsolete. They are good and simple and timeless. The system, is not in such good shape. A solution costs money and there is a need for someone that understands it to take charge (The USPTO never is run by a person that has been involved in the system). Most of the professor types that write about the Patent Crises really know very little and do not have the deep knowledge that comes from examining patents (USPTO examiner), prosecuting patents (Patent Agent/Attorney) and litigating patents (very few Human beings have really done all three).

Solution:

Massive investment in USPTO examining corps. Good patents issuing two years after filing can only come from that. This takes time to establish as we want experience. Clinton and Bush devastated the system on this point (the Ex corps).

A new federal Court system for patents. Make the litigation side fast with good tech judges (I have never met a judge that went to engineering school). There are ways to limit the lawyer BS. The German system is being used by all sorts of companies including US as the whole case can be done in 6mo. We need to borrow from them and understand how do they do it. I have had cases run 5 yr plus with no trial in case and judges that hate the subject matter. Of course the jury system (for patents) must be thrown out (Constitutional issue) unless it is a jury of persons of ordinary skill in the art.

Anyway, if they change the laws, they will screw it up. Read 35 USC 101, 102, 103 and 112. Well written IMO. Fast prosecution and fast litigation do not require a major rewrite.

It is interesting after writing all of this (and I should be working) I noted that I have a solution, but it may highlight a deeper problem. We just don't have a mass of technically literate people. We should have a technical judiciary branch, with our countries size we should have 10,000 patent examiners. The problem may not really be a patent problem at all.

BTW, I agree with Dan that an extra system with sjort protection span for software may be useful.

Comment from Bucktowndusty @ FromThePen.com on 2008-09-26

2008-09-26T14:44:45Z

My father got a patent and I spent many weekends with him at the Patent office. My aunt was also a patent lawyer's secretary for 20 years so I can tell you what I learned.

Patent lawyers make their money convincing people that they need as many "claims" as they can get for their patent so that someone doesn't steal it somehow. The more the claims you have on your patent (my product does this, my product does that), the more protection it's supposed to have from copycats, and the more lawyers can charge. Most claims are irrelevant to protection but people go along with it because, heck, lawyers are the experts.

And while researching, we'd constantly hear people talking about "how they could take this idea, or that idea, and GET AROUND it while producing their own product. They didn't mind talking very loudly either. They didn't care who heard them.

My father actually had a patent lawyer tell him his idea wound not be approved(after my father told him he would try to do it on his own). My father did his own research and patent submission, and got it approved anyway.

The whole place is a cesspool of corruption if you ask me.

Comment from Crag on 2008-09-26

2008-09-26T14:45:24Z

There should be another set of patent rules designed for software related matters. It seems the system is a bit outdated and could use some freshening up.

Craig
www.budgetpulse.com

Comment from M-A L. on 2008-09-26

2008-09-26T14:58:14Z

Great post!

I agree with the fact ideas build on each other; humanity was build around the evolution of ideas. It's true sharing your ideas can be beneficial for everyone. The real problem comes when someone takes advantage of it; economic incentives are simply too strong without patents.

Comment from Felix Pleşoianu on 2008-09-26

2008-09-26T15:02:18Z

"The patent system was designed to protect innovations that required a lot of investment to develop. Without that protection, no one would invest billions (or even tens of thousands) of dollars developing something without the prospect of a return."

And what's stopping the inventor to implement the idea *better and faster than everyone else?* After all, the originator of an idea is in the best position to do just that. Do I detect fear of competition here? :)

@CoryS @Jack Maybe there's something I don't get, but your proposed solutions for a "middle ground" sound like more complications. Just what the system needs right now. :P

Comment from Ivan Ičin on 2008-09-26

2008-09-26T16:24:04Z

We need patents, but we also need some more mechanisms like enforced licensing - see my post related to software patents

Comment from J. Smith on 2008-09-26

2008-09-26T16:39:27Z

Patents protect NEW innovations and their creators. With the speed of technology as stated, we live in a world where a good idea gets capitalized on, improved on and re-designed better by masses sometimes before the original designer ever gets to market. The problem is in my opinion is that there are aspects of technology that are open and should remain open and others, such as outright software design, should be patentable. The problem is: who decides? If all else fails, we can all just pay royalties to Al Gore for inventing the internet.

Comment from Mark McGuire on 2008-09-26

2008-09-26T17:16:20Z

As an entrepreneur that has filed software patents in several companies, I couldn't agree more that the system doesn't work at present. We should either do away with software patents altogether, or create a system with a quick examination process (perhaps a peer review on obviousness/prior art) and a very short exclusionary period (3 years?).

The current system stiffles innovation (I've been counseled not to even search patents for fear of finding something).

I'm onto my next start up and we are going to file a few patents again, but only because you have the play the game and have something in your arsenal if you get sued. (I love the analogy to a nuclear bomb).

If interested, you can how I struggled with the decision to file again here: ( http://flywheelblog.com/2008/09/to-patent-or-not-to-patent/ )

Mark McGuire
Alice.com

Comment from phil.gs on 2008-09-26

2008-09-26T17:25:18Z

It's ridiculous to say that we should throw out the entire patent system because of software patents. Amazon's infamous one-click patent was probably cooked up by Jeff Bezos over a cup of coffee. A major pharmaceutical, in contrast, costs about $1 billion to bring to market. The FDA rules require enough disclosure to allow competitors to easily replicate a new drug. If there weren't patent protection, the drug makers would have no incentive to develop new drugs.

Perhaps the system does no need some adjusting with respect to software, but the system overall works pretty well.

And for the people who wrote that we need openness to drive innovation, the patent system encourages people to disclose their inventions in exchange for exclusive rights for a limited period of time. Without the patent system, people would not disclose their inventions and innovation would be stifled.

Comment from Felix Pleşoianu on 2008-09-27

2008-09-27T07:18:23Z

@phil.gs They would disclose their inventions by default when their products hit the market and other people can analyze them. That would take time, which in turn would give them a healthy head start, if the invention is truly original (and if it isn't, why should it be protected?)

As for drug development being expensive, maybe it wouldn't be if pharmaceutical companies *shared their research*. That's how science outperformed alchemy, remember?

Comment from jeremy on 2008-09-29

2008-09-29T20:23:41Z

ive written fairly extensively on this topic. the problem is-- its to your advantage to file as many patents as you can.

here is my post:

http://tinyurl.com/3rwrqm

Comment from Michael on 2008-10-02

2008-10-03T00:05:07Z

Bzzt. Wrong. The patent system has never really 'worked', it has always increased cost and reduced innovation - the exact opposite of what it was intended to do.

The whole system should be scrapped, and it has nothing to do with the abomination of software patents - which should never even have existed in the first place. Copyright already provides (way-more-than) adequate `revenue protection' for software.

Patenting software is like patenting the brush-stroke technique used to paint a picture, not the copyright which covers the finished work. The mere notion of patenting technique is obviously absurd and completely immoral (yes i went there - how do you think humanity would have got to where it is if the first pre-ape to bang a couple of rocks together `protected' that idea rather than sharing it for the good of all?).

Patenting algorithms is patenting mathematics which is not allowed even in the current crazy system, so you are intentionally misleading when you mention `algorithms'. Patents must cover actual products.