VC Explains How Damaging Software Patents Can Be

Venture Capital

from the thank-you dept

Despite claims that no VCs would ever invest in companies without patents, we’ve been seeing more and more VCs moving over to the side of recognizing that patents are more often hindering their portfolio companies rather than helping them — and these are some of the most respected VCs around these days. Brad Burnham, who has already called for an independent invention defense for patents has responded to Nathan Myhrvold’s ongoing campaign to legitimize patent shakedowns. Burnham has written up a detailed post on how and why software patents are so damaging. It comes back to the same point that we’ve been making for years: truly inventive people don’t need a patent as incentive to invent: they just need a need in the marketplace and they go and create. And, when there’s a need, plenty of people are probably coming up with similar solutions — but why do we limit the market to just one?

Burnham talks about the experiences with his portfolio companies. First, in explaining why the software industry took off, he points out that Myhrvold is wrong in suggesting that it was intellectual property protection that resulted in software becoming an industry:

The real reason the independent software industry emerged is that operating systems and APIs made it possible for independent software vendors to develop applications independently. They no longer had to ask permission of the hardware vendors. This same characteristic of permissionless innovation led to the explosion of independently created services on the internet. The rampant abuse of the patent system has created the opposite condition for the creators of software and web services today.

Not only is it becoming impossible to invent new services on the web without the permission of a patent holder who claims to own the intellectual property embodied in your invention, it is impossible to know who you need to ask permission of.

From there, he puts to rest the myth put forth by our favorite patent supporters in the comments that every tech company should just do a simple patent search and they’ll be “safe” by pointing out how unrealistic that is. An entrepreneur, who Burnham knows, gave this example:

I hired several firms to search for patents that our service might infringe. Each of them came back with completely different patents and each time I sent them back to do it again, they came back with still more different patents. When I searched myself in the patent database, each time I entered the same search query, it would return different results. None of these patents seemed to cover what we did, so I eventually gave up.

But the real issue here is the total myth that tech companies infringing on patents are “stealing” ideas from others. Time and time again, the actual details of lawsuits have shown that it’s almost never the case that a company accused of infringing ever actually knew about the original patent. Instead, it’s almost always an independent invention. And yet, Myhrvold persists with the myth that techies are going out and “stealing” the ideas of others. Burnham points out how rare this seems to be:

I have been investing in software and web services since 1993 and have worked in venture backed startups since 1985. I have never met the people Nathan is describing here. I have never been a party to a discussion about ignoring someone’s intellectual property rights for the sake of market share or to free up expansion capital. If anyone can point me to the clear cut abuses that Nathan is describing, I’d be grateful. My experience has been the opposite. As I described in this post, the companies I work with invest a huge amount of time and energy creating a service from scratch only to find after they have launched and become successful that a patent holder they have never heard of, operating (if they operate at all) in an entirely different market claims that our company has stolen their property.

Indeed. This is the key sticking point. Patent system supporters love to create this false imagery of the independent inventor who had his “idea stolen” by some big company. And, there’s no doubt that there are very rarely stories of some company copying an idea from someone else — but it’s pretty rare — and usually it just happens in the course of traditional competition. When McDonald’s launches chicken nuggets, should that mean that Burger King cannot do the same? That’s the nature of competition and it’s what leads to greater and greater innovation. What Myhrvold is pushing does not lead to greater innovation at all, but to the hoarding of information and to the limitation on the necessary process of experimentation and competition that result in real, and necessary, innovation.

Filed Under: brad burnham, innovation, patents, software patents