How One Startup Used Patents To Kill A (Better) Competitor
from the sad dept
Teck points us to an all too typical, but still disappointing, story of a startup, Like.com (which previously was Riya), and how it allegedly killed off a better competitor with patents. In a strategically timed move, it sued the competitor, Modista, just days before it was going to close funding:
The lawsuit caused investors including Kumar to drop out, for fear of dealing with an expensive lawsuit that could cost more than they had even planned to invest. Because Modista had no money to defend the suit in court, the company later shut down.
This sort of story is more common than you might imagine. I recently had a conversation with a serial entrepreneur who told a similar story. One of his previous companies had been quite successful, and was on the verge of being acquired for upwards of $70 million. Days before the deal was to be closed, one of their competitors got wind of the deal, and filed a patent infringement lawsuit against them, leading the acquirer to drop the deal. Without the funds to fight the lawsuit, the entrepreneur had no other option but to sell his company to the company who sued him for less than $5 million.
Ask around, and you discover that this happens all the time — patent holders using patents not to innovate, but to block and kill other companies — especially when those companies really are more innovative and have a better product.
Filed Under: competition, image recognition, patents
Companies: like.com, modista, riya
Comments on “How One Startup Used Patents To Kill A (Better) Competitor”
It isn't just patents...
I got put out of business on a bogus trademark claim on my domain name. The person applied for the trademark months after I incorporated and obtained my domain name. Not only that, the trademark is on a very common phrase so could probably be disputed. I did not have the funds to fight it and had to shutter the site. I kept the domain name though.
Don’t you get it? Intellectual Property is more important than actually making stuff. Having tons and tons of patents sitting in the shelf is the true way to run an innovative business. And when some less prepared fool shows up, you smack him down with patents and buy his business. Hey, if he was so great, why didn’t he have tons and tons of patents?
/Sarcasm
Resolution Systems had a web version of the mediation process and had to shut it down, but got a ‘really good price’ to use the patent holders web version.
Perfectly Simple Fix
This sort of abuse is easily fixed, if Congress has the will. Just repeal that part of the law which makes patent infringement illegal. Patents should be used by engineers to make better products, not by lawyers to prevent better products. The only reason the lawyers can do their evil is because patent infringement is illegal. Scrap the concept. Call it “patent use” and encourage it, instead. If any inventor gets huffy and claims that others are stealing their stuff, then they should keep their invention secret. Somebody else will be happy to take the credit for the invention, plus the consulting fees to help others use the invention. Necessity is the mother of invention, not patent law. Patent law has been a total failure at encouraging invention.
Re: Perfectly Simple Fix
“Necessity is the mother of invention.”
Ironically, Edison said that even though he held many patents that spoke to the contrary.
Re: Re: Perfectly Simple Fix
Edison’s patents are the reason Hollywood is in Hollywood.
Don’t want to pay Edison for use of his patents, and not suffer from Edison’s thugs sabotaging your cameras and sets?
Move out west where no US Marshalls are and start recording.
It’s interesting that nearly every “content” industry started out as a pirate to someone else.
Re: Perfectly Simple Fix
A more simple fix would be to make the one who file patent infringement lawsuit temporately pay the lawyer’s fee of the defendent until the result is known. And if the defendent is not found guilty, they don’t have to pay the lawyer’s bill.
In this way, patent holders should think twice before they file a lawsuit.
Re: Perfectly Simple Fix
>Just repeal that part of the law which makes patent infringement illegal
How is that different from abolishing the patent system (which I would totally support, btw, especially as it relates to software). If permission isn’t needed to use them, then there’s no reason to grant them…
“patent holders using patents not to innovate, but to block and kill other companies”
Sounds like a business method, probably patented too. I expect them to be sued into the dirt.
The value of a patent is: to EXCLUDE others. Why is it a surprise that it can also be used to shutdown a “second comer?”
I also have some doubts about the $70M story, here’s why: if the patent was actually invalid or there was no infringement, pursuing a patent litigation defense in that case would still make sense for an acquirer. The cost of a patent case through trial can mean multiple millions, but that’s still far less than the acquisition price.
Re: Re:
“The value of a patent is: to EXCLUDE others”
Actually, no. The supposed value of a patent was to make technology and scientific knowledge more widely available, while at the same time, rewarding the “inventor” for his hard work. It was supposed to be an enabling tool, not a weapon to destroy competitors and prevent others from competing.
Re: Re: Re:
I don’t think that you disagree with me.
The patent system “rewards” limited, exclusivity to a patent owner in exchange for a public disclosure of the invention. If others are free to use the patented invention, then there is no exclusivity and no “reward” for the inventor of the bargain.
Because the patent system’s “reward” is exclusivity, compulsory licensing of competitors or something similar doesn’t make much sense either.
Re: Re: Re: Re:
“The patent system “rewards” limited, exclusivity to a patent owner in exchange for a public disclosure of the invention. “
No,the public isn’t getting anything in return. A piece of paper that says, “the public can’t do x without my authorization” requires x to be specified. That’s not disclosure, that’s dictation. It’s little different than saying “you can’t drink water without my my authorization”. You must disclose to those others what it is they can’t do. Such ‘disclosures’ benefit no one (other than the monopolists).
As far as I’m concerned, the monopolists can keep their alleged disclosures to themselves if that makes them happy. But don’t tell anyone else what they can’t do under the false pretext that you’re disclosing valuable information to them.
Re: Re: Re:2 Re:
As far as I’m concerned, the monopolists can keep their alleged disclosures to themselves if that makes them happy.
Would you like the Polio vaccine inventor to keep that knowledge to himself? How about the inventor of some of the antibiotics on the market now? Be careful what you wish for. Patents were invented to circumvent secret societies and guilds. Without intellectual property laws, knowledge retreats behind paywalls and even more sinister situations.
Re: Re: Re:3 Re:
You do know that the person who invented the polio vaccine didn’t want a patent, right?
Re: Re: Re:3 Re:
“Patents were invented to circumvent secret societies and guilds.”
[Citation needed]
As far as I’m concerned, Microsoft has many patents yet their software is still closed source. and what about Pepsi and Coca Cola, what are their secret formulas?
Re: Re: Re:4 Re:
“and what about Pepsi and Coca Cola, what are their secret formulas?”
Wow does it REALLY need to be pointed out what the difference is between PATENTS and TRADE SECRETS?
You DO realize that:
a) the cola companies did NOT, in fact, ever patent their formulas
and
b) you CANT patent a forumla or recipie
Re: Re: Re:5 Re:
The point is that even with patents, secrets still exist and IP still even protects them (ie: trade secrets). It suggests that patents don’t provide incentive to expose these secrets.
Re: Re: Re:6 Re:
The point is that even with patents, secrets still exist and IP still even protects them (ie: trade secrets). It suggests that patents don’t provide incentive to expose these secrets.
That’s because these secrets (i.e., source code and recipes for soft drinks) are not patentable. See the Printed Matter Doctrine.
Re: Re: Re:7 Re:
“Alexander C. Howell, of Vienna, New Jersey, was granted a patent for “cream soda-water” on June 27, 1865.”
http://en.wikipedia.org/wiki/Cream_soda
No, it’s because corporations simply hide what they want to hide and monopolize what they want to monopolize.
Re: Re: Re:8 Re:
Also see
http://www.dannisblog.com/page/TRADE-SECRETS-VS-PATENTS-THE-COCA-COLA-STORY.aspx
Re: Re: Re:9 Re:
and here is another soft drink patent.
http://www.freepatentsonline.com/7550163.html
Re: Re: Re:7 Re:
As far as software is concerned, the reason why patents on specific source code does not exist is because
“There are very, very few patents that disclose anything that couldn’t be figured out otherwise.” (quoted from Mike).
Not because they’re not patentable, if the corporations wanted to patent source code then they’ll make them patentable (corporations clearly have that leverage). The USPTO is completely careless about what patents it grants and if the corporations wanted patents on source codes they’ll find a way to get them. The source code isn’t patented because the source code can’t easily be figured out otherwise. Sure, you can use disassemblers to disassemble code but the code you get is not the original and it’s not as easily adaptable and modifiable as the original source code. It discloses much less and gives much stronger monopoly power to simply patent broad and obvious software related ideas without even the need to link them to any specific piece of software that uses them. and that’s what patents are. They don’t disclose anything, they’re simply a way of telling people what they can’t do under the false pretext that controlling others somehow discloses valuable information to them.
Re: Re: Re:3 Re:
“Without intellectual property laws, knowledge retreats behind paywalls and even more sinister situations.”
[citation needed] Do you have evidence to back this statement up? Or is it just more FUD?
Re: Re: Re:3 Re:
Would you like the Polio vaccine inventor to keep that knowledge to himself? How about the inventor of some of the antibiotics on the market now? Be careful what you wish for. Patents were invented to circumvent secret societies and guilds. Without intellectual property laws, knowledge retreats behind paywalls and even more sinister situations.
Interesting choice of examples, since it basically disproves your point:
Edward R. Murrow: Who owns the patent on this vaccine?
Jonas Salk: Well, the people, I would say. There is no patent. Could you patent the sun?
There are very, very few patents that disclose anything that couldn’t be figured out otherwise.
Re: Re: Re: Re:
The patent system “rewards” limited, exclusivity to a patent owner in exchange for a public disclosure of the invention
The “disclosure” myth again? Come on… That’s old. There’s very little actual disclosure in patents, and if disclosure was the true point, there would be much different requirements.
Because the patent system’s “reward” is exclusivity, compulsory licensing of competitors or something similar doesn’t make much sense either.
If you look at the history of patent law, there’s actually a very strong case that the framers meant “exclusivity” to mean “exclusivity of the profits,” rather than the product. Thus, a compulsory license may, in fact, be much more in line with what the founders intended. I’m not a fan of the compulsory license solution, but it’s certainly better than killing off competition and innovation.
Re: Re: Re:2 Re:
The “disclosure” myth again? Come on… That’s old. There’s very little actual disclosure in patents, and if disclosure was the true point, there would be much different requirements.
So you’re saying that Section 112 of the Patent Act is a myth? The legal requirement that “The specification shall contain a written description of the invention, and of the manner and process of making and using it, in such full, clear, concise, and exact terms as to enable any person skilled in the art to which it pertains, or with which it is most nearly connected, to make and use the same, and shall set forth the best mode contemplated by the inventor of carrying out his invention” is merely mythological?
Someone should tell the Federal Circuit…
Re: Re: Re:3 Re:
“So you’re saying that Section 112 of the Patent Act is a myth?”
This is another example of the legal process failing the citizenry. People ask for reality, people cite reality, people cite experience, and the legal system gives them jargon and paperwork.
Section 112 of the Patent Act exists, if you say so. But it exists in the same sense that I have a book at home where section 112 says that the sun rises in the West, and sets in the North every morning.
You can write any amount of counter-factual laws. That doesn’t make the content of the laws truthful.
Re: Re: Re:4 Re:
This is another example of the legal process failing the citizenry. People ask for reality, people cite reality, people cite experience, and the legal system gives them jargon and paperwork.
Section 112 of the Patent Act exists, if you say so. But it exists in the same sense that I have a book at home where section 112 says that the sun rises in the West, and sets in the North every morning.
You can write any amount of counter-factual laws. That doesn’t make the content of the laws truthful.
You clearly do not understand what prompted my response. Mike said that “if disclosure was the true point, there would be much different requirements.” I cited Section 112 of the Patent Act, which is a requirement of patentability. It requires all issued patents to “contain a written description of the invention, and of the manner and process of making and using it, in such full, clear, concise, and exact terms as to enable any person skilled in the art … to make and use the same.”
If this law does not indicate that the point of patent law is to encourage disclosure, then I don’t know what does.
Re: Re: Re:5 Re:
Section 112 says that, if you say so. Just like the US Constitution gives Congress the Authority to declare war, and yet, here we are, in 2.5 wars. The 4th Amendment to that same constitution gives the citizenry freedom from unreasonable search and seizure, yet all US adults can rely on the FACT that our government listens to us all every day, and that the FBI issues “national security letters” without any judicial oversight whatsoever.
You just proved my point by giving out legal piffle that contradicts most people’s day-to-day experience. It’s like the fine print in car commercials on Tee Vee: the warning’s all there, but it goes by so fast you can’t read it. So, nobody believes the ads.
Re: Re: Re:3 Re:
So you’re saying that Section 112 of the Patent Act is a myth?
No. I’m saying that patent lawyers like yourself who wrote the patent laws have Section 112 in there so they can claim that patents disclose stuff. It’s out here, in reality, where people who actually do innovative work and know that patents don’t disclose a damn thing.
http://www.techdirt.com/articles/20070321/021508.shtml
http://www.techdirt.com/articles/20081107/0135002767.shtml
http://www.techdirt.com/articles/20070814/015013.shtml
No one learns anything from patents. They don’t disclose anything.
The legal requirement that “The specification shall contain a written description of the invention, and of the manner and process of making and using it, in such full, clear, concise, and exact terms as to enable any person skilled in the art to which it pertains, or with which it is most nearly connected, to make and use the same, and shall set forth the best mode contemplated by the inventor of carrying out his invention” is merely mythological?
The legal requirement is not. The actual disclosure is. Seriously, read any patent, and tell me what a real innovator can learn from it? The answer is nothing.
Re: Re: Re:4 Re:
No. I’m saying that patent lawyers like yourself who wrote the patent laws have Section 112 in there so they can claim that patents disclose stuff. It’s out here, in reality, where people who actually do innovative work and know that patents don’t disclose a damn thing.
http://www.techdirt.com/articles/20070321/021508.shtml
http://www.techdirt.com/articles/2 0081107/0135002767.shtml
http://www.techdirt.com/articles/20070814/015013.shtml
No one learns anything from patents. They don’t disclose anything.
That’s a lot of poppycock. The three articles to which you link speak to (1) what one law professor (who has never practiced patent law, mind you) believes regarding unscrupulous patent attorneys trying to game the system (which is not as successful as the professor would have you believe); (2) a technologist’s opinion of what a claim discloses, which clearly shows that the technologist never read the actual written description of the patent he criticized; and (3) a policy Microsoft had in order to avoid willful infringement liability. None of this nonsense speaks to whether patents disclose anything useful and whether anyone learns anything from patents. If anything, these three links show that the persons discussed therein have never actually read a patent before. If you want to know whether patents disclose useful information, why would you trust the opinion of a person who has never actually read a patent?
Honestly, Mike, I would expect you to actually know your own work before you pompously cite it to me as some sort of authority.
The legal requirement is not. The actual disclosure is. Seriously, read any patent, and tell me what a real innovator can learn from it? The answer is nothing.
How arrogant. When was the last time your read a mechanical device patent? How about a medical device patent? Maybe a biological composition patent? What about a patent to a manufacturing process? Have you read any patents on chemical processes?
When it comes to patents, your view is clearly confined to the scope of software and computer methods. If you want to discuss the merits of what is disclosed in such patents, be my guest. But don’t issue overly broad generalizations about what patents disclose and what can be learned therefrom when the entirety of your experience with patents is limited to software.
Re: Re: Re:5 Re:
“When was the last time your read a mechanical device patent? How about a medical device patent? Maybe a biological composition patent? What about a patent to a manufacturing process? Have you read any patents on chemical processes?”
So if someone had a patent that lets them sue anyone who benefits from the idea that 1 + 1 = 2, maybe a one year old can learn from that patent. But that’s irrelevant. The point is that patents aren’t needed for people to learn this stuff and people don’t go around reading patents to learn anything, and that is especially true of people well versed in the field. They read textbooks, take classes, and conduct R&D to learn this stuff, then IP maximists simply take ideas learned from others after the fact and create patents on them, many of which are ideas based on concepts and research developed and conducted by others (often times funded by the U.S. govt even).
To say that because Mike is familiar with computer methods there might be a bio patent that Mike could learn from misses the point. The patent needs to be non-obvious to someone trained in the field, not to someone who is trained in a completely different field. and most patents simply don’t disclose anything of value that can’t be learned elsewhere (or anything of value whereby the information necessary to figure something out can’t be picked up from elsewhere).
People would be afraid of conducting any R&D before getting a patent because if they spend money on all this R&D someone else might get (or already have) a patent and sue them after the fact. So what do they naturally do? They get patents before conducting any R&D. Basically they collect already existing information and come up with an idea that anyone else can just as easily come up with given the available information. That’s what pharmaceutical patents amount to. They are generally granted before any R&D is conducted. They’re essentially worthless to society.
Re: Re: Re:6 Re:
and, furthermore, I have evidence to support my position. There is plenty of evidence to support the argument that patents only hinder innovation and there is little to no evidence to support the argument that they support innovation.
and since
A: monopolies are known to create an economic harm (ie: they cost jobs by restricting the competition that hires people, they reduce aggregate output)
B: No one is entitled to having any government grant them a monopoly on anything
The burden is on IP maximists to justify the existence of IP (it’s not on me to justify their abolition). That burden has not been met.
Re: Re: Re:7 Re:
The burden is on IP maximists to justify the existence of IP (it’s not on me to justify their abolition). That burden has not been met.
Says you.
Re: Re: Re:8 Re:
says we
Re: Re: Re:8 Re:
The burden is on IP maximists to justify the existence of IP (it’s not on me to justify their abolition). That burden has not been met.
Says you.
That doesn’t look like proof that IP needs to be maximized.
Abort/Retry/Fail?
Re: Re: Re:9 Re:
That doesn’t look like proof that IP needs to be maximized.
Nor is it my position that IP needs to be maximized. Perhaps you should stop swinging at that strawman.
Re: Re: Re:10 Re:
“Nor is it my position that IP needs to be maximized. Perhaps you should stop swinging at that strawman.”
That wasn’t a strawman. Someone brought up the point that perhaps you need to define your position. I’m reiterating those words.
Your answer was a mere “Says you.” with nothing to actually refute what the other AC has said. So either you’re trying to justify your own position that patents are teaching something (without proof) or the AC is correct with the evidence put up.
So before you decide to get off topic and justify, my point is that you need a lot more than two words to answer someone that has put up an assertion. That’s my only reason for the other post.
Re: Re: Re:6 Re:
So if someone had a patent that lets them sue anyone who benefits from the idea that 1 + 1 = 2, maybe a one year old can learn from that patent. But that’s irrelevant.
Yes, it is. So why did you bring it up?
The point is that patents aren’t needed for people to learn this stuff and people don’t go around reading patents to learn anything, and that is especially true of people well versed in the field. They read textbooks, take classes, and conduct R&D to learn this stuff, then IP maximists simply take ideas learned from others after the fact and create patents on them, many of which are ideas based on concepts and research developed and conducted by others (often times funded by the U.S. govt even).
No, technologists do not have to read patents in order to learn the state of the art. But the fact is that they could, at least as a supplement to their regular continuing education, and that’s what matters.
To say that because Mike is familiar with computer methods there might be a bio patent that Mike could learn from misses the point.
That’s not what I said. I think you’re missing the point.
The patent needs to be non-obvious to someone trained in the field, not to someone who is trained in a completely different field. and most patents simply don’t disclose anything of value that can’t be learned elsewhere (or anything of value whereby the information necessary to figure something out can’t be picked up from elsewhere).
So what? I can learn about World War II from reading Wikipedia, or I can learn about it from reading a history textbook. Does that mean we should discard Wikipedia?
Better analogy: I can get packages sent to me by either the U.S. Postal Service or via a private common carrier like Fed Ex or DHL. Does that mean we should discard the U.S. Postal Service entirely?
We can have mercenaries perform the duties of a standing army just as well as the U.S. military. Does that mean we should do away with the U.S. military?
People would be afraid of conducting any R&D before getting a patent because if they spend money on all this R&D someone else might get (or already have) a patent and sue them after the fact. So what do they naturally do? They get patents before conducting any R&D. Basically they collect already existing information and come up with an idea that anyone else can just as easily come up with given the available information. That’s what pharmaceutical patents amount to. They are generally granted before any R&D is conducted. They’re essentially worthless to society.
Something tells me that you have no idea how the pharmaceutical industry actually works.
Re: Re: Re:7 Re:
“Yes, it is. So why did you bring it up?”
Because it’s similar to the argument that you’re making, your argument is the one that’s irrelevant.
“But the fact is that they could, at least as a supplement to their regular continuing education, and that’s what matters.”
No, it doesn’t matter, because they can simply just go to a better source of information, which is pretty much what everyone already does.
“So what? I can learn about World War II from reading Wikipedia, or I can learn about it from reading a history textbook. Does that mean we should discard Wikipedia?”
The difference is that Wikipedia isn’t a list of what I can’t do without a license.
“Better analogy: I can get packages sent to me by either the U.S. Postal Service or via a private common carrier like Fed Ex or DHL. Does that mean we should discard the U.S. Postal Service entirely?”
The difference is the USPS doesn’t prevent competitors from sending packages (though it does wrongfully prevent competitors from delivering mail into mail boxes), patents prevent competitors from existing. I’m fine with the USPS giving me the option of using them to deliver mail, I’m not fine with them preventing me from using others to deliver my mail.
“Something tells me that you have no idea how the pharmaceutical industry actually works.”
Something tells me that you will continue not to back up anything you say with any evidence.
Re: Re: Re:7 Re:
Wikipedia should only be discarded in that example if it starts trying to tell you that any other source of WWII data is breaking the law…..
Re: Re: Re:7 Re:
“Something tells me that you have no idea how the pharmaceutical industry actually works.”
I think part of the problem is that no one really know how it works because the pharmaceutical industry is afraid of allowing independent auditors to audit their costs.
“”# The industry fought, and won, a nine-year legal battle to keep congressional investigators from the General Accounting Office from seeing the industry’s complete R&D records. (See Section IV) Congress can subpoena the records but has failed to do so. That might owe to the fact that in 1999-2000 the drug industry spent $262 million on federal lobbying, campaign contributions and ads for candidates thinly disguised as “issue” ads. (See accompanying report, “The Other Drug War: Big Pharma’s 625 Washington Lobbyists”) “”
http://www.mindfully.org/Industry/Pharma-R&D-Myths.htm
and see
http://www.techdirt.com/articles/20091001/0410036386.shtml#c744
for some relevant commentary.
Re: Re: Re:5 Re:
“How arrogant.”
No, what’s arrogant is the idea that patent holders are superior to others and so their ideas need to be protected because if they’re not, no one else will be able to come up with similar ideas when the need arises.
Re: Re: Re:6 Re:
No, what’s arrogant is the idea that patent holders are superior to others and so their ideas need to be protected because if they’re not, no one else will be able to come up with similar ideas when the need arises.
That’s not arrogant; that’s idiotic, and also the beginning of a strawman argument. Instead of manufacturing arguments that you perceive to be held by your opposition, why don’t you actually argue against the points actually made?
Re: Re: Re:7 Re:
And can you do actually give proof of the benefits of IP max?
Re: Re: Re:8 Re:
No, he will ignore the evidence given to him and provide absolutely zero evidence of his own. That’s what IP maximists do.
Re: Re: Re:8 Re:
And can you do actually give proof of the benefits of IP max?
Can you construct a sentence in English? Thanks.
It is not my position that IP maximalism is the ideal scenario. I am merely pointing out that patents do provide beneficial disclosure, contrary to the opinion held by Mr. Mike Masnick. If you want evidence of this, feel free to have a look at any patent assigned to a company that does not practice in the software field. If you would like some examples, try 3M, Johnson & Johnson, Boston Scientific, Boeing, Raytheon, Bose and Merck, to name a few.
Re: Re: Re:7 Re:
Maybe not you, but I’ve seen IP maximists argue some pretty ridiculous things that at least come close to the above argument. For instance, see
bob writes
“Would you like the Polio vaccine inventor to keep that knowledge to himself? How about the inventor of some of the antibiotics on the market now? Be careful what you wish for. Patents were invented to circumvent secret societies and guilds. Without intellectual property laws, knowledge retreats behind paywalls and even more sinister situations.”
Read what the argument is, specifically, read the last sentence. The implication is that without IP others there wouldn’t be anyone to spread knowledge. But that’s false. Here on Techdirt alone lots of people are spreading knowledge. Wikipedia is full of knowledge that’s released under a licensed at least in part designed to circumvent IP. As far as I’m concerned, even if some people will refuse to ‘disclose their knowledge’ by applying for patents, I’m fine with that, because, like most people, I will simply find that knowledge elsewhere.
Re: Re: Re:8 Re:
Sorry, some corrections…
“The implication is that without IP there wouldn’t be anyone to spread knowledge.”
“As far as I’m concerned, even if some people will refuse to ‘disclose their knowledge’ by not applying for patents …” *
Re: Re: Re:4 Re:
“The legal requirement is not. The actual disclosure is. Seriously, read any patent, and tell me what a real innovator can learn from it? The answer is nothing.”
I hate to disagree, Mike, but wasn’t it Einstein that learned quite a deal from patents while working in Sweden?
I’m not familiar with patents currently, and I’ll have to look at the three articles posted, but perhaps there are a number of benefits to other inventors in seeing how work is done.
Re: Re: Re:5 Re:
Einstein worked as a patent clerk in Switzerland around the turn of the last century. I doubt that Swiss patents in 1903 are the same as USA patents in 2011.
For starters, they didn’t have software to patent back then, and people would have laughed a “business model” patent out of the office. In fact, in the USA, you had to submit a working model of your patentable thingy for a long time, up until 1880. I wonder if Switzerland had the same or similar policy?
Re: Re: How do you think it rewards the inventor?
The trade off is that the inventor gets the right to sue in return for disclosing the knowledge. Society doesn’t reward the patent holder with a check. Nope. Society just gives the patent holder the right to sue. So why is anyone surprised that the patent holder is suing or threatening to sue?
Re: Re: Re: How do you think it rewards the inventor?
“Society just gives the patent holder the right to sue.”
No, it’s our broken legal system that is giving the patent holder a privilege to sue, not society. I never gave them any such privilege. Sure, my elected officials did, but perhaps part of the purpose of this discussion is to help us find better officials to elect.
Re: Re:
The value of a patent is: to EXCLUDE others. Why is it a surprise that it can also be used to shutdown a “second comer?”
For those who believe that competition drives innovation, it’s not a surprise. It’s just sad and innovation hindering.
I also have some doubts about the $70M story, here’s why: if the patent was actually invalid or there was no infringement, pursuing a patent litigation defense in that case would still make sense for an acquirer. The cost of a patent case through trial can mean multiple millions, but that’s still far less than the acquisition price
The story is absolutely true, though I can’t name names. I can confirm that it is absolutely true. If you think that it makes sense to tie up a tech your acquiring in court for 5 or more years to defend what you believe to be a frivolous lawsuit… well… you haven’t worked in many tech businesses.
Re: Re: Re:
The story is absolutely true, though I can’t name names. I can confirm that it is absolutely true. If you think that it makes sense to tie up a tech your acquiring in court for 5 or more years to defend what you believe to be a frivolous lawsuit… well… you haven’t worked in many tech businesses.
If the lawsuit was indeed frivolous, then it would likely not take 5+ years to be resolved. Indeed, if it was truly frivolous, there would be multiple opportunities to dispose of the case well before the costs of litigation begin to mount to a significant level. Furthermore, the costs of defending against a “frivolous” lawsuit, while not trivial, are certainly not within sniffing distance of a $70M acquisition price. The cost of losing a patent infringement lawsuit, however, would be substantial, especially if the value of the company’s business was worthy of a $70M bid from a buyer.
My guess is that the buyer backed out because it was actually afraid of losing, not just defending the lawsuit. In such circumstances, the idea that the patent infringement claim was frivolous begins to lack merit.
Re: Re: Re: Re:
If the lawsuit was indeed frivolous, then it would likely not take 5+ years to be resolved.
Ha! You can’t be serious. How long did the RIM patent lawsuit last?
Furthermore, the costs of defending against a “frivolous” lawsuit, while not trivial, are certainly not within sniffing distance of a $70M acquisition price.
No one said that it did. But you are now adding millions to the $70M purchase price, plus uncertainty, plus the potential that the $70M might go towards nothing. That’s crazy costly.
It makes no logical sense to compare the cost of the lawsuit to the cost of acquisition. The two are independent.
My guess is that the buyer backed out because it was actually afraid of losing, not just defending the lawsuit. In such circumstances, the idea that the patent infringement claim was frivolous begins to lack merit.
Your guess is wrong. The buyer backed out because this added significant costs to an acquisition it reasonably valued at $70M.
And what was so insidious about this was the timing of the lawsuit. The two products had co-existed in the marketplace for about five years. It was only when the one company got wind of the acquisition that it filed the lawsuit.
Re: Re: Re:2 Re:
Ha! You can’t be serious. How long did the RIM patent lawsuit last?
Longer than it needed to last. RIM could have settled the case long ago for far less than the final judgment levied against it. It chose to roll the dice in court and lost in a big, big way.
Furthermore, you are citing only one very public example. There are thousands of other cases that did not result in the lengthy, costly dispute that RIM decided to undertake. Your opinion here suffers from a small sample size problem.
In my opinion, RIM handled its case very poorly.
No one said that it did. But you are now adding millions to the $70M purchase price, plus uncertainty, plus the potential that the $70M might go towards nothing. That’s crazy costly.
True, it could be costly. But if all those things could have happened, then perhaps the suit was not as frivolous as you claim it to be.
It makes no logical sense to compare the cost of the lawsuit to the cost of acquisition. The two are independent.
I’m not comparing the costs of acquisition to the costs of litigation. I am saying that the cost of litigation must be priced into the buyer’s offer.
You can cry about the uncertainty of litigation and all, but you already put forth the assumption that the lawsuit was frivolous. That phrase imparts the belief of a high probability that the case will be dismissed or ruled in favor of the defendant. In such circumstances, the only costs to the defendant are time and legal fees, and a $3M legal expense for patent litigation (which is a generous estimate and assumes that the lawsuit is indeed frivolous) is not enough to entirely eviscerate the value of a $70M deal.
Your guess is wrong. The buyer backed out because this added significant costs to an acquisition it reasonably valued at $70M.
That’s it? Then why didn’t the buyer just lower the bid price? Increased costs is reason to lower the bid price, not back out of a deal.
And what was so insidious about this was the timing of the lawsuit. The two products had co-existed in the marketplace for about five years. It was only when the one company got wind of the acquisition that it filed the lawsuit.
Then perhaps the parties involved should have been more tight-lipped about the transaction. If all the competitor wanted to do was kill the deal, the competitor did not have to use patents to do it. If the deal fell apart because the competitor got wind of the deal, then I would be pointing the finger at the parties who had the duty to keep information confidential, not at the competitor legitimately exercising its patent rights.
Re: Re: Re:3 Re:
“Furthermore, you are citing only one very public example. There are thousands of other cases that did not result in the lengthy, costly dispute that RIM decided to undertake. Your opinion here suffers from a small sample size problem.”
and your opinion that
“If the lawsuit was indeed frivolous, then it would likely not take 5+ years to be resolved.”
Suffers from the fact that it’s a Non-Sequitur. What does the length of resolution time have to do with the frivolous nature of the lawsuit?
“Indeed, if it was truly frivolous, there would be multiple opportunities to dispose of the case well before the costs of litigation begin to mount to a significant level.”
Another non-sequitur. You’re on a roll.
What does the frivolous nature of the lawsuit have to do with the number of opportunities available to dispose of the lawsuit? The above is just your unsubstantiated opinion.
“My guess”
and that’s just your guess. It’s an unsubstantiated guess at best.
“is that the buyer backed out because it was actually afraid of losing, not just defending the lawsuit. In such circumstances, the idea that the patent infringement claim was frivolous begins to lack merit.”
More non-sequiturs. Just because someone might be afraid of losing a lawsuit doesn’t make the lawsuit any less frivolous.
Re: Re: Re:4 Re:
What does the length of resolution time have to do with the frivolous nature of the lawsuit?
Lawsuits that are indeed frivolous can be disposed via a motion to dismiss for failure to state a claim upon which relief can be granted. Such motions are commonly granted for defendants that are subject to frivolous claims of vexatious litigants, and they typically end the lawsuit in less than a year’s time.
Other suits can be disposed of via a motion for summary judgment, which occurs after discovery but before trial. Such motions rule on claims where there are no disputed factual issues, thereby streamlining cases. In the case of a truly frivolous lawsuit, the facts of the given case should be such that no possible claim can be made under the facts. A summary judgment motion can typically dispose of a case within 2 years’ time.
That’s how truly frivolous lawsuits are typically handled. They also tend to result in the plaintiff being sanctioned for bringing a frivolous lawsuit and wasting judicial resources. In sum, truly frivolous lawsuits are handled rather quickly in comparison to legitimate claims.
What does the frivolous nature of the lawsuit have to do with the number of opportunities available to dispose of the lawsuit? The above is just your unsubstantiated opinion.
I have been practicing law for about two years, and I’ve been involved in a number of litigations, both patent and others. My opinion is based on my legal experience and education. What is your opinion based on? What Mike says?
If you think my opinion is wrong, feel free to tell me why.
Just because someone might be afraid of losing a lawsuit doesn’t make the lawsuit any less frivolous.
Frivolous. You keep using that word. I do not think it means what you think it means.
Tell me: if a lawsuit is truly frivolous, what do you think are the chances that said suit will end with a favorable judgment for the plaintiff?
Re: Re: Re:5 Re:
“Lawsuits that are indeed frivolous can be disposed via a motion … In sum, truly frivolous lawsuits are handled rather quickly in comparison to legitimate claims.”
and who’s to say that the definition of a ‘truly frivolous lawsuit’ isn’t based on the subjective opinion of the judge making that determination? and the patent itself grants standing to sue so that the lawsuit can indeed go forward, but who’s to say the USPTO itself didn’t grant a frivolous patent.
and it should also be noted that infringement damages far exceed the damages for falsely claiming infringement.
“I have been practicing law for about two years, and I’ve been involved in a number of litigations, both patent and others. My opinion is based on my legal experience and education. What is your opinion based on? What Mike says?”
Because when you can’t defend your position, just appeal to your own authority.
“Tell me: if a lawsuit is truly frivolous, what do you think are the chances that said suit will end with a favorable judgment for the plaintiff?”
Doesn’t matter, the lawsuit process itself can be an expensive endeavor and plaintiffs have been known to engage in venue shopping in hopes of gaining access to venues that are more likely to act favorably to them (ie: East Texas) and hence increase their chances of success. Is that how the patent system should work?
Re: Re: Re:5 Re:
I’m not sure it means what you think it means either.
You seem to be using the word as some sort of quasi-legal definition of “having no merit in terms of legal process”. Others seem to be using it closer to the dictionary sense:
To convey the idea of something that is clear to any observer skilled in the field is nonsensical, but will be endlessly argued over by lawyers because a piece of paper says they can.
You do, however, score a +1 Princess Bride reference.
Re: Re:
Why is it a surprise that it can also be used to shutdown a “second comer?”
Except in the case I am aware of, Resolition systems was 1st to market and didn’t bother with a patent as their business was mediation for years VS the web company which was a web only thing.
Shocked! Shocked, I say!
Let’s get this straight. The patent system is designed to protect innovators from copycats. And someone got a patent and then sued a copycat. It must be a slow news day for you, Mike.
I agree with #6, here. It’s not like the target couldn’t indemnify the buyer for any patent problems, especially if this is one of those “baseless” claims you’re so fond of writing about. More likely diligence revealed the deal was a dog and this was just an excuse to walk away from it.
XOXO, Anonymous
Re: Shocked! Shocked, I say!
It sounds like these were software patents which IMHO shouldn’t even be allowed. It is one thing to innovate with hardware but most software patents are on obvious things. Just look at the Amazon patent on one-click checkout. Web retailers were storing your shopping cart and your previous credit card info so it is only logical that a one-click checkout would show up. It is not some giant leap in innovation.
Also, think of the balance of patents for both inventor and consumer. For an inventor to block out all competition is bad for the consumer. A balance must be struck and right now there is no balance.
Re: Shocked! Shocked, I say!
“The patent system is designed to protect innovators from copycats”
Really?
Re: Re: Shocked! Shocked, I say!
Yes, really. The “design” of something, especially a process, can differ substantially from the intent that put the process in place.
Take software development in big corporations as an example. Big corporations put in place “methodologies” that have the intent of making quality software, and indeed, making it on schedule and predictably.
The reality is that the design of the system almost always devolves into a bunch of paperwork, because the folks that *design* the process have different goals than the people who said the process should exist.
Re: Re: Re: Shocked! Shocked, I say!
Business methods and software should not be patentable.
Re: Re: Re: Shocked! Shocked, I say!
“Designing software takes a bunch of work and thinking”
That’s why we have copyrights. Paintings, novels, movies, music, etc, all take substantial investment of effort and skill, but we don’t grant patents on them. Patents are not a reward for hard work, they’re an incentive to discover truly novel things
…And that never happens, so fuck ’em.
Re: Shocked! Shocked, I say!
The patent system is designed to protect innovators from copycats.
No it is to promote progress by limiting the use of ideas. Read that again. Progress and limiting used in the same sentence. Sounds like a great government work there…adding the fuzzy definition of limited now patents can last minimum 20 years, which is about 19 years too long in the tech world.
Re: Shocked! Shocked, I say!
No, patent is meant to provide incentive to produce more scientific discovery under the assumption that the discoverer gets exclusive rights to produce and sell the results of that discovery.
Re: Re: Shocked! Shocked, I say!
right, and the incentive to produce more scientific discovery falls on the competitor. Faced with the exclusive patent rights, the competitor is expected to conduct research and development to build a better mousetrap, which itself could be patented. The patent system is designed to create a technology arms race with each competitor trying to one-up each other. The public gets the benefit of the R&D via the public disclosure required to obtain a patent.
The original post mentioned “patent holders using patents not to innovate, but to block and kill other companies — especially when those companies really are more innovative and have a better product.”
So the real question here is, if this competitor really was more innovative, why did it not have patents of its own to use as leverage against the first company? It either was not innovative, or the management lacked the business expertise and strategic thinking needed to be successful.
Re: Re: Re: Shocked! Shocked, I say!
“or the management lacked the business expertise and strategic thinking needed to be successful.”
Patents shouldn’t be a game of who can get to the patent office first just to avoid getting sued (or to sue others). That’s not encouraging innovation. If someone has to consider going to the patent office and get a patent before doing anything just to avoid getting sued then that’s a sign that the patent itself is not necessary for an innovation to occur. The patent shouldn’t have been granted.
Someone has to get to the patent office first but if everyone can come up with similar ideas around the same time regardless and someone can market the idea without patents then clearly patents weren’t needed and shouldn’t have been granted. I highly doubt that this competitor even saw the patent in question before innovating. If they had, they probably would have avoided using the idea and getting sued. They likely independently came up with the idea or didn’t think it was patent worthy.
If the innovation can occur without patents then the patent system shouldn’t be about ensuring that companies have the strategic thinking to get to the patent office first. Not every new idea deserves a patent. Innovation can happen, and has happened, without patents and it will continue to happen without them. Patents should only be granted on innovations that need patents to emerge, not on every new innovation possible.
Re: Re: Re:2 Shocked! Shocked, I say!
“Patents should only be granted on innovations that need patents to emerge, not on every new innovation possible.”
AGREED. The legal standard for granting a patent is 1) Utility 2) Newness/novelty 3) non-obviousness.
Whether a patent application discloses something that is non-obvious is highly subjective and difficult to determine. Prior to 2007, the patent office used a somewhat loose standard. However, in 2007, the Supreme Court issued the KSR decision that made the determination of non-obviousness far more strict and difficult to overcome. I would bet that thousands upon thousands of issued patents are now subject to invalidation (through reexamination or litigation) as a result of the new non-obvious standards issued by the Supreme court in KSR. While litigation can be quite expensive, initiating a re-examination proceeding at the patent office is relatively cheap.
In each of these patent stories, it would be beneficial to check whether the patent at issue was granted before or after the KSR decision, but that would make a big difference in determining whether the patent is valid.
Re: Re: Re: Shocked! Shocked, I say!
Except, the inventor of the “better mousetrap” gets sued by the one with the “older mousetrap”, not because they’re similar or the second was based on the first one, but because “we already have a mousetrap we don’t need another.”
Great job, patents.
Re: Re: Re:2 Shocked! Shocked, I say!
Hey, I guess all those LED lightbulb makers shouldn’t copycat the incandescent lightbulb by making something lightbulb-shaped. How long until they get sued for being copycats!
Re: Re: Re: Shocked! Shocked, I say!
Which is only 1 way to look at it. Invention is incremental ALWAYS. The fact of it being “different enough” to warrant a separate patent rather than being infringing is merely a matter of degree and ultimately subjective.
It is just as true to say that the public would derive more benefit from that same R&D money going to an incremental improvement of, say, the manufacturing of a patented item that significantly reduces the cost to the public of producing a desired thing.
It’s not so good for the company now with stiff competition, but it can be argued that it’s better for the public, which is who patents are supposed to benefit in the first place.
Re: Re: Re: Shocked! Shocked, I say!
right, and the incentive to produce more scientific discovery falls on the competitor. Faced with the exclusive patent rights, the competitor is expected to conduct research and development to build a better mousetrap, which itself could be patented. The patent system is designed to create a technology arms race with each competitor trying to one-up each other. The public gets the benefit of the R&D via the public disclosure required to obtain a patent.
This is the mythological position which does not match to reality. I prefer my innovation policy to match reality. Not a myth.
You prefer the myth?
Re: Shocked! Shocked, I say!
No one is entitled to have a government protect them from alleged copycats and that’s not the purpose of the patent system to begin with.
Re: Shocked! Shocked, I say!
“patent holders using patents not to innovate, but to block and kill other companies”
Yes, I must agree that it’s a slow news day. Does anyone know how a patent holder would use a patent to innovate? The only thing they do is give you the right to stop other people from using your invention. The innovation is up to you.
Re: Shocked! Shocked, I say!
See the Steam Engine patent wars for an example of innovation being hindered by patents.
Also hugging and kissing everyone? Good luck with the oral herpes.
Re: Shocked! Shocked, I say!
Let’s get this straight. The patent system is designed to protect innovators from copycats. And someone got a patent and then sued a copycat. It must be a slow news day for you, Mike.
What if it wasn’t even a valid patent lawsuit in the first place, but was just filed to scare off investors?
Re: Shocked! Shocked, I say!
Saying patents were designed to protect against copycats is like saying cd players were designed to spin cds.
The monopoly is the means, the porpose is to get more useful goods out to the public.
Re: Shocked! Shocked, I say!
News day isn’t the only thing that slow around here.
Re: Shocked! Shocked, I say!
Let’s get this straight. The patent system is designed to protect innovators from copycats. And someone got a patent and then sued a copycat
Not a copycat. An independent inventor who was better.
It must be a slow news day for you, Mike.
It’s not. I have to admit, I don’t understand when people make this statement. What do you think you’re saying?
I agree with #6, here. It’s not like the target couldn’t indemnify the buyer for any patent problems, especially if this is one of those “baseless” claims you’re so fond of writing about. More likely diligence revealed the deal was a dog and this was just an excuse to walk away from it.
Ha! Spoken like someone who has no experience in business. A multi-year patent lawsuit is a huge cog in a wheel of innovation. Even with an indemnity clause, it’s not worth the hassle.
Well if it is such a problem why aren’t people going to the FTC or BBB to actually get something done about it. The first legal thing I can attest to is insider trading with a smidge of deceptive business practice with a dash of corporate espionage.
If he lost 70 million there it hit somebodies radar. I’ll let FUDbuster have at this one. This doesn’t even pass the smell test.
Govt imposed monopolies cost jobs. Abolish them.
I agree with the person saying software patents shouldn’t be allowed. I’d be very interested to see a software patent case where the judge actually wants to look at the source code. If 2 companies are doing the same thing, but going about it in completely different ways, how can that be infringing? And even if they’re doing it the same way.. they’re basically saying “only we can arrange ones and zeros in this order”.
Another Way To Help Solve This Problem
When applying for a patent, the applicant has a built-in time limit to “perfect the invention” before the final decision is made by the examiner as to whether or not the invention is patentable at all. If the invention is “incomplete” or doesn’t quite work yet when the application time limit runs out, the application is rejected.
So, do the same thing at the other end: treat the invention as “probational” even after the patent is issued – say, for two years. The examiner watches the newly issued patent as though carrying out the implementation of the invention is part of the original “proof of concept” portion during the application process. If the new patent holder fails to do anything with the new invention after two years, the patent is automatically “challenged” by the examiner, and the patent holder has to demonstrate why they failed to implement the invention. If they cannot defend their patent, it reverts into the public domain — which allows anyone else access to it use — but they cannot re-patent it — they must “improve” upon it in order to apply for their own version.
Re: Another Way To Help Solve This Problem
But that would be a good thing, and could possibly help to spur innovation and advances with greater ease and less money.
-This has now been patented-
Patents are for blocking companies
“patent holders using patents not to innovate, but to block and kill other companies”
A patent is not an innovation, it does no innovation, it advances no science or engineering. It is license to prevent others from using a invention in exchange for making the knowledge of the invention public.
Using Patents to block other companies are exactly what a patent is for.
Re: Patents are for blocking companies
“It is license to prevent others from using a invention in exchange for making the knowledge of the invention public. “
Then, as far as I’m concerned, they can keep the knowledge of the invention private. I don’t care. Many others will likely come up with the similar inventions independently whenever the need arises. It’s not like patent holders are somehow more capable inventing than others.
“Using Patents to block other companies are exactly what a patent is for.”
I don’t want a system that can block other companies to exist.
Re: Re: Patents are for blocking companies
I don’t want a system that can block other companies to exist.
We do not need a system that can block other companies to exist.
Fixed 🙂
Re: Patents are for blocking companies
“Using Patents to block other companies are exactly what a patent is for.”
Using taxi cab monopolies to block competitors is exactly what taxi cab monopolies are for (despite the fact that these monopolies make us less safe).
That’s no reason for taxi cab monopolies to exist.
stop dissembling
Who says Modista had a better technology? Apparently they didnt have any patents of their own. Time and again you use psuedo logic with an agenda.
It is not innovation that patents hinder, but the theft of.
Re: stop dissembling
You’re assuming that number of patents = measure of innovation. But that assumption is a very assumption in question here.
Google wasn’t really big on patents yet they were very innovative. They’re only now starting to acquire patents not because patents help drive innovation but because they want to avoid getting sued by people with those patents (and they want the ability to potentially counter-sue those who might sue them for infringement to deter others from suing them).
competition
It certainly seems that, nowadays, many IP owners use patent litigation more as a weapon to destroy competition in the marketplace than as a system for enforcing infringement of their IP. It’s questionable whether these wars should take place in the courts, in the form of patent litigation, or should be properly restricted to the marketplace, where they rightfully belong. Whatever one’s position on the issue, however, it’s true that as long as IP rights exist, then patentees have every legal right to enforce them.