Clear And Concise Explanation For Why Software Patents Harm Innovation

from the transaction-costs dept

Tim Lee points us to an excellent discussion at The Abstract Factory blog for why software patents harm innovation (though, I'd argue that the reasoning set forth applies beyond just software patents). The writer, Cog, initially discusses the sort of story that's all too common these days, about some friends of his who build a cool online service, with plenty of important details in the execution and the implementation that make it better and significantly more useful than whatever else is out there... only to find themselves sued by a patent holder, whose own technology includes none of the wonderfulness that makes Cog's friends' product so powerful. From there, he goes on:
One thing that I find extremely frustrating about many legal scholars and economists' approach to patents it that they make two false assumptions. The first assumption is that transaction costs are acceptable, or can be made so with some modest reforms. The second assumption is that patent litigation is reasonably "precise"; i.e., if you don't infringe on something then you'll be able to build useful technology and bring it to market relatively unhindered. As my friend's story shows, both of these assumptions are laughably false. I mean, just black-is-white, up-is-down, slavery-is-freedom, we-have-always-been-at-war-with-Eastasia false.

The end result is that our patent system encourages "land grab" behavior which could practically serve as the dictionary definition of rent-seeking. The closest analogy is a conquistador planting a flag on a random outcropping of rock at the tip of some peninsula, and then saying "I claim all this land for Spain", and then the entire Western hemisphere allegedly becomes the property of the Spanish crown. This is a theory of property that's light-years away from any Lockean notion of mixing your labor with the land or any Smithian notion of promoting economic efficiency. And yet it's the state of the law for software patents. Your business plan can literally be to build a half-assed implementation of some straightforward idea (or, in the case of Intellectual Ventures, don't build it at all), file a patent, and subsequently sue the pants off anybody who comes anywhere near the turf you've claimed. And if they do come near your turf, regardless of how much of their own sweat and blood they put into their independent invention, the legal system's going go off under them like a land mine.

It is hard to think of a more effective mechanism for discouraging innovation in software. I mean, I suppose you could plant a plastic explosive rigged to a random number generator under the seats of every software developer, and that would be slightly worse.
The only thing I'd quibble with is the claim that this is the typical economists' approach to patents. Plenty of very smart economists (including some Nobel Prize winners) agree that the patent system makes no sense. But, other than that, this is quite an accurate description of the problem and the underlying fallacies from those who think the system works. Cog also points out (as we have in the past) that it's ridiculous to claim that the patent system serves a separate purpose in "disclosing" inventions such that everyone can learn from them:
At any software company with competent legal counsel, developers are instructed in the strongest possible terms never, ever to look at a patent, because the tiniest amount of documented influence could be used as ammunition in a lawsuit. The only time a sane software developer reads a patent is when your company's lawyers specifically ask you to help them prove you're not infringing on one. If you ever get wind that there's a patent even vaguely related to your work, you stick your fingers in your ears and run in the other direction. In short, software patents facilitate "conversation" about as well as poison gas bombs do.
What he's talking about is the fact that if you're found to have willfully infringed on a patent, the damages suddenly get tripled. And, showing that you looked at the patent in question is often how patent holders will claim willful infringement. The system is designed such that whatever benefits there may be from "disclosure" have been completely wiped out due to willful infringement damages.

Oh yeah. As for Cog's friends? They're basically screwed:
Now, my friend and his partner have consulted multiple IP lawyers and they've said, "Yep, the law is probably on your side." They have also said, "You're still screwed." The trial would take forever, the legal fees would be ruinous, and in the meantime nobody will invest in a company which has a litigation cloud hanging over it.
So, none of us ever get to see or use the software that they created. That's the opposite of what the patent system is supposed to do.


Reader Comments (rss)

(Flattened / Threaded)

  1.  
    identicon
    Anti-Mike, Nov 9th, 2009 @ 3:51pm

    giggles

    It is hard to think of a more effective mechanism for discouraging innovation in software.

    I always get a laugh out of these sorts of statements, because it sort of indicates that the guy isn't thinking outside the box.

    Innovation isn't taking something someone else created, adding a few lines of code, and calling it your own. Innovation is coming up with a new way to do something, a new way to accomplish something, and to push further than that, and go past everything that is out there.

    It's why there isn't just one operating system, one word processor, one spread sheet, or one database system. It is why car manufactures, when faced with meeting the OBDC II standards each came up with their own ways of doing things, that all met the standards.

    If anything, blocking certain paths makes TRUE innovators work around them and get better. Re-examining a problem and finding a different and better solution shows true innovation.

     

    reply to this | link to this | view in thread ]

  2.  
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    Ima Fish (profile), Nov 9th, 2009 @ 4:04pm

    This is a pretty good explanation on how patents harm innovation. But what about the other side of the coin? How does the patents in this circumstance help innovation? Did the "friend" in this story dig through some patent database to discover the amazing software patent which lead to his coding? Of course not. The granting of the patent helped absolutely no one other than the grantee.

     

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  3.  
    identicon
    Anonymous Coward, Nov 9th, 2009 @ 4:06pm

    Re: giggles

    "Innovation is coming up with a new way to do something, a new way to accomplish something, and to push further than that, and go past everything that is out there."

    Yeah, damn those non-innovative cars. They should be figuring out how to drive on rotating squares!

     

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  4.  
    identicon
    TheStupidOne, Nov 9th, 2009 @ 4:15pm

    Re: giggles

    Yea, because if you make something truly awesome and unique someone will still find some way to F#$% you in the A#& with some patent governing using information you pull from one database to lookup information in another database. Or bankrupt you through legal fees for including a way to search through the information your user has input into your software.

    Software, and even lots of tech has gotten to the point where no matter what you do some generic patent that doesn't really say anything and can be twisted to mean anything will be used against you. I fail how that is good for anybody (except the lawyers and patent holders of course ... though they are probably one and the same)

     

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  5.  
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    ChurchHatesTucker (profile), Nov 9th, 2009 @ 4:17pm

    Re: giggles

    "If anything, blocking certain paths makes TRUE innovators work around them and get better."

    That's like saying the way to find TRUE athletes is to cut their hamstrings and see how well they perform.

    How 'bout just letting them compete?

     

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  6.  
    identicon
    Anonymous Coward, Nov 9th, 2009 @ 5:22pm

    Re: Re: giggles

    Nice idea, but you fail to understand something:

    It isn't competition if one guy had to run the full marathon, and the other one jumped in on the last few feet to wun the race.

    Development of things is often marathon, not a sprint race. What this guy wants is to be able to benefit from everyone else running the marathon, and then come right at the end to snap the tape and get his picture in the paper as the winner.

    It isn't about cutting hamstrings, it's stopping people from standing on other people's shoulders and acting like they are naturally tall.

     

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  7.  
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    Derek Reed (profile), Nov 9th, 2009 @ 5:27pm

    Re: Re: giggles

    Agreed.

    And it's not just "blocking certain paths", it's land mines in the middle of the interstate that no one can see.

     

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  8.  
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    Derek Reed (profile), Nov 9th, 2009 @ 5:34pm

    Re: Re: Re: giggles

    Disagreed.

    It's not a marathon because there is no finish. It's bad not only that this first sprinter is suing this second sprinter; it's bad if either of those first 2 sue the 3rd, 4th or 60th sprinter. It's just not efficient or necessary.

    It's unnecessary because the 2nd sprinter didn't stand on top of the 1st. They built their own stilts and started walking around, then some tall person walked up out of nowhere and chopped their legs off.

     

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  9.  
    identicon
    Mr giggles is a troll, Nov 9th, 2009 @ 5:53pm

    Re: giggles

    "Innovation isn't taking something someone else created, adding a few lines of code, and calling it your own."

    Having read the linked article, I failed to find the part where the defendant took anything from the plantiff. What I did find was a reference to the "genuinely innovative, original technology" developed by the defendant. So, Mr. anti-mike could you please point us all to where you got this piece of incriminating evidence? Furthermore, I find the remainder of your post to be wholly inadequate with regards to why I should believe anything you have to say.

     

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  10.  
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    Derek Reed (profile), Nov 9th, 2009 @ 5:54pm

    Re: Re: Re: giggles

    And it's those land mines that keep so many (companies I've worked for included) from even getting on the interstate in the first place.

    Man, I really like this analogy stuff ...

     

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  11.  
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    Derek Reed (profile), Nov 9th, 2009 @ 6:11pm

    Re: Re: giggles

    I don't think it's fair to label him a troll for offering a dissenting opinion, but you do point out one of the excellent reasons why he's wrong (This specific case is yet another where the second innovator copied nothing from the first).

    He is making arguments similar to some things said here before about true / vertical / horizontal innovation, but I think it's important to point out all the reasons why he's so very, very wrong (not that I'm qualified to do it). Vertical innovation is also good, but killing horizontal innovation is very, very bad for both types, the line between the two is very blurry.

     

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  12.  
    identicon
    Conclusion, Nov 9th, 2009 @ 6:15pm

    I have come to the conclusion that ill just write the software , never profit and giv eit out to other pirates.
    WHY? cause the system is so broken that i no longer care , and as they say if i stay poor your not going to get jack from me.

    With an IQ of 165 and loads of ideas ill just DO.
    Screw this system and just try and stop me.
    I won't be alone and others will start ignoring your laws too.
    THIS is what prohibition of the 30's causes.
    WILLFUL NON VIOLENT DISOBEDIENCE OF LAW.

     

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  13.  
    identicon
    mano, Nov 9th, 2009 @ 6:27pm

    Re: Re: Re: giggles

    The patent system is not about helping someone win the marathon! It's about helping the audience (the society) get a good deal. At least that was what it was intended for.

     

    reply to this | link to this | view in thread ]

  14.  
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    Derek Reed (profile), Nov 9th, 2009 @ 6:32pm

    Re:

    Sad state of affairs when this is the most effective course of action proposed on this page. But I suppose we really are in a sad state of affairs, aren't we?

    Really, this is what many are doing whether by holding their hands to their ears and hoping not get sued, or just being misinformed about the variety of patents they're already violating and being small enough to not get sued for. And apparently there's even a few doing it and yelling to others about in capital letters.

     

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  15.  
    identicon
    Wesha, Nov 9th, 2009 @ 7:10pm

    Simple rule...

    ...whoever starts the mess, pays for it.

    Make plaintiff pay ALL the legal bills (BOTH his and defendant's), until the judgment is made. Then, if the defendant loses the case, he reimburses the plaintiff. If he wins, well, tough luck.

    Multiple benefits:
    * Incentive not to sue if you know you can't win, or if you're planning to drag your feet forever;
    * Incentive not to sue if you know defendant simply doesn't have enough money to reimburse you (RIAA vs. Jaymie Thomas)
    * Defendant isn't forced to stop defending himself only because he ran out of cash.

     

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  16.  
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    -I (profile), Nov 9th, 2009 @ 7:26pm

    "Innovation isn't taking something someone else created, adding a few lines of code, and calling it your own. Innovation is coming up with a new way to do something, a new way to accomplish something, and to push further than that, and go past everything that is out there."
    Throughout history, there have been many cases where momentous innovations are credited to one person over another by the matter of who got to the patent office first, with the difference being measured in hours, or minutes. Of course, back in the day, you had to arrive with a working prototype. Nowadays, you don't need a working prototype, and assuming you know your invention will work, you'd be insane to build one. That's wasting time best spent getting to the patent office early. After you've got your patent, there's not really any point going the extra step of actually inventing the thing and marketing it, at least not if someone else will do it for you. And when that guy goes to the effort of building a working prototype and establishing a business and turning a profit, then you roll up with a lawyer behind you and your hands out for your share (which, ideally, is all of the money he earned, plus any other money he might have lying around). It really is a great system we've established here.

     

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  17.  
    identicon
    Anonymous Coward, Nov 9th, 2009 @ 7:27pm

    Re: Re: Re: Re: giggles

    Society benefits when new things are created and true innovation occurs. Society doesn't benefit when someone takes an existing product, adds "Special platinum edition" on it and calls it innovation.

    Society benefits when we get something truly new, when things are moved forward rather than just moved around.

     

    reply to this | link to this | view in thread ]

  18.  
    identicon
    Anonymous Coward, Nov 9th, 2009 @ 7:36pm

    Re: Re: Re: Re: Re: giggles

    Don't get lost in all the straw you're spewing out.

     

    reply to this | link to this | view in thread ]

  19.  
    identicon
    Anonymous Coward, Nov 9th, 2009 @ 7:39pm

    Re: giggles

    "Innovation isn't taking something someone else created, adding a few lines of code, and calling it your own. Innovation is coming up with a new way to do something, a new way to accomplish something, and to push further than that, and go past everything that is out there."

    Innovation isn't coming up with obvious ideas and preventing others from doing it and asking for large sums of money if they do. Innovation is coming up with a product and a business model that competes in the FREE MARKET, not in the marketplace where the government holds your hand because you can't compete in the free market.

     

    reply to this | link to this | view in thread ]

  20.  
    identicon
    Anonymous Coward, Nov 9th, 2009 @ 7:47pm

    Re: giggles

    "Innovation isn't taking something someone else created, adding a few lines of code, and calling it your own. Innovation is coming up with a new way to do something, a new way to accomplish something, and to push further than that, and go past everything that is out there."

    You also make the assumption that ALL ideas require monopolies (ie: patents or copyrights) and that no innovation would ever occur without intellectual property and hence every idea that hasn't already been patented is deserving of a patent. The fact is that A LOT of innovation would occur perfectly well without intellectual property and intellectual property hinders the progress of many innovations. The goal of our patent system shouldn't be to give a monopoly to any idea that anyone can possibly think of that hasn't already been given a monopoly/patent. It should be to figure out which innovations would progress without patents and to exclude those from getting patents and to ONLY grant patents for a REASONABLE period of time (20 years is too long) to ideas that would not otherwise advance. To assume that ALL ideas would not advance without a monopoly and to disallow any ideas from advancing without such a monopoly is very bad policy.

     

    reply to this | link to this | view in thread ]

  21.  
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    BearGriz72 (profile), Nov 9th, 2009 @ 8:37pm

    Re: Simple rule...


    ...whoever starts the mess, pays for it.

    Make plaintiff pay ALL the legal bills (BOTH his and defendant's), until the judgment is made. Then, if the defendant loses the case, he reimburses the plaintiff. If he wins, well, tough luck.

    I suppose it is a good idea in the case we are discussing but what about when the tables are turned? What if a small innovate company with little to no capital comes up with a really good idea, then 'Hugeandenormous Inc.' comes along and steals the idea. (Ostensibly what software patents are supposed to protect against.) Now I happen to agree that in most cases IP is just BS but the idea you are proposing would make it all but impossible (not that it is much better now) for the little guy to fight. Or did I miss something?

     

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  22.  
    identicon
    Anonymous Coward, Nov 9th, 2009 @ 10:05pm

    Re: giggles

    Innovation isn't taking something someone else created, adding a few lines of code, and calling it your own.

    So, did you actually not read the article or are you just pretending that you didn't? Because that isn't the case here at all. It clearly said that multiple IP lawyers said the law was on their side but that the patent system would still ruin them.

    The only "innovations" I see the patent system producing are new ways for patent trolls to shake down people who are actually producing. It that's what it's supposed to do, then it's working great.

     

    reply to this | link to this | view in thread ]

  23.  
    identicon
    Anonymous Coward, Nov 9th, 2009 @ 10:50pm

    Re: Re: Re: giggles

    "I don't think it's fair to label him a troll for offering a dissenting opinion,"

    He's a troll because he's pretending the article said something it didn't. Clear enough?

     

    reply to this | link to this | view in thread ]

  24.  
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    Phatnobody (profile), Nov 9th, 2009 @ 11:23pm

    Re: Re: Re: giggles

    It also isn't a marathon if the first runner sat on his backside on the start line saying;

    "I've got a great idea how to run this marathon but I'm too unfit to do it. However because I have patented my marathon running idea, no one else can attempt the marathon by putting one foot in front of the other."

     

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  25.  
    identicon
    John Doe, Nov 10th, 2009 @ 4:21am

    Re: Re: Re: Re: Re: giggles

    This is ridiculous. If email was patented and only 1 company in the world could do it, how would society benefit? Yes, the company could license the technology to others but at what price? Since they have a government granted monopoly on the "idea" they could charge anything they want to. What they should have is a patent on the "implementation". If someone else figures out how to implement it better than so be it. That is called competition in a free market. In the end, society benefits whether the original innovator does or not.

     

    reply to this | link to this | view in thread ]

  26.  
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    Nick Coghlan (profile), Nov 10th, 2009 @ 5:43am

    Re: giggles

    Umm, you seem to be a touch confused about the difference between "innovation" and "invention".

    'Invention' is coming up with completely new ways of doing things (i.e. what you seem to be talking about). It often represents a profound break with preceding technology.

    'Innovation' is applying existing solutions to new problems, creating novel combinations of existing ideas that weren't effective on their own, that kind of thing. The key point about 'innovation' is that the *idea* is often the least important part. *Execution* of that idea and turning it into a useful product, successfully navigating all the inevitable compromises that reality will enforce upon you is the hard part.

    A key word associated with innovation is "incremental" - party A implements a good idea, party B later does the same thing but adds their own twist, party A later adopts that twist as well since users like it, etc, etc.

    The patent system unduly rewards merely having ideas without putting any effort into making them actually happen. Without execution to put them into effect, ideas are largely useless, but companies like Intellectual Ventures are able to game the patent system and act as a tax on the real innovators.

     

    reply to this | link to this | view in thread ]

  27.  
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    Nick Coghlan (profile), Nov 10th, 2009 @ 5:53am

    Transaction costs

    One point worth making when it comes to "reasonable" transaction costs is that they're relative. In manufacturing industries (e.g. cars, tractors, etc) and other industries with large up front capital requirements (e.g. lab facilities for pharmaceutical research), the transaction costs associated with patents just aren't that big relative to other costs.

    The up front expenditure associated with independent software development, on the other hand, can be close to nil. High quality development tools (including compilers, runtime interpreters, code editors, source control tools, defect trackers, online collaboration tools) can all be legally downloaded for free, cloud computing services such as Google's App Engine or Amazon's S3 offer low cost entry into the web service world, plenty of cheap hosting sites (and bittorrent) offer entry into the downloadable software world, etc.

    In an environment of such minimal capital expenditure, the transaction costs involved with the patent start looking ridiculously out of proportion (particularly when patent examiners have very little idea what an experienced software developer would consider obvious, and even when they do recognise an idea as obvious, they still have trouble knocking back an application without documented prior art that someone, somewhere, had previously combined a bunch of trivial ideas in the particular way that the patent describes).

     

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  28.  
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    ChrisB (profile), Nov 10th, 2009 @ 6:39am

    Re: Re: Re: giggles

    > It isn't about cutting hamstrings, it's stopping people
    > from standing on other people's shoulders and acting like
    > they are naturally tall.

    Good try, but science/tech has always been that way.

    "If I have seen further it is by standing on the shoulders of giants" - Isaac Newton

     

    reply to this | link to this | view in thread ]

  29.  
    identicon
    staff2, Nov 10th, 2009 @ 9:50am

    counter sue

    "...some friends of his who build a cool online service, with plenty of important details in the execution and the implementation that make it better and significantly more useful than whatever else is out there... only to find themselves sued by a patent holder, whose own technology includes none of the wonderfulness that makes Cog's friends' product so powerful."

    If their product was so great and if they had the good sense to patent it, they would counter sue. That's why it's so important for small firms who really have worthwhile technologies to obtain patent protection. You cannot afford to give your market away. Patents are only bad for those who do not have them whether for lack of innovation or business sense.

     

    reply to this | link to this | view in thread ]

  30.  
    identicon
    Anonymous Coward, Nov 10th, 2009 @ 12:53pm

    Re: counter sue

    If their product was so great and if they had the good sense to patent it, they would counter sue.

    Looks like somebody else either didn't read the article or is pretending that wasn't covered: the legal costs would be ruinous.

     

    reply to this | link to this | view in thread ]

  31.  
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    wvhillbilly (profile), Nov 10th, 2009 @ 11:30pm

    patent troll strategy

    I would liken patent troll strategy to someone who obtains a copy of the title to someone else's house, puts his name on it, then demands rent from the owner and threatens to sue if he refuses. These people have been known to watch what others are developing, patent it and then sue the pants off of the inventor for infringing their patent. Jerome Lemelson, the granddaddy of all patent trolls amassed a $2 billion fortune doing this, then cried when someone called him a parasite.

    And that's exactly what I think patent trolls are. They just mooch off of other people's work.

     

    reply to this | link to this | view in thread ]


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