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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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Games Where The Only Winning Move Is Not To Play

Comments (307)

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.

The Real Cost of Patent Trolls

Comments (44)

James Bessen, Jennifer Ford, and Michael Meurer of BU School of Law have written a phenomenal paper titled The Private and Social Costs of Patent Trolls. Rather than be politically correct and refer to NPE’s simply as “non-practicing entities”, they cut through all the noise, define what a patent troll is, and go through a detailed and rigorous analysis of the private and social costs of patent trolls. Some highlights from the paper follow:

Regarding money:

  • From 1990 – 2010 NPE lawsuits are associated with $500 billion dollars of lost wealth to defendants.
  • In the past four years, NPE lawsuits are associated with an average of $80 billion per year of lost wealth to defendants.
  • Very little of this loss wealth represents a transfer to inventors.

The litigation has distinctive characteristics:

  • It is focused on software and related technologies.
  • It targets firms that have already developed technology.
  • Most of these lawsuits involve multiple large companies as defendants.

The authors suggest that these lawsuits exploit weaknesses in the patent system. They conclude that the loss of billions of dollars of wealth associated with these lawsuits harm society and state “while the lawsuits increase incentives to acquire vague, over-reaching patents, they decrease incentives for real innovation overall.”

While I’ve just summarized the executive summary, the paper is extremely well written, the topic rigorously researched, and the conclusions follow from the actual data. The footnotes are a joy to read as they tackle a few previous papers that use completely contorted logic to make their points. My favorite is footnote 6:

“In effect, Shrestha is arguing: A) Valuable patents receive higher citations, and, B) NPE litigated patents receive higher citations, therefore, C) NPE litigated patents are valuable patents. This is a classic logical fallacy.”

It’s a special bonus that the header on each page says “page # – Troll – 9/11″.

My partner Jason and I were talking about exactly the problem the other day as we wondered why so many people have trouble with logic and deductive reasoning. Our world of software patents is rife with this category of problem. It’s awesome that serious academics like Bessen and his colleagues are going deep into this issue.

Another Day, Another Patent Troll

Comments (298)

These days I’m regularly exposed to patent trolls. Sometimes I read about them, sometimes friends email me about them, and sometimes companies I’m an investor in gets sued by them. Whenever I read the claims in the lawsuits, I often think that the claim in question is “obvious.” For those of you out there who know how patents are supposed to work, for something to be patentable it needs to be “non-obvious” as well as “unique.” While the specific claims may not be obvious to the patent troll, especially those who are lawyers who own patents they’ve picked up from other people (bankrupt companies, individuals who applied for and got a patent, patent factories), they are often extremely obvious to any software developer.

For a while I was frustrated by software patents. I tried to educate some of my friends in government about this. I was hopeful when the Supreme Court heard Bilski that they would take a stand on it. And I hoped that the people I talked to in the Obama administration, who acknowledged that they understood the issue, would try to do something about it. I hoped that the Patent Reform Act would actually have some teeth in it that would help address the completely messed up dynamics around software patents and my strong belief that this is a huge tax on the innovation process.

I had zero impact. Zero. As I sit here at the end of 2011, the software patent situation has spun completely out of control. In addition to endless patent trolls, who are multiplying like tribbles, large companies are now fighting massive legal battles with each other using patents. Some of the inventors (including a number of amazing software engineers) listed on the patents are finally speaking up against the patents, but since they’ve assigned them to companies they are no longer at, or the company that owns the patent acquired the company the original patent creator was at, their only recourse (and impact) is to get tangled up in a lawsuit as a witness.

In his 2003 letter to shareholders, Warren Buffet famously called derivatives, “”financial weapons of mass destruction” that could harm not only their buyers and sellers, but the whole economic system. “ You may recall that AIG, thanks to its non-transparent and heavy investments in derivatives, was almost bankrupt once the mortgage-backed securities it was insuring began to drop in value. The $85 billion bailout of AIG was the beginning of the government’s response to the financial crisis and we are still feeling the after-effects of that calamity.

Today, we are experiencing a similar threat to innovation with patents playing the role of “weapons of mass destruction.” Sadly, the America Invents Act, which seeks to provide the Patent Office with tools to operate better and passed recently, does precious little to address the patent litigation mess.

Like derivatives, there are thousands of software patents that are not transparent and remain available to do damage in the hands of patent trolls – and even respectable companies – who use them in lawsuits that bear little relationship to protecting inventions or spurring innovation. As others have detailed, there are increasingly destructive dynamics at play here and the easiest solution is to abolish patents in areas – most notably, software and business methods – where they are doing more harm than good.

Unlike the financial system, which derivatives helped bring to its knees, it is not clear how our innovation system will get to a breaking point that will require attention from policymakers. The Supreme Court could address the problem, but it missed a golden opportunity in the Bilski case, where it declined to end (by a 5-4 vote) the patenting of business methods. Perhaps the Supreme Court will realize that the situation requires fixing, looking for other ways to limit the damage.

The are simple options, such as disclosure where patent applicants should be required to disclose the source code behind their inventions, thereby ensuring that the invention is real and not merely a basis for a future lawsuit, which is what many software patents have become. Indeed, this requirement of the Patent Act (Section 112) is applied with some rigor in the biotech context, but has yet to be happen with regard to software. Such a change cannot come soon enough.

At some point the software industry is going to have to do something about this. We seem to not be able to rely on the government to take action that will affect change. I can only hope there are other leaders in the software industry, especially the amazing developers creating the innovations in the first place, who will take some collective action before it’s too late.

Time To Really Deal With The Broken Software Patent System

Comments (64)

I’ve been railing against software patents for a number of years. I believe software patents are an invalid construct – software shouldn’t be able to patented.

For a while, I felt like I was shouting alone in the wilderness. While a bunch of software engineers I know thought software patents were bogus, I had trouble getting anyone else to speak out against software patents. But that has changed. In the last few month the issue of software patents – and the fundamental issues with them – have started to be front and center in the discussion about innovation.

There have been two dynamite stories on NPR recently – the first on This American Life titled When Patents Attack! and one on Planet Money titled The Patent War. If you have an interest in this area, the two are well worth listening to.

In the past week, the discussion exploded starting with a post from Google titled When patents attack Android. The word “patent” shows up in 20 of the Techmeme River articles from the last week. Martin Fowler, a software developer, had a well thought out article titled SoftwarePatent. And they kept coming, such as Why Google Is Right Yet Short-Sighted To Complain About Mobile Patents.

But my favorite was Mark Cuban’s post titled If you want to see more jobs created – change patent laws. He starts strong:

“Sometimes it’s not the obvious things that create the biggest problems.  In this case one of the hidden job killers in our economy today is the explosion of patent litigation.”

And he ends strong:

“We need to face the facts, patent law is killing job creation. If the current administration wants to improve job creation, change patent law and watch jobs among small technology companies develop instantly.”

I hope my friends in the White House are listening. And to all the software engineers who are co-authors on patents that they aren’t proud of, or think are bogus, or were forced to create the patent by their company, or were paid a bonus by their company to write a patent on nothing, or are now working for a company that is getting sued for a patent they co-authored that they aren’t even sure what it says, speak up!

Have We Reached The Software Patent Tipping Point?

Comments (9)

We’ve shifted into a new zone in the world of software patent stupidity.  A few weeks ago, Oracle sued Google over a series of Java-related patents they got when they acquired Sun.  Last week, Paul Allen sued 11 major software companies, including Google, over four patents that were granted to his now defunct Interval Research think tank.

Much of the early commentary has already been said.  And, from what I’ve read, it’s not very generous to either Oracle or Paul Allen.  One of the best lines is from James Gosling, the authors of RE38.104 (Method and apparatus for resolving data references in generated code) in his post The shit finally hits the fan.  There has been plenty of speculation about the motivation of the Oracle patents and the speculation as to Paul Allen’s motivation is just beginning.  Regardless, there are lots of lawyers in the mix advising their clients and devising strategies around these patents.

My own opinion will be no surprise to regular readers of this blog.  I think this behavior is an absurd abuse of the patent system.  I think it’s a massive tax on innovation.  I think it’s an insult to anyone who is a real innovator.

As I was reading through some of the Paul Allen commentary this morning, it occurred to me that this might finally be a tipping point.  Last week, Microsoft asked the supreme court to hear their appeal of the I4i patent suit.  I hope Google steps up and really takes a stand here given that they are on the receiving end of both the Oracle and Allen suits.

Maybe we’ve reached a tipping point.  If you want a little more perspective, go read the book review of Lewis Hyde’s Common as Air.  Or better yet, read Common as Air.

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