Almost a third of our portfolio is under attack by patent trolls.(unionsquareventures.com) |
Almost a third of our portfolio is under attack by patent trolls.(unionsquareventures.com) |
I don't think people really understand the extent of the problem. I think they need to see exactly the damage that's being done before there will be any energy put into fixing it.
I do think that patents hold a valuable place in certain areas of research and development, but there are also areas in which patents are crippling development.
I do think that patents hold a valuable place in certain
areas of research and development, but there are also
areas in which patents are crippling development.
Metallurgy, semiconductors, superconductors, ...
Patent trolling reminds me of a game of chicken. I wonder whether chicken strategies have been tried to combat it.
For example, if the start-up could position themselves so that it is profitable for them to defend themselves if they are sued by a patent troll, and the trolls were aware of this (and rational), the trolls may be scared to litigate. This could be in the form of "insurance" that pays out when the company successfully defends itself against a patent claim. Ideally, the fact that the company is insured would thwart off trolls, so the premiums could be lower than what companies currently pay out in settlements.
As you said, the fact that you are even insured by this company may already signal to the troll to back off.
So it's a win-lose scenario. So there is no insurance possible. The best lawyers in your hypothetical insurance company, at best could convince the judge that you are not infringing. But it won't make you any money. So there is no business insuring against patent troll.
Don't get me wrong, I wish there was.
I assume their portfolio companies pool their patents together for the common defense. If not, that might be a good idea.
Still, with 26 portfolio companies, he's claiming 8-ish concurrent lawsuit threats... that's alarming. On the other hand, their portfolio is pretty high-profile (Etsy, Twitter, Zynga, Foursquare, Indeed, etc).
Also he doesn't put this claim in historical context: is this normal for a maturing (and very nice) portfolio? Are they going after the tender young startups or the bigger ones?
Unless you're a startup that just wants to make a good product and isn't interested in spending tens of thousands of dollars acquiring patents on software you think shouldn't even be patented in the first place. Then you have no defense. You also don't have the funds for a protracted legal battle, since you're living on investment capital, or are barely profitable.
It's an interesting item but wrapped in self-serving omission and linkbaity style.
"But anyone who has spent a significant time in technology based businesses will understand that two groups working completely independently from each other will often solve a problem similarly. One group is not copying or ripping off the other group. They are simply coming to similar conclusions about how to get something done.
In these cases, it makes no sense to protect one group from the other. Nobody has taken anyone's "intellectual property." Both groups should own their inventions outright without having to license technology from the other."
I wonder if there is a non-legislative fix available because I've heard about programmers wanting patent reform for as long as I've been programming and I believe almost no substantial progress has been made.
Brad mentions that larger companies have more resources available for fighting patent trolls. What if VCs set aside a pool of capital for defending their investments from patent trolls as part of raising their funds?
The idea would be to create a pool money whose size would ward off patent trolls. I'm sure it would take a few victories in court, but it could establish a precedent and change the game.
It certainly seems easier than attempting to reform patents.
http://www.google.com/patents/about?id=wIEoAAAAEBAJ&dq=5...
It's especially interesting to read the "referenced by" list on that page. "Incorporating state information into a URL" ... "Method for transmitting images over a network" ... "System for tracking the purchase of a product over the internet."
Seriously, what are we going to do about this?
I guess the "American" (assuming you're in America) course of action is to speak to your senator to push for reform and help evolve our government. If that fails, ditch the government altogether and either start or move to another country.
I think they are a giant waste of money. You spend $20K on lawyers, to get nothing more than the right to spend more money on lawyers in the future.
That $20K could be better invested elsewhere (like on product improvement).
I think it would be worth considering eliminating software patents.
However, I don't think an "independent invention defense" is a good idea. It would essentially eliminate all patent protection. Basically, the absence of proof that you knew a patent existed, would get you off the hook for infringing on it. This means that as long as you had the right set of rigorous policies in place, you could operate with complete immunity from patent infringement claims.
If all employees were trained (by mandatory corporate training) that "under no circumstances should you ever read any patents, ever", and "if you ever have any doubts about anything being patentable, direct the question to our lawyer", and you were very strict about enforcing it, you could make a case that pretty much every invention was discovered independently.
That would defeat the whole purpose of patent protection. The idea is that by getting inventors to disclose details of their invention (which benefits society), that they get a monopoly on its use. Without the monopoly, there is no point in having a patent.
If software patents pose a fundamental problem, then I think the best course of action is to eliminate software parents, not to undermine the entire patent system.
Thanks to the "treble damages" part, this is exactly how it operates right now, right down to the corporate training. Unless you're a patent attorney, "never ever read a patent" is pretty good advice for any technical professional.
That quote astonished me, I never really knew the extent of the problem.
What falls into the category "under attack"? threat of litigation? actual litigation? in process of settling? having settled?
If we take the familiar example of the ICE, simple dimensions like the bore and stroke of the cylinder aren't arbitrarily chosen. Altering the ratio of the bore and stroke changes the revving characteristics of the engine (a somewhat larger bore than stroke will cause the engine to have a higher rev limit, for example), and increasing the size of the bore requires disproportionately heavier cylinder heads (because cylinder heads have to have some depth and lateral reinforcement).
The size and weight of the cylinder heads, combined with the stroke effect the strength and dimensions required of the connecting rods and the crankshaft, so on and so forth.
Basically, a lot of mechanical "inventions" are big physics and engineering puzzles where the mere dimensions of each part was worked out through a lot of equation crunching (and probably a lot of plain old tinkering and testing as well). So for someone to just go and copy someone else's design, well that's kind of a big deal.
Many, many more details in Heller's book and in this Econtalk interview:
http://www.gridlockeconomy.com/
http://www.econtalk.org/archives/2009/11/heller_on_gridl.htm...
it's the NIH and universities (via government funding) that actually discover the drugs, then they sell the exclusive rights to manufacture it to big pharma (who then spends a lot to get it approved and market it and such...)
(this is the book, i haven't read it) http://www.amazon.com/Truth-About-Drug-Companies-Deceive/dp/...
so in this case (if true) patents fail again.
Since manufacturing, testing and marketing a drug is hysterically expensive, the patent seems to serve a purpose there -- even if pharma companies are more akin to specialized investment bankers than scientists.
[I know DES isn't patented, and there's plenty of good reasons why you don't want a patented crypto algorithm, but I think they certainly qualify.]
Lawyers can make a considerable amount of money, any disruption to the Patent Trolls' game will severely reduce their numbers. These Patent trolls, as you said, are often lawyers and by tying them up in court you are costing them profitability. Every non-settlement forces them to go to court and actually fight.
This is how the courts work: Out-of-court settlements are frequent and are preferred as it saves a Judge's time for real cases, however mass submission and withdrawal of suits are seen as a waste of the courts time and effort. A fair amount of cases end up in front of a judge before settlement, if these end up being withdrawn (and the judge will know it's withdrawn not settled) you're going to be in bad credence with a judge. Pissing off a judge is a big no-no. Patent Trolls will be pissing off multiple judges, which is like putting a shotgun in your career's mouth and pulling the trigger.
An insurance agency that fights patent trolls would be ideal. Offer $X amount of legal fee coverage for $Y a month, get a few talented lawyers and a fair amount of paralegals. Once word gets out, the majority of the work can be performed by paralegals (essentially everything up until you're standing in front of a jury-or-equivalent can be performed by paralegals) as no troll will want their time tied up. Eventually, only Trolls with a fair-case will fight, you then have 3 options to give your clients: offer them your lawyers' services/suggest settling/wish them good luck elsewhere. It would be a sort of no-case-no-extra-fee's deal.
Lawyer's typically bill by the 6-minute interval, and frequently charge 100's of dollars an hour. In fact 1-2 billed hours is typically a lawyers daily pay, and they may still have 6-8 hours on top of what they're billing clients. If you start consuming these lawyers time, their profitability drops, especially considering they require settlements for their pay. They're invested in the 'easy win', which isn't conducive to fighting a drawn out case. If companies actually start going through with the court battles, the payment is potentially delayed anywhere from 3-months to 3-years.
The trolls don't want to enter a losing battle because of the cost (even if they're in the business of litigation, time spent suing one company is time that could be spent suing another). Also, losing would damage the validity of the patent for future cases. (In my understanding, that is. IANAL)
For example, if USV is typical and 1/3 of venture-backed companies are being attacked by patent trolls, then the premiums for this insurance would have to be extremely high -- enough to cover a third of the cost of defending a typical case.
Also, if the patent troll is suing a bunch of companies you're insuring based on the same patent, you could attempt to combine the cases, thus consolidating the defense costs. This works because patent trolls work by firing off lots of very similar lawsuits, each for a small enough amount that it's economical to settle. That's what keeps their costs down; such an insurance policy would let the defense leverage the same economy of scale.
Essentially, if you could show that any patent-troll would face an SCO vs IBM situation, I think you could have some plausible deterrence.
RSA was patent-encumbered for a long time too. You can formulate a similar argument about that. "RSA makes systems safer [ed: no it doesn't, but continuing...], so it's wrong to allow it to be patented".
The step from (1) to (2) seems doubtful. If the CR people hadn't been able to patent a bunch of ways to deal with DPAs, they might none the less have published about them. It's not as if no one ever tells the world about a security vulnerability without a patent-based incentive.
The step from (2) to (3) seems doubtful. It seems more likely that without CR, sooner or later someone else would have thought of differential power attacks and published about them. Unless CR are just much much smarter than everyone else -- in which case, the guys in black hats would have been just as much worse off as the guys in white hats.
The step from (3) to (4) is OK, with the proviso I just mentioned: it seems that the obvious way for (3) to be true would tend to make the vulnerability matter much less.
Here is where insurance can actually increase litigation: a person without assets often isn't worth suing but a person with the deep pockets of an insurance company can become worth suing.
I still think it's good idea to create an anti-patent legal pool but it's important to understand all the angles...
The problem would be maintaining a reputation as someone willing to pay for long legal battles.
Don't a lot of trolls actually have valid patents that read on whatever it is you do?
If this worked, why wouldn't Microsoft just "self-insure" and never, ever settle a patent claim?
In this instance, Microsoft's attorneys risk alienation too by playing the chicken game, and they don't want to do that.
How it could work is to find a judge who thinks patent cases like this are ambulance chasers, and then ensure that all the suits against you are relocated into her court. If you have a friendly judge then it becomes much easier to play chicken.
How exactly do you do this? I've been wondering. It seems trolls are able to get these cases heard in disproportionate numbers by a strange little puppet court down in east texas that has become famous for being troll friendly. (and indeed seems to have based its entire local economy around it)
Regarding (1) to (2): sure, maybe CRI would have published even without compensation. Just like maybe I'd do my job part-time for free anyways even if I wasn't getting paid. You can say that for anyone who's doing what they love: musicians, lawyers, architects. But what's the win for not compensating CRI? Huge consumer electronics companies have to pay slightly less NRE to build new products. I'd rather have CRI in the world.
I don't think "maybe CRI would have published even without compensation" is at all the same as "maybe I'd do my job part-time for free". In a world in which CRI couldn't patent anti-DPA measures, I'm betting they'd still be able to get paid plenty well for doing crypto. A fair number of super-smart crypto people are, after all, and they don't all have CRI's patent portfolio. So the analogy is more "maybe I'd publish interesting and useful crypto stuff for free even though it isn't what I'm getting paid for". Which, in fact, you do.
(If you're inclined to object that what you publish for free is not innovative on the scale of the discovery of DPA attacks, let me remind you that you just claimed that CRI are much much smarter than you are.)
For the avoidance of doubt, I am not positively claiming that the world would be better with a patent system in which CRI couldn't have got the patents they have. I don't know whether it would. I just don't think your argument supports your claims very well on this point.