Investors Speaking Up About Patents Harming Innovation

from the good-for-them dept

One of the key things that we hear from people who defend the patent system is that patents are necessary for raising money from venture capitalists, and that investors won't invest if you don't have a patent. We've debunked that claim plenty of times, showing some of the most respected investors around who are equally as fed up with the problems of the patent system as we are. One of the most respected venture capitalists around these days is Fred Wilson. I have a friend (who once worked for a Wilson-funded startup) who insisted that should he ever start a company, he'll go talk to Fred, and if Fred won't invest, he'll know something's wrong with the idea. Over the past few years, Fred has been growing gradually more and more agitated by the problems the patent system causes, and has spoken out about it numerous times, with his latest words clearly showing his anger, as he says "enough is enough" when it comes to software patents specifically, mostly in response to the Lodsys lawsuits:
The whole thing is nuts. I can't understand why our goverment allows this shit to go on. It's wrong and its bad for society to have this cancer growing inside our economy. Every time I get a meeting with a legislator or goverment employee working in and around the innovation sector, I bring up the patent system and in particular software patents. We need to change the laws. We need to eliminate software patents. This ridiculous Lodsys situation is the perfect example of why. We need to say "enough is enough."
Fred isn't missing a chance to bring this up repeatedly, and he recently made the same point on a panel discussion with two other very highly respected investors, David Lee and Chris Dixon, who agreed about the problems of the patent system (with slightly different takes on it than Fred):
The key part from Wilson, again:
"The basic problem with patents is that you're trying to assign property rights to something that doesn't deserve property rights. The fact that these property rights end up in the hands of financial owners as opposed to the original inventors just exacerbates the problem. The basic problem is that Chris [Dixon] and a bunch of engineers can be sitting at Hunch designing some amazing new feature and somebody unbeknownst to them has a patent on this feature and never actually implemented it and can now screw them overÖ Itís just not right, it shouldnít exist."
Dixon points out a key part of the problem is that so many patents are clearly obvious to anyone skilled in the art. He notes that any competent engineer could create what's found in the vast majority of software patents, and notes that the examiners simply aren't competent enough to recognize what's obvious. Dixon, who is both an investor and a long-term entrepreneur, certainly knows these things. What's amazing to me, honestly, is how few people in Silicon Valley actually think patents are a good idea any more. The system has become so distorted that most of the people they're supposed to benefit the most don't want them, but feel compelled to get them due to the system. What a massive amount of waste, leading to a mess that holds back innovation.

Wilson makes one other statement that I thought was interesting. †He compared patenting software to patenting music, noting that neither makes sense.


Reader Comments (rss)

(Flattened / Threaded)

  •  
    identicon
    6, Jun 8th, 2011 @ 4:02pm

    Those involved in software probably don't want patents. Those involved in the Useful arts however do like them very much. Indeed, that is why they were created.

    Software folks usurping the patent system to use for themselves is the issue guys, be sure to keep your sht straight.

     

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      Jordan (profile), Jun 8th, 2011 @ 4:51pm

      Re:

      Now we just need to define "useful"

       

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      Mike Masnick (profile), Jun 8th, 2011 @ 5:03pm

      Re:

      Those involved in software probably don't want patents. Those involved in the Useful arts however do like them very much. Indeed, that is why they were created.

      Not always true. I was just involved with a roundtable of 7 SV entrepreneurs -- most of whom were hardware guys, and they *all* were mostly anti-patent (varying degrees...).

      They just find them to be a waste. One guy was explicit: "They're useless. I'm happy to compete in the marketplace."

       

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        identicon
        Anonymous Coward, Jun 8th, 2011 @ 9:49pm

        Re: Re:

        Investors in these areas are often anti-patent because it keeps the costs of development down, and also shortens the time to market. What they really want to do is stand on the shoulders of others, and benefit from all of it.

        What you miss is that in a system without patents, the investors (and companies) that put the money into the research to create the original products just won't do it if they don't see good economic return. If others can easily replicate their work, standing on their shoulders and claiming the profits, it pretty much makes the big investments hard to make.

        If you talk to investment people who are working with the latter group (shoulder standers) they will always say they have patents. Patents are not to their financial benefit.

         

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          Atkray (profile), Jun 8th, 2011 @ 10:31pm

          Re: Re: Re:

          What you miss is that in a system without patents, the investors (and companies) that put the money into the research to create the original products just won't do it if they don't see good economic return and as a consequence will fall behind their competitors who choose to invest. If others can easily replicate their work, standing on their shoulders and claiming the profits, it pretty much means they have to have a solid business plan instead of relying on a government granted monopoly.

          There, FTFY.

          You are welcome.

           

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          The eejit (profile), Jun 8th, 2011 @ 11:47pm

          Re: Re: Re:

          There's a reason VCs exist, you know.

           

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          DannyB (profile), Jun 9th, 2011 @ 7:01am

          Re: Re: Re:


          What you miss is that in a system without patents, the investors (and companies) that put the money into the research to create the original products just won't do it if they don't see good economic return.

          The first thing (patents) is not the cause of the second thing (good economic return). So in a system without patents, investors will put money into original products because in the market they can still see good economic return. Do something. Do it first. Do it best.

          If it is software, then it is extremely likely that it is obvious. If it is a business method then it shouldn't even qualify as patentable subject matter.

          The fact that these ridiculous patents are always about something utterly trivial, that the inventor only did on paper, and then waited for someone else to commercialize, says it all. The fact that nobody seems to invent "machines" anymore, but just ink on paper with no followup, speaks volumes. The fact that patents are approved so quickly, and at an accelerating rate, and are presumed to be valid, should concern everyone.

          If you are a supporter of the patent system, then you should be even more interested than I am in FIXING IT. Because if you don't get it fixed, the pendulum is soon going to swing too far.

           

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          Josh in CharlotteNC (profile), Jun 9th, 2011 @ 7:23am

          Re: Re: Re:

          What they really want to do is stand on the shoulders of others, and benefit from all of it.

          All progress stands on the shoulders of those who came before.

          All knowledge is based on existing knowledge.
          All science depends on previous science.
          All art is to some degree derivative of previous art.
          And so on.

          It is nothing but hypocrisy for one person to claim that they get to stand on the shoulders of everyone before them, but no one can stand on theirs.

           

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          Josh in CharlotteNC (profile), Jun 9th, 2011 @ 7:35am

          Re: Re: Re:

          What you miss is that in a system without patents, the investors (and companies) that put the money into the research to create the original products just won't do it if they don't see good economic return.

          Venture capital investors expect that most of the companies they invest in to fail and lose their money. For example, if a VC invests in 20 start-ups, 16 will fail and they'll get nothing out of it. 3 will break even or show small profits, just not really go anywhere, but that one remaining could be the next Google and will more than offset the losses by the others.

          Obviously some VCs have better or worse track records, but they absolutely will invest even if success is not "guaranteed" by some piece of paper that the government gives you to claim you own an idea.

           

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    identicon
    Rick Falkvinge, Jun 8th, 2011 @ 4:18pm

    Fantastic

    These are great, much-needed quotes that I will use frequently in political debates.

    Thanks!

     

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    Paul Hatch, Jun 8th, 2011 @ 4:27pm

    I came to the conclusion years ago that the nonsense of software patents is only there to act as a barrier to entry to the market and is a wheeze dreamt up by large corporate entities.

    They have the funds and manpower to patent the most trivial of things and sow the market up as all the large corporates have armies of lawyers sueing each other. The resulting patent licensing all comes out in the wash due to cross licensing.

    What is worse now is the number of companies that pool their patents into joint holding companies along with competitors. Essentially Keeping new entrants to the market out.

     

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    identicon
    Anonymous Coward, Jun 8th, 2011 @ 4:46pm

    Not everyone associated with patent law subscribes to what is said in the first sentence. Yes, there are some who do, but in my experience most of those who deal regularly with persons having investment capital recognize that the presence or absence of a patent is merely one of many factors that enter into investment decisions.

     

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    identicon
    Anonymous Coward, Jun 8th, 2011 @ 4:49pm

    Patenting music?

    > He compared patenting software to patenting music, noting that neither makes sense.

    DON'T GIVE THEM IDEAS.

     

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      Joseph Kranak (profile), Jun 8th, 2011 @ 4:57pm

      Re: Patenting music?

      Yeah, I think I'm going to apply for these patents:

      Patent on using a percussion instrument to set the beat of a song.

      Patent on accompanying a solo pianist with a full orchestra.

      Patent on playing the notes in a chord in succession instead of simultaneously.

       

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      AdamR (profile), Jun 8th, 2011 @ 4:57pm

      Re: Patenting music?

      Dubious Record Label Insists It Has A 'Patent-Pending' Method To Guarantee A Platinum Selling Album

      "http://www.techdirt.com/articles/20110531/00303814468/dubious-record-label-insists-it-has- patent-pending-method-to-guarantee-platinum-selling-album.shtml"

      And there off!

       

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      identicon
      Music Man, Jun 8th, 2011 @ 5:08pm

      Re: Patenting music?

      > He compared patenting software to patenting music, noting that neither makes sense.

      DON'T GIVE THEM IDEAS.


      Why not? It sounds like an excellent idea! Processes are patentable, and what is a process other than a series of steps? If I invent a series of steps (i.e. sequence of notes) to produce a certain sound, why shouldn't I be able to patent it?

       

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      identicon
      Anonymous Coward, Jun 8th, 2011 @ 5:44pm

      Re: Patenting music?

      Too late. Now the RIAA is going to start patenting songs, in addition to copyrighting them. Then they'll start suing people they already sued for copyright violation, except this time around it'll be for patent violation.
      Now they just need to trademark music, and they'll have completed the arbitrary lawsuit trifecta.

       

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      •  
        identicon
        Anonymous Coward, Jun 8th, 2011 @ 8:56pm

        Re: Re: Patenting music?

        Hey, they can sue all the artists they supposedly represent too!

        Their lawyers will be so happy.

         

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  •  
    identicon
    Anonymous Coward, Jun 8th, 2011 @ 4:51pm

    A major problem associated with so-called "software patents" is that no one has really taken the time to define the meaning of the term.

     

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  •  
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    Simple Mind (profile), Jun 8th, 2011 @ 6:01pm

    Obama, want to get the economy going again?

    Eliminate all patents. Small business would thrive.

    Govt is too dumb and too deep in the pockets of big business to ever consider this. Hence, we are doomed to permanent steady economic decline.

     

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  •  
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    Shawn (profile), Jun 8th, 2011 @ 6:22pm

    No need to change the law, just enforce it.

    Sorry Fred, there's no need to change the law; software patents are illegal. All software is proven to be algorithms and algorithms cannot be patented.

     

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  •  
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    Steve R. (profile), Jun 8th, 2011 @ 7:12pm

    It's a Perception Issue

    There is an ethos in the US concerning property rights and entrepreneurship that has melded into so-called "intellectual property". I will even go so far as to say that Ayn Rand has exacerbated the whole issue by asserting that "mental work" deserves to protected.

    Consequently we are left with the motherhood perception that if you don't believe in "intellectual property" that you are depriving creators of their income and they will all starve to death.

    People can be shown the "truth" as Galileo tried to do before an inquisition, but the "truth" may simply be deemed to heretical by the populace to be accepted. Not to mention that many of our politicians blindly accept the rationale of their contributory sponsors.

     

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    identicon
    anger-management dude, Jun 8th, 2011 @ 7:49pm

    Who Is This Punk Fred Wilson?

    Never heard of this guy. Betcha he doesnít have a single patent to his name, like I have. All his money doesnít mean a thing; spend it once, and itís gone. But my Intellectual Property will pay for itself over and over and over. Want to talk about who is adding real value to the economy? A patent is like an infinite resource: you can keep selling it, and yet still own it. It effectively has infinite value! Thatís right punks, Iím not merely a millionaire or a billionaire, Iím an infinitaire!

     

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  •  
    identicon
    darryl, Jun 8th, 2011 @ 9:38pm

    an investor and a long-term entrepreneur (he should know) --- is he Madoff ?

    Dixon points out a key part of the problem is that so many patents are clearly obvious to anyone skilled in the art. He notes that any competent engineer could create what's found in the vast majority of software patents,

    If that was the case then why are there not a large number of "prior knowledge" cases before the court, if it is THAT obvious as Dixon states then you would expect prior knowledge to be a primary method of fighting these patents.


    BUT NO, for some reason that IS NOT THE CASE, why is that DIXON ????? Here's why !!!

    Dixon, who is both an investor and a long-term entrepreneur, certainly knows these things.

    You see Dixon IS NOT A COMPETENT ENGINEER, therefore he does not have a CLUE about what can or cannot be patented, he certainly does not hold the technical qualifications that the patent reviewers would have at the patent office.

    an investor and a long-term entrepreneur

    Like Burnie Madoff ?


    Lets face facts guys, if there was prior knowledge then that would most certainly be used for the making void of these patents, it would be easy to show prior knowledge if in fact it existed. Trivial in fact to do.

    Yet, it's not done and if it not done then you have to ask yourself WHY it is not done, (if it is so easy, and so obvious).

    I know why its not done, because its one big, poorly build straw man.

    I sorry that you are incapable of invention and innovation yourselves, but I am not sorry that you do not have the right to steal other peoples innovation by just saying "oh, that is obvious". Yea Right... so obvious that you could NEVER think of it. (until someone else did!!)..

    What is obvious is this 'trick', or that there is something different or special about software in particular that means 'because its easy to steal idea's then it should be allowed'.

    and "prior knowledge" bullshit, we're sick of that weak line of argument.

    or the one where you say "everyone is clueless except me".

    Being "an investor and a long-term entrepreneur" does not give you engineering skills, or legal skills (particularly in patents) or anything else.

    Why do you think groups like Patent Offices employ people like "Albert Einstein" for example.
    (not because they are inventors and long-term entrepreneur's)..

    What you are an an investor and a long-term entrepreneur

    Great here is a Phd in Electronics and Software engineering, after all 'you' should know !!!!..
    Thank you Mr Madoff, come again, or should I now call you Dr Madoff ?

     

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      identicon
      Anonymous Coward, Jun 9th, 2011 @ 9:15am

      Re: an investor and a long-term entrepreneur (he should know) --- is he Madoff ?

      "Lets face facts guys, if there was prior knowledge then that would most certainly be used for the making void of these patents, it would be easy to show prior knowledge if in fact it existed. Trivial in fact to do."

      It's trivial to find prior art for the vast majority of software patents. It's hard and expensive to actually challenge the patents. That's why it's not done.

      For the record, I am a successful software engineer of over 25 years, I have started two very successful software businesses, and I have invented a few new, useful, and non-obvious software techniques.

      I've ever patented anything. This is for two reasons:

      First, software patents should not exist, period -- software is a mathematical process, explicitly unpatentable. Not only that, software patents have done, and continue to do, great harm to the software industry.

      Second, obtaining and owning a software patent is a distraction and expense that gives you no real market advantage if you want to be in the business of making software (rather than playing the system). Once you have the patent, you have to police it to make it pay. And once you're doing that, you're in a different business. You're spending less time doing what you really want to be doing: writing great software.

      Practically speaking, the software business moves so fast that, if you're doing it right, you've already extracted most of the money you're going to within the first couple of years of the product life cycle. Then, you're on to other, better things before your competitors have gained any real advantage from your "invention" anyway. Patents bring nothing to that sort of party.

       

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      identicon
      Anonymous Coward, Jun 10th, 2011 @ 3:19pm

      Re: an investor and a long-term entrepreneur (he should know) --- is he Madoff ?

      I -AM- a software engineer, and have been for 30 years. Not only does 'prior art' disqualify an 'invention' but it should also not be 'obvious' to someone who is 'skilled in the art'. So many of the patents that I see awarded are for things that I did as part of my homework as a freshman. For example using an xor to blank a cursor. It is trivial, obvious, and anyone who has actually worked in the field has done it. But since there wasn't something published, there is no 'prior art', and the patent was issued. That is why so many things get by the prior art clause. If you really want to find the source of almost everything in the software world, go read Donald Knuth's series of books, 'The Art of Computer Programming'. Essentially everything that can be done could be traced to that. What would have happened to the software field if he had patented all of his ideas?

       

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    identicon
    darryl, Jun 8th, 2011 @ 9:50pm

    prt 2

    Dixon points out a key part of the problem is that so many patents are clearly obvious to anyone skilled in the art. He notes that any competent engineer could create what's found in the vast majority of software patents,

    Yes, funny that, that is how patents are supposed to work, of course once a competent engineer SEE's WHAT'S FOUND on the patent he can easily (RE)create that software patent.

    what he was not capable of doing is coming up with that idea in the first place.

    The entire concept of patents is that once it's logded and approved then anyone 'skilled in the art' is capable of reproducing it.

    That patent has to be written specifically for that purpose, it has to be a practical invention.

    So of course anyone skilled can read that patent and create that technique.

    But he cannot 'invent' or come up with that technique himself (anymore) because even if he did think of it independently (and in this case he did not), then he was too late to the patent office, and he loses out.

    ANY competant engineer could do that, but not "Dixon, who is both an investor and a long-term entrepreneur, certainly knows these things."

    Im sure an "inventor" and long term "engineer" was what you were really trying to say.

    What is Dixons field of expertise ?

    And 'investor and long-term entrepreneur' could be someone who sells oranges on the side of the street !

    Or your Mom selling AVON !!

    Or the people who ran ENRON or B Madoff, does Dixon have a degree in computer science or software engineering ?

    (I didn't think so)

     

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    Atkray (profile), Jun 8th, 2011 @ 10:40pm

    darryl,

    There are not cases before the court because the cost to settle and license is less than the cost of fighting in court, especially if you are a small company. If you are big then you get the cell phone companies suing each other.

    But then you knew that didn't you.

    Impressive quantity of rant BTW

     

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    identicon
    Andrew D. Todd, Jun 9th, 2011 @ 4:59am

    Requests for Re-Examination are becoming More Common. (response to Daryl, #18, 20)

    The short answer to Daryl is that big companies are starting to file requests for re-examination with the patent office, especially requests under KSR v.Teleflex. The patent office is so glacially slow that it isn't much good to file a request when you are actually being sued, especially in East Texas. However, requests for re-examination are remarkably cheap, as legal work goes. So the thing to do is to file a lot of them. The thing to do is to preemptively sweep out all patents in your neck of the woods. Big companies are coming to this understanding reluctantly, of course. They don't want to compete in a free market-- they want to have shares of a government monopoly. However, the market is closing down on them. There is room for the survival of Apple, or Microsoft, or Adobe, or Oracle, but not for the survival of two or more of them. The hanged man dances energetically in the air before expiring. Patents won't save anyone for any length of time, because the state of the art, circa 1990-95 was much more advanced than most people realize. It was just beyond the price range of typical consumers, that's all.

    The law of diminishing returns is operating. A high proportion of the new patents from Apple or Microsoft are self-evidently silly, things like DRM which do not create value for the buyer. Apple and Microsoft are creating-- and patenting-- features at the demand of people who cannot pay for these features, starting with the RIAA and working down to the police chief of Miami Beach. In the latter case, when the chickens come home to roost, that poor son of a bitch isn't even going to be able to pay his own legal bills.

     

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    DannyB (profile), Jun 9th, 2011 @ 7:07am

    Let's try changing the PTO's incentives

    To file a patent you have to pay a fee.

    Make the fee very high if the PTO rejects the patent for any valid reason. (Novelty, prior art, non patentable subject matter, etc)

    Make the fee very low if the PTO grants a patent.

    This will both speed up the process of rejecting patents, and will significantly increase the percentage of rejected patents.

    This will also give the PTO incentive to crowd source the finding of prior art, etc. In fact the PTO could pay a bounty to anyone who can show grounds that lead to rejecting the patent application. (eg, it will create jobs)

     

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    Gene Cavanaugh (profile), Jun 9th, 2011 @ 9:42am

    Fred Wilson on patents

    Great article, again, though it suffers from the same-old, same-old. Example: "Communism is evil! Communism is a social system, and is neither good or bad, dictatorships (most communist or socialist systems, at this time) are evil!
    Here, as I read it, Fred Wilson did NOT say patenting is bad, he said the abusive system we have NOW is bad!
    He is dead right; as an IP attorney, I agree completely. To say all IP systems are bad, on the other hand, twists what he said, and is completely wrong - IP, as the founding fathers saw it, has benefits (I avoid "good" and "bad", it is a business or societal system, not a "thing").
    I will say "Pegging is bad - though it is all too common!"

     

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    Gene Cavanaugh (profile), Jun 9th, 2011 @ 9:47am

    Fred Wilson on patents

    Okay, forgot one thing: I am going to "peg", even though that, to me, proves Einstein was right when he said "the only things that are infinite are the universe and human stupidity, and I am not sure about the universe".
    SOFTWARE PATENTS ARE BAD! COPYRIGHT, FOR MORE THAN, SAY, FIVE YEARS, IS BAD!

     

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    identicon
    Gotcha, Jun 9th, 2011 @ 4:10pm

    Patents are clearly and convincingly presumed valid and good.

    Little i4i today beat big bad Microsoft to the tune of $290M in a Supreme Court case. http://www.burdlaw.com/blog/?p=174

    You Techdirt fools (Masnick's Morons) who think software patents are bad now have another nail in your Frankenstein brains.

     

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