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Hi, I’m Brad Feld, a managing director at the Foundry Group who lives in Boulder, Colorado. I invest in software and Internet companies around the US, run marathons and read a lot.

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Empirical Evidence of Why Software Patents Are Bad (or Good) – Part 3

Comments (3)

Jason is getting riled up about patents over on AsktheVC. I figured it’d be a good time to finish up the set of posts from John Funk suggesting an empirical way to evaluate whether software patents are bad (or good). If you haven’t read Part 1 and Part 2, take a look at them first (they are both short.) Part 3 follows.

But I think there may be another interesting angle. It may be able to be answered with just interviewing software companies or it may require a broader context. Here’s how I’m thinking about it. Map a three-dimensional grid with X-axis being economic value of a patent (or even a software patent portfolio); Y-axis being form of value (e.g., consensual/collaborative money payment, consensual/collaborative cross-license [note: this would appear to be an end-run around the system as it is a forced equality of unequal assets], litigation inspired royalty payments, a successful cease-and-desist/block against competitors, etc.), and Z-axis being number of years since issuance.

I think the X-axis is axiomatic. Y-axis exists to try to document how different forms of “value” represent “clean” vs. “bastardized” forms of value (I would argue consensual payments and successful “blocks” are clean forms of value; litigation inspired payments and cross-licensing are bastardized forms, with cross-licensing being the most dramatic bastardization as I think it’s very rare outside of software patents.) The Z-axis exists to bring some texture to whether software patents in particular are x% of the time irrelevant by the time they actually issue since the business moves so fast.

Now, it may take some other industries like pharma/biotech, consumer products, chemical/mech tech, etc. to show how different the industries and categories are, or it may be evident from the first map how screwed up software patents are vs. the public policy. But I would think that in the absence of some compelling evidence of substantial, “clean” value transfer across the full 20-year horizon, one could disprove the social policy hypothesis of “if we take away patents, innovation will be chilled” since there is little meaningful GDP add without clean value transfer.

Anyone in academia interested in patents should feel free to refine this and do a real study on it. We promise we won’t claim any ownership of it.

  • Dave Jilk

    A good empiricist, despite potentially having preferences or biases for a particular outcome, would avoid using terms like “bastardized.”

    In any case, I think you would have a hard time separating consensual from non-consensual. It would require understanding the history of the case – when someone licenses consensually, it may be simply the easiest way out rather than actual value (e.g., if the licensee believes that the patent is bogus, but does not want to commit the resources to defense). Further, even what you call “bastardized” has some potential real value, because indeed it may keep OTHER competitors out.

    Not that I have any better suggestions for measuring this. I don’t have problems with software patents per se so much as with the fact that many/most of them do not really meet the requirements of novelty and non-obviousness.

  • http://www.mit.edu/~eesley Chuck Eesley

    Some good work is starting to be done on software patents, but despite how “screwed up software patents are” the issues are complicated. Eric Von Hippel for one is advocating bringing down the entire patent system. :)

    http://www.nber.org/papers/w12195

    http://www.nber.org/papers/W11168

    http://elsa.berkeley.edu/~bhhall/NBER_summmary_03-06.htm

    Chuck

  • http://www.feld.com Brad Feld

    Given that Eric was my PhD advisor at MIT (no – I didn’t finish), at least we are consistent in our thinking.

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