What’s broken, patents or the legal system?

Referring to the America Invents Act (AIA), aimed to cull low-quality software, the head of the United States Patent and Trademark Office, David Kappos says:

“Give it a rest already. Give the AIA a chance to work. Give it a chance to even get started.”

He’s mostly reacting to studies that claim patent trolls enabled by USPTO cost the economy upwards of $29 billion annually. While awards vary, what’s constant is the exorbitant cost of litigating patent cases. Large scale cases can easily run into tens of millions, taking months and years.

One way to make sense of this situation is to declare the very notion of (software) patents archaic and indefensible in the 21st century. But what if the problem isn’t the fundamental notion or the general utility of patents, rather the inefficiencies in our legal system?

If the legal costs associated with getting and defending patents were 10X cheaper and the process of adjudication much faster, professional and predictable, would we feel differently about patent claims?

18 thoughts on “What’s broken, patents or the legal system?

  1. @Kontra In defense of patents you said ” A company (investors) will think twice about spending hundreds of millions over several years developing stuff that can then be cloned in a matter of weeks.”

    Assuming the companies ability to develop software is equal there’s no way the second company could clone the feature in a few weeks, it would also take them several years. Just because they can copy the idea doesn’t mean they don’t have to do the work to make it happen.

    Take for example the lock screens in iOS and Android. The lock screen is an essential features and all essential features will be copied, regardless of patents. Since Google couldn’t slide to unlock they came up with a new idea, one that likely took just as much work as Apples. Implementing the slider would also take them just as much work. They’re given an idea, not the source code.

    If your company is perpetually innovating you will always be ahead in innovation, patents or no patents. Patents would more commonly have a ‘tortoise and the hare’ effect in software.

    Imagine a situation where company A spends a year creating a new product with an innovative core feature set then does nothing but polish that same feature set for the next five years. Company B, who is better at software, can them come along, release the same starting product a year behind, and then proceed to make up the quality gap by more effectively iterating over the core features. This has already happened with personal computers in the eighties and nineties. Microsoft came out on top because they’re the best at software, period.

    The same could happen in mobile but probably won’t because Apple is the best in design and (imo) that is actually what’s selling phones. People keep talking about a post PC world where people do work on their mobile phones, Apple’s probably praying they’re wrong because if we do go in that direction, utility will take precedence over design and you know who will win? Microsoft, of course.

  2. I was really hoping that Kontras reply would have addressed the points that JerryL made earlier.

    Your point about the inevitability of reevaluation seems true enough, but so vague I can’t get an idea of what direction you have in mind.

    But rather than imagining the cost and time involved in litigation being reduced by 90%, and extrapolating from there, Why not imagine the lifespan of the patents themselves being reduced by an order of magnitude (or some other large fraction)?

    Wouldn’t that effectively reduce the incentive to bring legal action?

    • “incentive to bring legal action”

      Legal action — were it professional, speedy, fair, effective and reasonably priced — wouldn’t be something that necessarily inhibits the original purpose of patents. Now, it’s a very expensive crapshoot.

  3. “…And Boy, Have We Patented It!”, Steve Jobs, excerpt from the 2007 keynote presentation of the iPhone…

    Well…the easy one was to patent the sum of its proprietary parts. The incommensurately hard part was to erect a ‘rationale’ as a line of defense around the “more” than the sum of…all…of its parts, …the revolutionary whole of it, …the paradigm shift that cast a badass-smart spell from thereon in over mobile communication.

    It’s one thing to be confronted with legal challenges from the competition. It’s all in a day’s work. For the repeat innovative offender that is. It’s raising it a quantum notch for the initiator of a revolution to ostentatiously, albeit in a round about way, claim ethical paternity over both the revolution’s offshoots as well as its tributaries. It’s tantamount to driving head-on into the point of maximum institutional resistance.

    Wall Street…Fleet Street…Madison Avenue…the Beltway…the Law’s territorial integrity…and post trickle down effect, the commons…none fancies having its vanity-run cut short by paradigmatic outrecuidance. Better remind a  channelled captaincy…least, that whence sensing radical and inevitable changes around and about its bluish lull-dom, it draws reddish lines of countermeasures from bounded neighborhoods of a-systemic illiteracy.

    A system, by definition, espouses revolutions or new paradigms in as much as they grind their teeth on the idealistic ambitions of house-bred revolutionaries.

    • @S T Coleridge

      A sniper’s Victorian lexicon for real.. bottom-up…verb-killing sarcasm.

      With the Honorable Gentleman’s permission, …and with a bit of cross-cultural, literary tempering of my own, a boomeranged ‘occis’-moron as an ad-lib in dire need of a verb…

  4. Patent trolls are just the tip of the iceberg. They’re the most obvious problem with the patent system, but probably not the most severe. Patent trolls are annoying, but it’s possible to deal with them (usually, they just want money, aren’t interested in litigation, and aren’t interested in actually killing your company).

    It’s often not possible to work around a patent that grants a real, non-troll corporation a real monopoly, though. At this point, it is basically impossible for a startup to release a new phone, for example. This area is so encumbered with patents that any new company will soon encounter huge patent issues, even if everything they do, they came up with on their own. And unlike patent trolls, these patent holders don’t want money. They want you out of their market.

    At this point, this probably affects a majority of startups that release products combining proprietary hardware and software, in fact (see: nest). It’s one of the reasons why you’re more likely to find hardware startups backed by Kickstarter than by venture capitalists. No sane venture capitalist gives money to a company that has a 99% certainty of being embroiled in years and years of extremely expensive patent lawsuits.

    The very concepts that patents are based on, namely that

    1. Ideas by themselves are valuable and need to be protected by the government

    and

    2. Ideas only happens when the government guarantees that the entity coming up with said idea will have a monopoly on it

    are just plain wrong (and actually counter to reality) in almost all areas of business. If patents stopped being granted today, not a single software developer would stop coming up with new ideas. Not a single software company would stop investing in innovation.

    One final point: before defending software patents based on the idea that they might not be so bad if the legal system was different, ask yourself this: do software patents actually have any positive effect at all? Do they encourage software companies to be more innovative? Are developers really writing interesting apps solely or mainly because they are patentable?

    If not, if software patents don’t do any good, then the question of how bad they really are, or might be in some other, hypothetical situation, is completely moot.

    • “Not a single software company would stop investing in innovation.”

      There’s no evidence for this (that applies in 2012). Patent is another way of saying (to investors, anyhow) ROI. A company (investors) will think twice about spending hundreds of millions over several years developing stuff that can then be cloned in a matter of weeks. If you think patent trolling is bad, wait till you see legally sanctioned cloning on a massive scale.

  5. @Kontra wrote, “But since the adjudication of patent disputes are handled still in fairly unspecialized, inefficient and very expensive legal processes, reforming the latter could have a very positive effect.”

    Part of the reason for this is that patents themselves represent innovations. Some are unfortunately minuscule but collectively, anyway, they reflect significant changes in business processes. The legal system, reliant as it is on sometimes centuries-old laws and precedents, by definition is NOT designed to keep up with innovations except by ground-breaking exceptions to old processes.

    FRAND requirements, for example, seem to be a response to Motorola’s refusal to license its GSM patents in the 1990s. (The original agreement was that various European telecomms—state-run enterprises—would not buy equipment from any firm that did not license their IP, but Moto only wanted to sell handsets, not towers, and blocked would-be competitors.) Now about 20 years later, courts are still trying to come to grips with FRAND terms, with e.g., Samsung trying to block Apple from its GSM, CDMA and LTE patents despite a promise to license under FRAND.

    So it seems unlikely to get fast-track legal processes that somehow run ahead of the direction of innovation, and the social agreements about fair use of IP. Sorta like how all the commotion around the stock market is a VERY expensive way to raise long-term investment capital (and looks to many like the hair on the tail wagging the whole dog), it seems that rapidly evolving technology will always run up against more slowly evolving social notions of fair ownership.

  6. There are different kinds of patent disputes, and the efficiency and cost of the patent system’s legal processes affect them differently.

    In suits between large companies – Apple and Samsung, for example – the legal costs run into the tens of millions, but from the point of view of the companies involved, it’s irrelevant. These are disputes that, to the companies involved, could be worth many times that. Changing the cost structure of litigation wouldn’t affect these suits at all.

    In suits between trolls and large companies, again the issue isn’t so much the cost of the legal process: If the large companies knew they had a very large probability of winning, they would litigate these cases for all they were worth, knowing that the trolls would run out of money before they did. The problem is that these cases are (a) *too* efficient – the trolls have found ways to avoid letting them drag on for many years; (b) the odds are by no means stacked in favor of the big guys; (c) the potential costs if the big guys lose is so large as to be material to them. Lowering costs here would only favor the trolls!

    Suits filed by large companies trying to kill small competitors, you have the troll situation in reverse, but worse (because we’re assuming we want the trolls killed but the small competitors to survive). Reducing the costs and getting greater certainty would help the little guys.

    Suits between trolls and small companies are a problem, because often the small companies don’t have the resources to fight even in a hypothetically highly cost-efficient court system.

    Suits between small companies are pretty rare – partly because of the costs involved, partly because even if the monetary costs were lower, small companies have too much to do to be able to afford all the ramifications (the time lost, the discovery efforts, etc.) of a lawsuit.

    While it’s a fine idea in the abstract to make the courts more accessible to the little guys by increasing efficiency and lowering costs, the concrete ramifications can be hard to foresee. There was a time, 50 or so years ago, when the deck was stacked in favor of the big guys. Look at FM radio, invented by Armstrong and stolen by RCA (in various ways, not just through the patent system). Partly in reaction, a number of changes were made to the patent system to help “the small inventor”. But … the same reforms also made possible the emergence of the patent troll.

    It’s a curiosity of the patent system that a patent can only be granted to the human inventors – it’s impossible for a corporation to get a patent. But once the patent exists, all rights to it can be assigned to another person, natural or artificial (i.e., a corporation); and once assigned, the patent is just another piece of “property” to be bought, sold, part of a bankruptcy liquidation, etc. Given that fluidity, any change to the legal system that helps individual inventors will almost certainly help other “small fry” – like trolls.

    — Jerry

  7. I believe you’re on to something; however, the resistance to change would (seemingly) be monumental though large interference should never stand in the way of improvement should it.   Thanks for this and the other thoughts.

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  8. I do not know if the system, the patents, or what is wrong.
    But I see that some companies (Motorola/Google & Samsung) that have put pattents under FRAND conditions are using them to avoid competition.
    Microsoft has pattents and reach agreements. Nokia has patents and reach agreements.
    But Motorola wants to ban competition in base to one patent.
    And this could be right if they did not committed to FRAN.
    So, other than bad system, bad patents, there are bad losers (Moto lost almost al its value in the market and Google only paid what it paid because of patents and patent’s attitude).

  9. Other fine tuning would also be needed. For example the payouts would need to be predictable (order of magnitude at least). There would also need to be some sort of statute of limitations – waiting many years until someone is big and successful and then pulling the rug from under them is a good indication that the alleged use of the patent wasn’t actually causing harm.

    But the real problem with software patents are that they are a risky unpredictable tax on progress and innovation, except the beneficiaries are lawyers (always), certain unproductive business models (often), inventors (sometimes), consumers (always ultimately end up paying) and almost never “Progress of Science and useful Arts”.

    Why not impose a 1% of revenue tax on all business in the US and then have an impartial body that redistributes that to patent holders based on contribution?

    • If you could license patents as easily as buying apps from the App Store (with search, discovery, reasonable prices, predictability, standardized licensing agreements, etc all baked in) you could start thinking differently about the whole notion of patents, couldn’t you?

    • App discovery is already a huge problem, and that is for something relatively simple. How on earth would a search be done for some code I am writing? What about every time it changes? (If I write the code, and then look for the patent doesn’t that imply the patent is obvious?) If a search is done and nothing relevant found, does that indemnify me against ones I missed out on? Do my searches count as prior art for later patents with the same terms?

      Without more details it still describes a tax on business and if we believe that innovation should be rewarded that way why not just do a tax and distribution body as I mentioned? That would even disengage those inventing from those making stuff thereby allowing pure patent oriented businesses. Those producing patents would be incentivized to increase business revenues so at least everyone’s goals would be aligned.

      What I would really like to see is any evidence of patents being useful. The constitution is in two parts: patents therefore the progress goal. I’m sure we all agree on the goal, so it should be established if patents meet that goal, or if there are better alternatives.

      And finally looping back a patent story. I hold several. One was granted a year or two ago for work done in ~2005. I read the granted patent and could not explain in any reasonable way what on earth it was describing. A patent lawyer wrote it based on a presentation to them.

      Now for the kicker. I was working for a startup that got acquired by a bigger company. Our product line was aging, several people left, and the bigger company slowed things down even more. I spent my time coming up with things to patent because it was virtually impossible to actually implement them in the stagnant product. The bigger company just wanted a larger quantity of patents and paid for them. If the patent ever gets enforced against anyone else it would be to stop them from making progress without paying the tax.

    • The question I asked was a narrower one. I didn’t want to imply that the current patent system was perfect or even adequate. On a parallel track, it can and should be improved. But since the adjudication of patent disputes are handled still in fairly unspecialized, inefficient and very expensive legal processes, reforming the latter could have a very positive effect. The simple demonstration of speedy, efficient and economical handling of patent disputes would inevitably force companies to reevaluate how they approach patents to begin with.

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