Posturing Over Patent Reform Shows How Young Companies Innovate While Old Companies Litigate

from the same-as-it-always-was dept

It's hardly a surprise, but the latest draft bill, put forth by Rep. Bob Goodlatte, head of the House Judiciary Committee, has many really good things included, but is unfortunately weak in other areas. While it does include changes like requiring disclosures for those who sue over patent infringement (to get past the problem of shell companies), and a few other useful reforms, it really misses out on some big useful changes. For example, it doesn't include a provision that will make it easier to invalidate bad patents, which would be a huge step forward.

Of course, as you might expect, there's something of a "split" within the tech sector over whether or not there's support for Goodlatte's latest bill. On the one hand, you've got over 200 startups asking for that accelerated review process for questionable patents. At the same time, you've got a coalition of about 100 more stodgy old line businesses (some of whom are in the tech world) arguing that such a review would "undermine many valid patents." Frankly, that's hogwash, as we'll discuss in a bit.

It's really not difficult to see how this all breaks down. As we've explained for years, the general rule of thumb in the tech industry is that when you're young you innovate, and when you're old you litigate (with patents). Entrepreneurs and startups generally don't think or worry too much about patents. They're kind of a distraction more than anything else. The focus is actually on building an awesome product and disrupting the legacy players. It's only the bigger old stodgy companies who freak out at the possibility of being disrupted, and who suddenly start suing the upstarts (and, well, any competitor they can find) when they realize that it's more difficult for them to keep pace with the startups, and that it's more cost effective to shut down innovation from others, rather than compete.

Given that, it's not difficult to pick randomly from signatories of the two letters and figure out who signed onto which list. Automattic, FindTheBest, StackExchange, TechStars and FireBase? Yeah, they're on the innovators letter. 3M, Adobe, IBM, Microsoft? Yup. On the old stodgy companies letter, arguing against accelerated review of patents. And yet, laughingly, they claim to be the "innovators." Yes, maybe decades ago, but all those companies are now way behind the true innovators of today. Also, it's telling that pharmaceutical giant Eli Lilly is on that letter as well. The big pharma companies were the ones who spent most of the last decade stifling any kind of patent reform, which was being fought for by many of the same tech companies that are now trying to block new patent reform. The innovators got old and now they're trying to stifle competition, rather than innovate. It's sad. Looking down that list, it's difficult to find any that you could legitimately call innovative today, even if some were in the past.

Furthermore, the claims made in that letter (which apparently was written by the BSA under the new leadership of the White House's former IP czar), that this would somehow undermine valid patents doesn't pass the laugh test. As Matt Levy over at Patent Progress notes, the arguments in the letter make no sense at all:
Suppose a company has an innovative product and asserts a related patent against a competitor. If the competitor requests [an accelerated] review of the patent and wins, the original company still has an innovative product; the difference is that now it might have a competitor in the marketplace.

That’s actually a good thing. Now we have two companies with innovative products instead of just one. And the competitor is allowed to keep making its product, which might be even better than the original company’s.

But a company with a patent, even an invalid one, can stop an innovative product from coming to market or add significantly to the product’s cost. That’s because fighting patent infringement is incredibly expensive.
Nothing in an accelerated review process could possibly harm actual innovation. The only thing it does is ensure that old, stodgy, slow companies will have to keep pace with more entrepreneurial entities, and compete by continuing to innovate. That's a good thing, but you can see why those legacy players are scared. They know they can't keep up any more.


Reader Comments (rss)

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    That One Guy (profile), Sep 24th, 2013 @ 3:28pm

    I must be missing something...

    How exactly could a faster review process for patents in any way, shape or form harm good, valid patents?

    I mean it's obvious it would be a massive threat to invalid patents, bringing them under the microscope quicker and making the patent trolling business more difficult, but for the life of me I cannot see how such a change could present problems to valid patents.

     

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      Mike Masnick (profile), Sep 24th, 2013 @ 4:20pm

      Re: I must be missing something...

      I mean it's obvious it would be a massive threat to invalid patents, bringing them under the microscope quicker and making the patent trolling business more difficult, but for the life of me I cannot see how such a change could present problems to valid patents.

      You're not missing anything.

       

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      out_of_the_blue, Sep 24th, 2013 @ 5:00pm

      Re: I must be missing something...

      @ "That One Guy"
      How exactly could a faster review process for patents in any way, shape or form harm good, valid patents?


      Unlike as Mike blithely answers, what you're missing is the likelihood that existing "bigger" companies could further game the system to run these cases through the courts and MORE QUICKLY shut down startups. Appears the assumption of those in block quote and Mike appears to be that this will also MAGICALLY make bad patents lose. But this process will be another crap-shoot at best, and odds are that those "bigger, old, stodgy" corporations are behind it, already figured out how to game it.

      Why do "libertarians" just NEVER even consider bad actors? They all seem to think corporations are inherently good and play fair: "bigger, old, and stodgy" are the worst pejoratives Mike can come up with.

       

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        Joe Dirt, Sep 25th, 2013 @ 5:15am

        Re: Re: I must be missing something...

        Blue,
        You miss the point...or choose to ignore it. Probably the latter.

        What difference does it make who brought the patent? A bad patent is a bad patent, no matter who it belongs to.
        Get them out of the system and there will be less footing for the trolls and legacy industries.

         

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    out_of_the_blue, Sep 24th, 2013 @ 4:52pm

    So how would this magically rid us of bad patents?

    The problem as I see it is that claims are so broad that only long review by a technical expert could distinguish, and that in practice it's left up to juries to decide who has the most convincing lawyers, or which the jury hates the least. It's a basically a crap-shoot. So "If the competitor requests [an accelerated] review of the patent and" LOSES how is it better? There's still no judgment on technical merits. -- Oddly, bad outcome isn't covered in the block quote, so I suppose authors just assume "magic" somewhere.

    Mike writes: "the general rule of thumb in the tech industry is that when you're young you innovate, and when you're old you litigate (with patents)." ... Hmm. ... But he does stumble toward truth a bit further on "only the bigger old stodgy companies". -- Yot, as the ancients knew (beginning about 1910, fading to the 1970's, and now long forgotten): BIG IS INHERENTLY BAD. Large corporations must be broken up before they become too reactionary and sheerly money-oriented. -- I'd hope that Mike is coming around to practical Populism, except I know was just a one-time phrase that fit his purpose here, not at long last setting aside the capitalist lies he's been taught.

    If you want meaningful patent reform, keep corporations small and hungry, not fat and lazy, through high tax rates. --- Corporations are one means of funding gov't for the general good, ya know. WORKERS are the ones who give value to corporate products, the ones who actually pay ALL taxes, and taking away excess upon excess from The Rich is far less onerous than further burdening workers. Corporations are efficient at gathering money, and they should be harnessed to do so for the gov't. -- As used to be standard!

    Common law and common decency requires the benefits of society be distributed reasonably fairly with the workers who produce all, not gathered up by a few already Rich shareholders and used to establish nearly feudal tyranny. Capitalism let loose is exactly like feudalism except with gadgets.

     

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      James Burkhardt (profile), Sep 24th, 2013 @ 7:43pm

      Re: So how would this magically rid us of bad patents?

      Let me help you here

      Unlike as Mike blithely answers, what you're missing is the likelihood that existing "bigger" companies could further game the system to run these cases through the courts and MORE QUICKLY shut down startups
      Except The patent owner is likely to be the big company. If its a bad, broad patent, they don't want a reexam. and If they get the reexam and win, then the patent is likely valid. Techdirt has argued that one of the biggest root problems (not a symptom but a root problem) in patents is the assumption of validity that patents have when they are taken to court, in the face of evidence that 90% of patents are found to be partially invalid. This article discusses a solution to that problem that Mike wants to see. Isn't that what you have been asking him for?

      ...keep corporations small and hungry, not fat and lazy, through high tax rates....
      Funny thing about taxes.....they are proportional. So a 70% corporate tax rate means Mom & Pop Co. loses 70% of its profits as well as Walmart. Which means Walmart is still 1000 times their size, M&P Co. is just that much smaller too.

      The problem as I see it is that claims are so broad...
      So you admit that patent filings are broken
      ...that only long review by a technical expert could distinguish, and that in practice it's left up to juries to decide who has the most convincing lawyers, or which the jury hates the least. It's a basically a crap-shoot.

      You fail to understand how this process would work. Currently, you have to rely on Juries and Judges because it takes years before your review comes up and the trial is not put on hold. The new law places the trial on hold while a priority review takes place, in which technical experts can provide evidence of prior art and proof of obviousness in the industry. Tech experts and less lawyers. Thats what you want right?

      So "If the competitor requests [an accelerated] review of the patent and" LOSES how is it better? There's still no judgment on technical merits. Again, you have no clue what a patent office review is, do you?



      Outside of your obvious socialist leanings, which are inherently incompatible with private ownership and IP (A writer is just grifting off the hard work of bookbinders, editors, publishers, marketers, and bookstores, without whom their product wouldn't get to market), you have solid ideas about the need to provide increased taxation of corporations...because it encourages corporations to reinvest in their business to reduce their tax burden. Job growth and domestic economic growth have been tied to high corporate tax rates.

       

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        James Burkhardt (profile), Sep 24th, 2013 @ 7:46pm

        Re: Re: So how would this magically rid us of bad patents?

        Ack, i dropped a tag....The final bit of the article starting with "Again you have no clue..." was not intended to be a block quote.

         

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        Pragmatic, Sep 25th, 2013 @ 3:29am

        Re: Re: So how would this magically rid us of bad patents?

        Blue is actually against socialism, communism, and any form of collectivism. That's why "Commie" is a favorite insult.

        The notion she has about corporations is that they're govt. backed, and govt. is evil so corporations are evil.

        Correct me if I'm wrong, Blue, but you want a flat tax rate, don't you?

        Needless to say, the fog of confusion she blunders about in prevents her from addressing her oft-repeated rants against "unearned income." Any company or corporation that provides a service or item for sale is earning its income. So why is it okay to raise taxes so high on earned income if it's by a corporation rather than an individual?

        I might suggest beefing up our anti-trust laws and tacking on a provision against resource-hogging so we're not held to ransom over land, water, and housing by unscrupulous actors, but that's another issue altogether.

        Suffice it to say that Blue's paranoia and circular thinking rule her out of being able to discuss these matters logically as she can't think clearly enough to do so, as she's demonstrated over and over again.

         

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      Gwiz (profile), Sep 25th, 2013 @ 8:26am

      Re: So how would this magically rid us of bad patents?

      If you want meaningful patent reform, keep corporations small and hungry, not fat and lazy, through high tax rates. --- Corporations are one means of funding gov't for the general good, ya know. WORKERS are the ones who give value to corporate products, the ones who actually pay ALL taxes, and taking away excess upon excess from The Rich is far less onerous than further burdening workers. Corporations are efficient at gathering money, and they should be harnessed to do so for the gov't. -- As used to be standard!



      Ok Blue. You keep bringing up your notions of "tax the hell out of the rich" and "tax the hell out of corporations to keep them from getting too big". Fair enough.

      My problem with your repeated yelling of these notions is that you (as far as I recall) have never quantified them. With an idea as grand as this, the devil is in the details. These ideas make for great song lyrics and powerful rallying cries, but not much more without the specifics. I could possibly agree with you about them, but you've never given answers that allow me to make an informed decision.

      Answers to these simple questions would be helpful:

      1) Where and how would you determine the line between "too rich" and "not too rich"?

      2) Where and how would determine the line between a corporation that is "too big" or "not too big"?

      3) What is your definition of "unearned income"?

      4) How would you counter the stigma of this being a "success tax"?

      5) What incentives would you use to encourage economic growth from corporations if you remove the profit incentives once they reach a certain point?

       

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        That One Guy (profile), Sep 25th, 2013 @ 6:50pm

        Re: Re: So how would this magically rid us of bad patents?

        Not blue, but offhand I'd say the answer to #2 would be 'When a company is large enough that they are for all intents and purposes immune to the law, as prosecuting or shutting them down would cause too much harm to the economy'.

        Now figuring out exactly when a company reaches that point would be anything but easy, but that seems to me to be a solid definition of when a company is 'too big', when they can stand up to a country, and break it's laws, without any real repercussions.

         

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    Anonymous Coward, Sep 25th, 2013 @ 3:04am

    be honest, why would anyone want to introduce a bill that did what is needed over whatever the subject is? if that were the case, he could be out of a job more quickly and there would be no way of having 'secret interpretations' used, loop holes exploited etc.
    a really good bill would be one that actually allowed things to be changed almost instantly when a problem is discovered in an existing bill so as to prevent it being reused.

     

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    Ninja (profile), Sep 25th, 2013 @ 4:39am

    I suppose any step forward is a win.

    Entrepreneurs and startups generally don't think or worry too much about patents. They're kind of a distraction more than anything else.

    I'm lazy to dig them but we have stories including some posted here on Techdirt on how these innovators become interested in actually getting patents or something AFTER they are contacted by lawyers from the legacy players or the patent trolls.

     

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      John Fenderson (profile), Sep 25th, 2013 @ 8:47am

      Re:

      Sometimes true entrepreneurs are forced into playing the patent game, but they still generally regard them as annoying distractions at best and a dangerous drain of time, money, and energy at worst.

       

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    jayster, Sep 25th, 2013 @ 1:23pm

    Patents

    I had a rather dismal thought about how patents work and that maybe it's by design. I know that the propaganda says that the patent office was created to help innovation, but what if it's true purpose is to hinder innovation? This way the government has time to adjust to any new technology by writing new bills to limit that technology. It allows the government to have more power, and we all know they're always power hungry.

    Now that I'm a conspiracy theorist, I'll go make a tinfoil hat.

     

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    Leonardo Balliache (profile), Sep 25th, 2013 @ 9:37pm

    They are tired

    It's just normal. They are really tired, no fresh blood to innovate.

     

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    Anonymous Coward, Oct 3rd, 2013 @ 2:37pm

    NOW I understand about Apple

    After reading the original post, and the response, I finally figured out that Apple was never innovative. Why do I say that? Because Apple was filing for patents within a few months after they started the company, and three years after the start of the company, they filed for LOTS of patents.

    All this time I kept thinking there was a time when Apple was innovative, and perhaps they were, for about six months.

     

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