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I’ve been asserting for at least six years that patent system is completely broken for the software industry. I’ve given numerous examples, dealt with the issue first hand as patent trolls have tried to extort many of the companies I’m an investor in, and I’ve had many public discussions about the topic.
On my run on Sunday, I listed to This American Life - When Patents Attack… Part Two! It is easily the best and most detailed expose I’ve ever heard on this issue. If you care to really understand how patent trolls work, spend an hour of your life and listen to it.
The issue has finally gone mainstream. Here’s a great quote on patent trolls from an article in Time Magazine (how much more mainstream can you get than that.)
“In 2011, Apple and Google spent more money on patent litigation and defensive patent acquisitions than on research and development. That’s not a good sign for the U.S. economy; in fact, it’s a stark indication that our intellectual-property system is broken. Rampant patent litigation is impeding innovation and ultimately increasing the costs of gadgets for consumers, according to legal experts and industry observers. Now President Obama says he wants to reform the system.”
There was an outcry of support last week when President Obama issued a set of executive orders and suggested legislative actions to fix the broken patent system. While the press release from the White House had a bland title, the substance was solid and the articles about it got to the point.
- Obama Plans to Take Action Against Patent-Holding Firms
- 3 Silly Abuses Obama’s Patent Troll Executive Order Could Stop
- Obama Orders Regulators to Root Out ‘Patent Trolls’
- President Obama to take aim at patent trolls with executive actions on Tuesday
As expected, plenty of people suggest all of this is misguided or overblown. I read John Sununu’s (former New Hampshire Senator) Boston Globe OpEd Who is a patent troll? Obama calls nation’s techies to arms, but enemy is difficult to define and grimaced as he mostly missed the point, while at the same time blaming it on the government and lawyers.
All of this is shining a bright light on a deeply rooted problem that has spiraled completely out of control and has become an enormous tax on innovation in the United States. While I don’t believe Obama’s executive orders go nearly far enough, they are a start in something that has been ignored by the White House and our government for far too long.
I woke up this morning to a great article by Nick Grossman at Union Square Ventures on The Patent Quality Improvement Act. Nick does a great job of describing the software patent problem, suggesting several solutions, and explaining how the Patent Quality Improvement Act helps the increasingly dismal situation around software patents.
Nick has a great paragraph from Mark Lemley of Stanford Law School that describes a powerful solution to part of the problem – that of eliminating “functional claiming.” Regarding functional claiming, Mark says:
“This is a problem that is unique to software. We wouldn’t permit in any other area of technology the sorts of claims that appear in thousands of different software patents. Pharmaceutical inventors don’t claim “an arrangement of atoms that cures cancer,” asserting their patent against any chemical, whatever its form, that achieves that purpose. Indeed, the whole idea seems ludicrous. Pharmaceutical patent owners invent a drug, and it is the drug that they are entitled to patent. But in software, as we will see, claims of just that form are everywhere.”
Mark has written a strong paper on this called Software Patents and the Return of Functional Claiming that describes the problem – and the solution – in detail.
Fred Wilson, Brad Burnham, Jason Mendelson, and I have been talking about the problem of software patents for a long time and Fred brought it up again today on his blog in a post titled Piecemeal Patent Reform. It’s nice to see Senator Chuck Schumer proposing a simple yet powerful solution to part of the software patent problem.
While we continue to struggle with patent trolls in the US – which used to be called “non-practicing entities” (NPEs) but now apparently prefer to be called ”patent assertion entities” (PAE) – the New Zealand government has announced that software will no longer be patented. Maybe someday we will be so bold.
I regularly get emails and have discussions with entrepreneurs who are on the receiving end of a software patent lawsuit. Many of these are young companies, often with little or no revenue. It’s total, completely madness. If you don’t believe me, read the latest rant from a young entrepreneur on the receiving end of a software patent lawsuit from a troll.
My startup, all five employees and $0 revenue, is being sued by a patent troll. It is madness.
Software patents are weapons of mass extortion. The trolls know that the cost of patent litigation is huge- millions of dollars for a thorough defense. The vast majority of companies do a simple cost benefit analysis and settle. It costs a pittance to file a lawsuit, a fortune to fight. A troll can sue many companies and live off the settlements. Trolling is a lucrative, legally sanctioned business model with virtually no risk. The longer this continues the worse it will get.
And getting a patent is not that hard. For less than the cost of a small friends and family round you make a series of claims that describe your “invention”. Sort of a technical concept document written by a lawyer. There is no code required, no detailed product spec. You don’t have to build anything. We are being sued for having a UI connected to a server connected to a mobile device. And get this- data goes back and forth between the UI and the mobile device. Break through, right? Yes, according to the Patent Office.
And just like with illegal extortion, patent extortion causes real personal and economic pain:
- I wake up in the middle of the night with my hands clenched like lobster claws. I’ve actually cried from the injustice and worry;
- Every three hours of legal advice costs the same as an on-shore customer service representative with benefits for a week.
- A full legal defense could be my entire future Series A. And who is going to invest in that round when use of funds says “litigation”?
It is romantic to fight but the trolls know that a startup’s number one job is to stay alive. Screw romance. Screw justice. One lawyer I consulted told me not to read the patents- they were irrelevant. And the troll agrees. He said he didn’t really understand my business and didn’t care. We just looked like other companies he has sued. If your startup hasn’t been sued yet, don’t worry. You will.
What we need is leadership. But where are our leaders? In court. It’s disgusting. The millions spent haggling over the curvature of an icon could fund a massive lobbying and social action effort. Is it possible we can send a million tweets about happy cats but not stop patent extortion? We’re a community that believes in big dreams and blowing up obstacles. We can do this. We just have to try.
I’m on a Google Hangout today at 1pm Pacific time hosted by the EFF. I’ll be discussing the broken software patent system with Jason Schultz and Parker Higgins.
I know this announcement is last minute – somehow the event eluded me and my calendar. Fortunately, due to the power of Twitter, I noticed that I was mentioned in a tweet about it.
I feel like it’s kind of trivial to be talking about stuff like this given the shooting in a movie theater in Colorado earlier today. I’m super bummed out about it and having trouble getting it out of my head. It’s so heartbreaking to me that we struggle with this kind of violence in our country and whenever it happens, especially close to home, it rattles me. I don’t know what to do other than send good karma to anyone who was a victim – so I’m sending out my thoughts and positive energy to whomever they are.
In the mean time, if you are interested in the ongoing saga of the broken software patent system, join me in an hour to discuss it more.
By now the blogosphere, twitterverse, and even mainstream media is abuzz with the absurd decision that Yahoo has made to sue Facebook over ten software patents with the assertion that Facebook’s entire business is based on Yahoo’s patented inventions. My partner Jason Mendelson called this on 2/28 when he wrote his post Goodbye Yahoo! It was nice knowing you and Fred Wilson weighed in this morning with his post Yahoo! Crosses The Line.
My personal view is well known – I don’t think any of these patents are actually valid. Take a look at the analysis on PaidContent of The 10 Patents Yahoo Is Using To Sue Facebook, read the plain English descriptions, and then look at the filing dates. Now, try to make the argument that these are novel, useful, and non-obvious inventions of the part of Yahoo. For a less nuanced view, now read TechDirt’s post Delusions Of Grandeur: Yahoo Officially Sues Facebook, Laughably Argues That Facebook’s Entire Model Is Based On Yahoo.
I’m hopeful this is the beginning of the endgame of massive patent reform around software. It’s time for the entire industry to recognize that we are quickly shifting from a cold war (patents are deterrents) to a nuclear war that – like the one in War Games - the only winning move is not to play.
I’ve decided to let a week pass while I think about what the right response to this is. Software patents have the same polarizing dynamic that SOPA/PIPA had . Our government is, through laws and regulations – many of which make no sense, has created a construct with the legal industry that is untenable. Once again, we see an incumbent (Yahoo – and yes, I recognize the irony of calling Yahoo an incumbent) attacking an innovator (Facebook) with irrational weapons that have huge collateral damage, all in the name of “enhancing shareholder value.”
This is not a winnable game for Yahoo, the Internet, innovation, or society. Like nuclear war, the only winning move is not to play. However, Yahoo has now played. The next few moves are critically important.