For many years, we've talked about just how bogus the numbers are that get thrown around for "losses" and "job losses" due to copyright infringement. And yet they keep getting repeated. Two years ago, we were particularly stunned by a report from the ITC that claimed $48 billion dollars in losses directly due to Chinese piracy. But, as we looked at the methodology, the whole thing was completely ridiculous. It was based on just asking a bunch of companies how much they thought they must have lost to Chinese infringement. Not only is that a horribly unreliable and biased way to try to determine what's actually going on, it's difficult to see how companies would even know that information in the first place.

Outside of piracy, we've also noted that the stats used to support "cybercrime" and "cybersecurity" efforts are often just as bogus. And here we have a story that brings the two subjects together.

SongLifter points us to a NY Post article about Chinese cyberhacking which builds off of the Mandiant report that got so much attention. The article is bizarre in that it claims that the US isn't fighting back against Chinese hackers and somehow that we're sitting on our hands while a great "cyberwar" is being waged against us. Apparently, the author, Ralph Peters, is wholly unaware that some of the only confirmed "attacks" via a computer system were by the US. All this "woe is us" hand-wringing is just bizarre. But then Rogers tosses out these bogus and debunked numbers as if they're proof that we must attack China online:

According to the US International Trade Commission, Chinese intellectual property theft cost the United States $48 billion in 2009, as well as taking away 2 million jobs. Since then, the amount of theft has worsened, so the total loss is likely around $300 billion. But US companies, afraid that making their losses public will shake consumer confidence, won’t go public with their outrage.

Except, there's no way those numbers are even close to accurate. Again, they're based on self-reporting, and any estimate of "value" is guaranteed to be grossly overweighted. Then, take those numbers and, for reasons that make no sense at all, you don't just "grow" the $48 billion, but expand it more than six times to claim it must be up to $300 billion by now? Really? And we're using that totally bogus and made up number as the basis of an argument for why we need to kick off a "cyberattack" on China? As if that won't escalate things even further? Incredible.

In a move that struck some by surprise, the US Patent Office and the Department of Justice put out an interesting statement arguing that companies need to stop abusing promises for fair, reasonable and non-discriminatory (FRAND) licenses (pdf) for standards essential patents (SEPs). They argued, quite reasonably, that lawsuits over SEPs can stifle innovation and block competition. Well, duh. While many are interpreting this as having to do with the FTC/Google settlement, which touched on exactly this issue, the DOJ/USPTO letter seems much more focused on trying to knock some sense into the International Trade Commission (ITC) concerning how it deals with the patent cases it hears. As we've been discussing for years, patent holders get two (entirely) separate cracks at using the legal process to slap down those they accuse of patent infringement. First, there's the federal court system, which is what most people think of when they think about patent disputes. The second is going to the ITC and seeking to ban the product from entering the country (i.e., getting an injunction).

The ITC process does not follow the same rules or timeline as the legal process and so you could have a situation where courts go one way and the ITC goes another. Either way, an injunction via either the courts or the ITC is like a death sentence for a product, so most companies figure out a way to "settle" a case when it reaches the injunction stage, so it becomes like a forced license at a ridiculously high price. Thanks to the MercExchange ruling at the Supreme Court, the federal courts are much more hesitant to issue injunctions these days, but for the ITC it's the only remedy they have -- and while they don't always use it, they do use it often enough.

The FTC has lately been expressing growing concern about the ITC's somewhat cavalier attitude towards the impact of the injunctions it gives out, and this DOJ/USPTO paper appears to be another push against the ITC. The statement makes it clear that the ITC needs to recognize that it's core mission is focused on what's best for "the public health and welfare of consumers," and thus, when it comes to standards essential patents, it needs to take into account whether or not the public good is actually served by issuing an injunction.

This is all good and we agree.

But... why is this limited to SEPs? This is an all too typical reaction from government bureaucrats on these issues. They're all up in arms that (*gasp*) companies might use the government granted monopoly privilege to do exactly what it's designed to do: to exclude others in order to drive up the price and limit competition. The real focus should be on whether or not the patents themselves are what's best for the public health and welfare, not whether or not the FRAND agreements on the tiny subset of all the patents out there, the SEPs, are what's best.

The whole thing is somewhat comical when you think about it. The government gives companies the ability to exclude others via a government granted monopoly. It doesn't take a degree in economics to understand that when you give someone the right to exclude others, limit competition and drive up the price of things, that's what's going to happen -- and it's not going to be the best thing for the public health. But rather than recognize that crux of the issue, the response is just to focus on a core subset of patents, the standard essential ones.

Oh, and concerning the Google/FTC settlement, Google finally dropped its ITC effort against Microsoft. Honestly, Google should have done that a while back. Yes, Google inherited the situation from Motorola, but what an amazing statement it would have made about the companies position on patents and the patent wars if it had simply dropped such ITC actions upon the close of the acquisition.

Either way, all of this is yet another example of just how broken the patent system remains. And while it's nice to see the DOJ and USPTO at least paying lip service to the problems of the patent system, it's unfortunate that they think the problem is about "standards essential patents," rather than patents themselves, which create the identical problem for others.

For years we've talked about how many patent holders these days have two cracks at anyone they accuse of infringing: through the courts and then separately through the ITC, which can issue an injunction (but not monetary awards) that block a product made elsewhere from entering the US. The ITC doesn't have to follow the same rules as the courts. So, for example, it doesn't need to abide by specific Supreme Court precedent, which can lead to some wacky outcomes. But, really, it's just one more example of a broken patent system.

It's interesting to see that in a high profile case that the ITC is handling, between Intel and X2Y Attentuators LLC -- which describes itself as "an intellectual property company" -- various members of Congress are so worried about the possibility of an injunction issued against Intel, that they've specifically sent a letter to the ITC urging it to "consider the broader public interest" before making a decision. Two letters were sent -- one from the two Senators and all five House reps from Oregon, and another from the two Senators and all eight House reps from Arizona -- telling the ITC that a ruling against Intel would have a "detrimental effect" on the workforce and such an injunction could "discourage" US production and "could do more harm than good with respect to the public interest."

While they're right, this does seem like blatant pandering to constituents. Intel has very large presences in both states (16,000 employees in Oregon and 11,000 in Arizona). However, as the National Law Journal article linked above notes, this is becoming pretty standard, any time a large tech company faces an injunction from the ITC. Its Congressional reps get together and send the ITC a letter. While I agree that these injunctions can do serious harm and the economy, and innovation is much better without the ITC issuing them, it's troubling to me that these elected officials are resorting to pressuring the ITC, rather than doing what they should: recognizing this is just one small symptom of a truly broken patent system. Instead of trying to pressure that one symptom, why not focus on actually fixing the problems of the patent system? If they want a starting point, we've got some ideas.

For years, despite being the defendant in tons of patent suits, and despite having a decent patent portfolio of its own, Google had never gone on the offensive with its patents against others. With the purchase of Motorola Mobility, it inherited an ongoing court case against Apple, which was unceremoniously dumped by Judge Posner. However, now there's news that Motorola Mobility has gone to the ITC to seek an injunction against Apple for the iPhone, iPad and some of its computers as well. Filing at the ITC can only lead to an injunction, rather than monetary damages, but the threat of an injunction is pretty big no matter what, and can often force a company to pay up.

What's disappointing here is that, even though this is coming from the Motorola side of things, as far as I can tell, it's the first time that Google itself could be described as a patent aggressor. For a company that had been coming out vocally about just how broken the patent system was, and which seemed to be fighting the good fight on stopping such abuses of patents to block competition, this is disappointing.

Yes, it's typical for companies, as they get bigger, older and less innovative, to start becoming patent aggressors, but Google had kept away from doing so for a long time, and certainly appeared, publicly, to have no interest in going down this road. Combined with the company's recent decision to cave on copyright issues as well, it seems that Google is taking some dangerous steps around copyright and patent law -- both of which may go against its own long-term best interests.

As many people expected, Kodak has officially moved to sell off its patents to whoever can abuse them the most. Since the company is in bankruptcy, it needs permission to do this, but that's the easy part. These days, thanks to a totally broken patent and legal system, the patents are incredibly "valuable." Not because they represent any kind of actual innovation, but because they represent a magic tollbooth that lets the holder force other companies to pay. Of course, some of that magic wore off last month when the ITC noticed that one of Kodak's key patents -- one that it had used to score nearly a billion dollars in licensing revenue, was blatantly obvious and never should have been granted in the first place. Kodak claims it's going to appeal, but the patent sale will likely happen prior to any appeal going through. Either way, like other companies who failed to keep up with a changing market (hello, Nortel!), Kodak's final legacy may be supplying weapons to yet another battle in the era of technology patent nuclear war. It's not something to be proud of.

Judge Richard Posner is, perhaps, the most influential judge not on the Supreme Court. Beyond writing a ton of books (and columns and articles and blog posts), his rulings often seem to carry extra weight. On intellectual property, he's been something of a mixed bag. He's written an entire book (which I consult frequently) on The Economic Structure of Intellectual Property Law. While extremely knowledgeable on the subject, he does (too frequently) come down on the side of believing that without IP law, you couldn't have a functioning market for products that are covered by intellectual property. Still, he doesn't just roll over on IP cases (or, really, any case -- though I'm still troubled by his belief that filming the police in public can be a bad thing).

While he normally is on the 7th Circuit Appeals Court, appeals court judges will sometimes "slum it" down at a district court. So Posner was handling a big patent fight: one filed by Apple against Motorola for patent infringement concerning (of course) smartphones, down in the Northern Illinois district court. As we've discussed at length in the past, there are a whole bunch of patent disputes concerning smartphones, with companies suing each other in the courts or seeking injunctions from the ITC. This case was one of the "main events," especially considering Google's purchase of Motorola.

So it's pretty interesting to see that Posner has told everyone he's dumping the case. The trial was supposed to start on Monday, but he released a statement saying that there's nothing worth reviewing at a trial, and that he's dismissing the case with prejudice (meaning it can't be refiled), and effectively saying (in much nicer language) that the whole thing is a joke. The note concerning this says he'll issue a full ruling within a week -- though, he says that "in the course of... preparation I may change my mind" on the reasoning for the dismissal. Still, he lays out the basics, which are that there's simply nothing worth discussing. As he puts it: "neither party can establish a right to relief." Apple has admitted that "it cannot prove damages for the alleged infringement" of two of the patents, that two other patents do "not create a genuine issue of material fact" that would allow a trial to move forward and, with the final patent, Apple's evidence of damages "fails to create a genuine issue of material fact."

This isn't a huge surprise, since Posner's statements in filings from a few weeks ago certainly suggested his annoyance that a lawsuit had been filed over these patents. As quoted by Jeff Roberts at GigaOm, Posner had hit back at claims from both sides with pretty strong language:

[re a slide-to-unlock patent] Apple’s .. argument is that “a tap is a zero-length swipe.” That’s silly. It’s like saying that a point is a zero-length line.

Motorola’s contention that the term has a “plain and ordinary meaning” is ridiculous; Motorola seems to have forgotten that this is a jury trial.

The statement from Posner also rejects the idea that, outside of the damages question, "injunctive relief" (blocking one another from offering the products) was reasonable, stating that it would "impose costs disproportionate to the harm" and "would be contrary to the public interest."

Roberts also notes that, in a bit of interesting timing, Posner had just a few days ago posted a blog post discussing the importance of capitalism, but noting that our version of capitalism is lacking in many ways -- with him specifically calling out the "dysfunctional patent system" as one of a litany of problems with the way we've embraced "capitalism."

Posner has certainly always appeared to recognize that intellectual property law could be abused, but this seems like a strong indication that he's realizing just how widely it is being abused under today's patent system.

It's a difficult time to be making an Android phone, it appears. Just days after customs started blocking various HTC phones based on an ITC injunction due to some Apple patents, the ITC has also ruled in favor of Microsoft in a patent dispute with Motorola over Android phones. While there will be appeals and other such things, if this stands, and there is no settlement, Motorola's phones could also be blocked at the border by ITC injunction. Motorola, for its part, noted that Microsoft filed with the ITC over nine patents, and the ITC has only said that the phones violate one patent. Of course, since the ITC has only injunctive relief, it doesn't seem to much matter if it's one, two, six or nine -- the phone can be blocked. I am, once again, at a loss as to how this does any good. Keeping competing products from entering the market seems like the opposite of how you encourage innovation.

In one of many Apple patent fights concerning smartphones, it went after Taiwanese smartphone maker HTC in both the courts and using the infamous ITC loophole that gives the company two separate cracks and blocking competition using the same patents. The ITC ruled in Apple's favor late last year, issuing its customary injunction (the ITC can only issue injunctions blocking import, rather than any monetary award). HTC was given time to create a fix, but the injunction has apparently gone into effect, and it means that the newest HTC phones -- eagerly awaited by some -- are being held at the border by customs to make sure that allowing them into the country won't violate the ITC injunction. It's pretty sad that Apple doesn't appear to think that it can actually compete on the merits in the marketplace, but rather has to resort to this sort of protectionism. Similar to Apple's complaints against Samsung, I have to admit that all this has really done is increase my interest in both the HTC One X and the HTC Evo LTE. If a smartphone is so good that even Apple is scared to compete against it, well, that seems like a phone that might be worth having...

Whaddaya know. Mitch Glazier (the man who tried to keep artists from regaining their own copyrights), the number two guy at the RIAA, has decided to speak out against the OPEN bill -- the alternative to SOPA/PIPA that has been proposed by Senator Ron Wyden and Rep. Darrell Issa. We've discussed some concerns about this alternative, but it's much, much better than the horror that is SOPA/PIPA. But Glazier's specific reasoning for being against OPEN really is quite stunning and shows the RIAA mentality on this is: any bill must be about censor first, ask questions later.

Specifically, he uses the example of the ongoing ITC case filed against Apple & RIM by Kodak to explain why OPEN is no good. His particular concern is the length of time it's taking the ITC to rule on the case:

The U.S. International Trade Commission (ITC) recently reported that it will delay ruling on an important patent infringement claim brought by well-known camera company Kodak against smartphone makers Apple and Research In Motion (RIM).  The case, originally filed in January 2010, now anticipates a ruling in September 2012. The delay now means that the ITC will have taken 33 months to decide on a high-stakes and time-sensitive issue.  So this is the “expedited” process SOPA opponents are embracing as an alternative in the proposed OPEN bill?

This is both disingenuous and obnoxious at the same time. First of all, as Glazier must know, but apparently is too intellectually dishonest to admit, a patent case involves some very different issues, involving some pretty specific efforts around figuring out exactly what a patent really covers. You don't have to deal with "claim construction" in a copyright case. But in a patent dispute -- in a federal court or at the ITC -- there's a big, long, complicated claim construction process to determine the actual boundaries of what's covered in a patent. Then there's the process (somewhat complicated) of figuring out if the products in question actually do infringe on the patent.

Copyright is different than patents. And while there does need to be a careful analysis of whether or not a copyright is infringed, the process is very different than with patents, and can absolutely be expedited, if need be.

Why in the world would we shift enforcement against these sites from the Department of Justice and others who are well-versed in these issues to the ITC, which focuses on patents and clearly does not operate on the short time frame necessary to be effective? In addition, the remedy traditionally offered by the ITC – an exclusion order to prevent foreign criminals from accessing the US market – is precluded under the OPEN Act.

Oh really? This would be the same "well-versed" experts at the DOJ who have been censoring multiple websites on no legal basis for over a year? The same "well-versed" experts at the DOJ who finally had to give back Dajaz1.com after an entire year in which it refused any and all due process?

I'm sorry, but I think there's more than enough evidence that the DOJ isn't that "well-versed" in these issues, and that when it acts in a "short time frame" it makes significant and serious mistakes. Similarly, where was that vaunted "short time frame" when it came time to admit that it totally screwed up and seized and censored a blog without legal basis? It took Dajaz1 over a year to get its domain name back, despite no legal action being taken against it. Multiple other sites are still being held. So, forgive me for questioning (1) if the DOJ is really that well-versed, (2) really should be operating on such a "short time frame" or (3) really does operate on such a "short time frame" when it comes to admitting it screwed up. And, the story of Dajaz1 seems like a pretty damn perfect example of why "an exclusion order" is a dangerous remedy. When you screw it up, you make a serious mess of things.

Realistically, what Glazier is making clear here, is that the RIAA wants a "censor first, ask questions later" approach to any site it doesn't like, no matter how legal it might actually be. That's scary. As the Dajaz1 case pretty clearly demonstrated, the damage such an approach creates is something we should all be against. Look, censoring a website is not something that should be done lightly. If we're going to have such a remedy in the law, it should be a slow process that takes time to review to make sure mistakes aren't made. Unfortunately, the current law and the laws that the RIAA wants appear to take the opposite approach: censor first, then take your damn sweet time in ever reviewing those censor orders.

In one prong of the many-pronged attack that Apple has been making on Android, it's scored a victory at the International Trade Commission, where it's been determined that the idea of making a phone number in an email or on a web-page clickable to dial it is so special and wonderful that only Apple could possibly come have up with it. It's rulings like this that make anyone with a modicum of technology smarts shake their heads and wonder why we let clearly non-technical people make decisions like this. Patents are supposed to protect inventions that are non-obvious to those skilled in the space. If you put a 100 groups of five engineers in rooms, asking them to design various smartphone features and interfaces around things like this, I'd bet 99 would come up with a similar feature. It's just natural.

In the meantime, Apple's statements about the ruling are equally ridiculous, given Apple's history of copying others (including Android):

"We think competition is healthy, but competitors should create their own original technology, not steal ours."

Copying an idea and building on it is not "stealing." And if Apple had to build its devices without building on the ideas of others, it wouldn't have very much today. This whole thing is a joke, and it's rulings like this that make engineers have even less respect for the patent system.