Venture Capital Trade Association Hires Patent Troll Lawyers, Fights Against Patent Reform... Even As Most VCs Want Patent Reform
from the this-is-just-strange dept
So... it seemed really, really odd earlier this year, when a guy hired by the NVCA to appear at a Congressional hearing on patent reform argued against patent reform and suggested, if anything, that patent protections needed to be ratcheted up. The guy in question, Robert Taylor, seemed like an odd choice. He was not a venture capitalist, but rather a consultant who focused on patent strategies for startups -- in other words, someone who would directly profit from a bigger patent mess.
But, his view is clearly not in the mainstream among venture capitalists. This can be evidenced from a few different places. First, a little over a year ago, a study was conducted by Robin Feldman on venture capitalist views towards patents, and it put to rest the myth that VCs love patents. That study was actually conducted in coordination with the NVCA. The survey was distributed by the NVCA to its members. And those members did not like patents or what they did to innovation. Some quotes from the results:
When asked whether they see patent assertion as positive for startups and the startup community, 72% of venture capitalists disagree....In other words, the vast majority of NVCA VCs recognize that patent trolling is a massive problem. And, yes, the majority of the problem comes from the trolls:
74% of the venture capitalists reported that patent demands had either a highly significant or a moderately significant impact on companies that received them, including distracting management, expending resources, or altering business plans....
When companies spend money trying to protect their intellectual property position, they are not expanding; and when companies spend time thinking about patent demands, they are not inventing....
... the venture capitalists were in general agreement that patent demands are increasing against venture-backed companies. 79% responded that the number of patent demands have increased over the last five years for their portfolio companies overall....
For 59% of the venture capitalists, the patent demands came either all or mostly from those whose core activity is licensing or litigating patents....
And, if you needed any more evidence that venture capitalists realize the patent system today is broken and reform is needed, you can just look at this letter a ton of venture capitalists sent to Congress earlier this year, demanding reform, and highlighting how patent trolls are a massive tax on innovation. The signatories to the letter (and there are a lot of them) basically represent a who's who of venture capitalists that any Silicon Valley startup would love to have invest in them -- including Andreessen Horowitz, Union Square Ventures, YCombinator, Greylock, Benchmark, Kleiner Perkins, Foundation Capital, Softech VC, SV Angels, Canaan Partners, First Round Capital, Lowercase Capital, Spark Capital and many more. It's hard to think of a top VC firm that isn't listed.
These are the companies and individuals who funded nearly all of the top internet companies today: Google, Twitter, Tumblr, Facebook, Amazon, eBay, Airbnb, Github, Pinterest, Slack, StackExchange, Kickstarter, Etsy, Cloudflare, Lending Club and many, many more.
Given all of this, many people were left scratching their heads and wondering why the NVCA was coming out against the rather clear wishes of its own members, and the rather detailed literature and studies highlighting how problematic today's patent system is for innovation and startups. Even some of the Congressional Reps at that hearing wondered about it, leading NVCA to issue a rather bizarre clarification that Taylor's testimony was not on behalf of NVCA members, but some amorphous "broader industry."
To be clear, Mr. Taylor was present at the hearing to testify as NVCA's outside counsel on behalf of the broader industry, not as a representative of individual NVCA member firms.Huh? What "broader industry"? And if he wasn't representing the interests of the NVCA's members, why was he there as the NVCA's representative at the hearing?
The same clarification also sought to totally reinterpret the Feldman study (which, again, had been done in cooperation with the NVCA), arguing that even though the vast, vast majority of NVCA members had real problems with patent trolls and saw them as damaging, the fact that a few did not, somehow made it okay for the NVCA to side with the few and to argue for stronger patents, even though the VCs and startups in the survey clearly indicated that such a solution would be a problem.
... the survey findings do not indicate a difference of opinion between NVCA's position on patent litigation reform and the issue of patent assertions....Hell yes it does.
From there, the NVCA blatantly lies and says that it actually supports reforms that deal with "abuses with patent assertions"... but immediately caveats that by claiming "we also believe that any attempt to reform the system must maintain strong patent enforcement mechanisms..."
This whole story got stranger still last month, when it was revealed that the NVCA hired lawyers closely connected to some big patent trolls to pressure Congress into weakening or killing patent reform.
A review of the leaked document also reveals another surprise: the names of the lawyers that the trade group has assigned to examine the law. One of them is Michael Spillner, who is general counsel for Tessera, which has been widely described as a patent troll. Another is William Nelson, a partner at the law firm Tensegrity, which was founded in 2012 by several elite lawyers seeking to cash in on the popularity of patent trolling.All of this should raise serious concerns among actual venture capitalists about just what their trade organization is doing in their name. It appears to have handed the keys to those in bed with the patent trolls, and against the interests of its actual members and the most well-known, successful and sought-after venture capitalists in the world.