Category: Technology
I have a number of friends who are patent attorneys. Some have strong negative feelings about software patents that mirror mine while others keep me entertained by arguing both sides of the situation with themselves while I sit around and listen. One of my friends – let’s call him Sawyer – has very strong negative opinions as he’s spent most of his time recently defending his clients against software patent suits including an increasing number from patent trolls (non-practicing entities). He spends a lot of time in East Marshall, Texas and has figured out where all the best restaurants are. While East Marshall isn’t quite as nice as an invisible, mysterious island in the middle of the Pacific Ocean, it clearly has a number of similar characteristics. Sawyer has decided that he can’t write publicly about his thoughts and experiences so I’ve agreed to channel his experience into my own parallel universe. Look for more missives from him (and better references from me with regard to Lost as I finally learn what really has been going on.) In the mean time here’s his reaction to the New York Times profile last week on Intellectual Ventures.
Last week there was an article in the New York Times profiling Nathan Myhrvold and his company Intellectual Ventures ("IV"). I suppose since it’s a profile, the article is by nature one-sided, but given how I broke into a cold sweat upon reading it, I was a little surprised at how unbalanced the presentation was on the merits. Mr. Myhrvold is characterized as a savior of inventors while his detractors are those big scary companies who want to infringe patents without compensation to the little guys.
What is the underlying premise of IV as a net positive for innovation and the U.S. economy? The traditional defense is that patents incentivize innovation. That has to mean innovation in a particular field, e.g., "software patents incentivize innovation in software." Let me underscore this point: there is no positive evidence for software patents improving or increasing innovation in software. None. I could make the same statement for pretty much any other field except biotech (which has its own problems that can be explored another time). There are a variety of articles setting forth why patents actually hurt innovation in software particularly, (e.g., the famous Bessen and Maskin working paper on the subject). Note that raw empirical data is hard to come by either way by nature of how the patent system operates, but the lack of positive evidence is telling.
Perhaps Mr. Myrhvold recognizes this, because in the article he says “I’m trying to get inventions that kind of respect as an economic entity.” (Emphasis added). IV apparently incentivizes innovation on…inventions? "Inventions" are actually a term of art in patent law, they are the things for which one can legally be granted patent rights. IV, therefore, seems to admit that it wants to enforce patent rights so that we can…have more patents. Mr. Myhrvold wants to create an entire economic category based on payments to entitles that don’t build, produce, sell, etc, any products, or create anything of value (i.e., that don’t innovate, at least in any useful way that advances human progress), in exchange for not being sued on exclusionary patent rights.
Let’s internalize that for a second. IV has collected over a billion dollars so that it can get more patents. They make no products. They apparently don’t funnel ideas to anyone else who makes products. Heck, the only useful thing I’ve seen out of IV is that mosquito-killing laser that Mr. Myhrvold showed off at TED this year. They collect massive amounts of money for their investors, and funnel much of it into buying and developing more patents. When I talked to a headhunter recently, in the midst of the worst market for legal jobs ever, she told me that the one employer who was always hiring people with experience in patents was IV. So, anecdotally, they hire a lot of lawyers. They set up a lot of shell companies. They sue people, or threaten to sue people, for massive license fees.
Now think about where this money would go otherwise. Microsoft, Apple, and Google, not to mention other large technology companies, have sizable legal departments with teams of attorneys focused full-time on managing the 50+ software patent cases they each are a defendant on. My guess is that they individually spend hundreds of millions of dollars defending and settling such suits per year. Most of the suits are backed by investment funds (here’s an example of one) through shell entities. Many of these funds are backed (with no transparency) by traditional investment banks and hedge funds. What we have, then, is a net outflow, on a yearly basis, of at least several hundred million dollars, from technology companies who "make stuff" and unquestionably innovate, to speculators and investors who don’t. I don’t think that baseline fact is something anyone would question. IV dresses that up in the clothing of "invention," but they’re really just out to capitalize on a broken patent system like every other non-practicing entity ("NPE" as we call them – they hate being called trolls). What kinds of cool products and technologies would that money be used to develop? We’ll never know, I suppose. At the very least we can presume that the pace of innovation in technology is being slowed by this net outflow of capital to non-innovating parties.
One thing I haven’t mentioned is that it isn’t just big companies who get sued. Startups, especially in software, are constantly targetted by patent suits, especially by pseudo-competitors who want to kill more innovative upstarts. How many great companies have been sunk by the costs of patent litigation? Think about it this way – if Facebook had been sued on a social networking patent within a year of its existence, would it be around today? It’s doubtful.
Finally, I think it’s important to address the moral point that’s always in the background when NPE’s talk about their business – having a patent doesn’t mean that you really invented anything, or that the person you’re suing would actually infringe in a rational world (the U.S. Constitution also only allows Congress to grant patents for "promoting progress," not for moral reasons). Patents are legal documents, highly opaque, and the meaning of patent claims rarely, if ever, rationally corresponds to a real world product. Patents are granted through a pseudo-adversarial administrative procedure where highly trained lawyers do their best to push extremely broad claims with extremely sparse/vague disclosure through overworked and underpaid patent examiners. That’s the name of the game. As much as companies like IV want to turn patent enforcement into a moral issue, it isn’t. Patent lawyers are paid to get broad patents, not capture the essence of a real "invention." And alleged infringers, in every case I’ve been involved in at least, don’t flagrantly violate patents. They’re caught unaware, and even when they are aware, have the impossible task of figuring out if they would infringe. It’s really a difficult Catch-22, but the patentees enjoy it, because it allows them to call defendants the "bad guys" while taking the moral high ground.
If there is one thing you read today, go read Brad Burnham at Union Square Ventures excellent essay titled Software patents are the problem not the answer.
Several years ago when I first started saying things like “software patents are invalid constructs” or “software shouldn’t be able to be patented” or “software patents are a huge drag on innovation”, I was told by many people (lawyers, journalists, patent trolls, and other VCs) that while I might be right, no other venture capitalist would agree with me or support this position.
Several years ago my partner Jason Mendelson agreed and since then he’s become outspoken about his desire for the end of software patents. Some people said that was cheating since he’s one of my partners at Foundry Group, but I’m ok with getting people on board one person at a time. BTW – my other partners – Ryan McIntyre and Seth Levine – also strongly agree with this position.
Several months ago, Brad wrote a great essay titled We need an independent invention defense to minimize the damage of aggressive patent trolls. I’m good friends with Brad and his partner Fred Wilson and we’ve had a number of conversations about this over the past six months, including the creation of an ad-hoc group we are calling “Abolish Software Patents” (which is similar in structure to the group behind the Startup Visa Movement.
Today, Brad wrote Software patents are the problem not the answer in response to the New York Times article on Nathan’ Myhrvold’s firm Intellectual Ventures approach to creating “invention capital” which was a soft profile piece in response to Myhrvold’s HBR article The Big Idea: Funding Eureka!
Brad’s post is outstanding and mirrors my perspective on this. And – if you want some entertainment (and additional perspective on what’s really going on) go take a look at TechDirt’s post today titled Nathan Myhrvold’s Intellectual Ventures Using Over 1,000 Shell Companies To Hide Patent Shakedown.
This problem with software patents (and the patent system in general) is going to come to a head in the next year or two and I hope the venture capital industry and broader software / Internet entrepreneurial community can rally behind intelligent solutions to this problem.
After not seeing the word patent in my daily information routine for a few weeks, I saw it twice today – first in an article titled Turning Patents Into ‘Invention Capital’ (in the NY Times) and then in Region Sustains Robust Patent Production in the WSJ. Both stirred me up early this morning, but for different reasons.
If you are interested in patents, I encourage you to read Turning Patents Into ‘Invention Capital’ as I’m very interested in your reaction. I’d love to hear what you think in the comments (anonymous is fine if you are concerned about attribution on this one.) I have an opinion and this article didn’t add anything to my thoughts (which is partly why I’m looking for yours as I’m curious what others think.) So I hit Ctrl-W and went to the next tab in Chrome.
The title of Region Sustains Robust Patent Production was fine (and yes it refers to Silicon Valley), but the first sentence in the article made me nuts:
“The economic slump has yet to damp innovation in Silicon Valley, at least not by one widely followed measure: patent production.”
It’s a short article that basically states that Silicon Valley received a similar percentage of utility patents granted in the US in 2009 that it did in 2008 and 2007.
“Silicon Valley denizens received 13,231, or 7.9%, of the total 167,350 "utility" patents granted in the U.S. in 2009, according to IFI Patent Intelligence, a unit of Wolters Kluwer Health that analyzes patent data from the U.S. Patent and Trademark Office. That is on par with Silicon Valley’s share of patents nationwide in 2008 and 2007, according to IFI.”
Other than the factual statement, there is no possible way the conclusion made in the first paragraph can be extracted from this data. The primary flaw here is that patents take many years to be granted. The number of patents granted in 2009 has nothing to do with the innovation activity in 2009!
Now, I don’t believe that patent activity correlates to innovation. While this might have been true in the 1970’s, there are so many factors in today’s broken patent system that undermine this. The article even points one out in the list sentence:
“Like many tech firms, Cisco offers some financial incentives to employees who file and receive patents, he (Tony Bates, SVP at Cisco) says.”
The “pay to file” dynamic is a mechanism that undermines the integrity of the patent system. Here’s the issue: assume I am a huge company that pays my engineers on average $100k / year. I offer $1k for every patent filing they make during work time. So, as an engineer, you can increase your compensation by 1% for every patent you file (forget about whether it actually gets granted). As the large company, I’ve got a huge legal machine in place to file the patents – all you need to do as an engineer is going through a prescribed process, write up a bunch of stuff that gets dropped into the patent application, and come to a few meetings to review the patent application. Is that worth an additional 1% of your comp regardless of the quality of the application? Sure!
Regardless of whether you think patents are useful, this is just such a crummy indication of “innovation”.
I had a very interesting meeting yesterday with an MIT Professor who I’ve known for a long time. He is anti-software patent, as am I. However, he suggested something I hadn’t really spent much time thinking about, namely that patents slow down innovation. Some very credible folks have been talking about this for a little while, including James Bessen and Michael Meurer in their excellent book Patent Failure: How Judges, Bureaucrats, and Lawyers Put Innovators at Risk.
In my conversation Friday, I heard a very interesting example. Regularly, patent advocates tell me how important patents are for the biotech and life science industries. However, there apparently is academic research in the works that shows that patents actually slow down innovation in biotech. The specific example we discussed was that there is increasing evidence that when a professor or company gets a patent in the field of genetics research, other researchers simply stop doing work in that specific area. As a result, the number of researchers on a particular topic decreases, especially if the patent is broad. It’s not hard to theorize that this results in less innovation around this area over time.
I’m just starting to read some papers about this stuff, including those by MIT Professor Fiona Murray. If you are interested, Stuart Macdonald’s paper When means become ends: considering the impact of patent strategy on innovation frames the discussion nicely. And Stephan Kinsella’s excellent essay Reducing the Cost of IP Law absolutely nails this.
I’m still obsessed with my mission to “abolish software patents” especially after receiving yet another email from a new startup that claims to be a “Patent Insurance Company.” A number of these have popped up recently in the past few years, including several that are funded by VCs. Their pitch is that you pay them an annual fee, license any patents you have to them, and they will “protect you” against any patent litigation. Whenever I hear this pitch, all I can think about is Al Capone walking the streets of Chicago going door to door offering “protection” to all of the local businessmen if they will pay his vig every week.
On Friday I spent two hours at Mahalo headquarters in Jason Calacanis’ studio filming This Week In Startups Episode #35. Jason and I have known each other since the mid 1990’s – the last time he interviewed me was at Josh Harris’ Pseudo.com thingymabob as part of a roundtable with Fred Wilson, Jerry Colonna, and Matt Ocko (can’t find the audio on the web – I know it’s out there somewhere.) No – I wasn’t naked during the interview, but I was a lot younger and thinner. And I think there were some naked people wandering around. If you know Pseudo, you know what I’m referring to. If you don’t, then Steaming Video will give you a few hints.
Jason is coming to Boulder on February 2 and 3 for the first Open Angel Forum in Boulder (if you are an angel investor or an entrepreneur that wants to pitch, sign up on the info on the Boulder Open Angel Forum links.) So – we talked some about Open Angel Forum, Startup Visa, TechStars, and a bunch of other things. And then in hour two we did the standard weekly TWiST things. Oh – and I got to meet Jason’s mom and dad!
A week or so ago, Fred Wilson Dictated a Blog Post. In it he dictated a blog post on his Nexus One phone. He then discovered Swype which now has an unofficial Android app. As usual the comment threads on AVC were very active and had lots of thoughts about the future (and past) of voice and keyboard input.
When I talk about Human Computer Interaction, I regularly say that “in 20 years from now, we will look back on the mouse and keyboard as input devices the same way we currently look back on punch cards.”
While I don’t have a problem with mice and keyboards, I think we are locked into a totally sucky paradigm. The whole idea of having a software QWERTY keyboard on an iPhone amuses me to no end. Yeah – I’ve taught myself to type pretty quickly on it but when I think of the information I’m trying to get into the phone, typing seems so totally outmoded.
Last year at CES “gestural input” was all the rage in the major CE booths (Sony, Samsung, LG, Panasonic, …). In CES speak, this was primarily things like “changing the channel on a TV using a gesture”. This year the silly basic gesture crap was gone and replaced with IP everywhere (very important in my mind) and 3D (very cute, but not important). And elsewhere there was plenty of 2D multitouch, most notably front and center in the Microsoft and Intel booths. I didn’t see much speech and I saw very little 3D UI stuff – one exception was the Sony booth where our portfolio company Organic Motion had a last minute installation that Sony wanted that showed off markerless 3D motion capture.
So – while speech and 2D multitouch are going to be an important part of all of this, it’s a tiny part. If you want to envision what things could be like a decade from now, read Daniel Suarez’s incredible books Daemon and Freedom (TM) . Or, watch the following video that I just recorded from my glasses and uploaded to my computer (warning – cute dog alert).
Brad Burnham at Union Square Ventures put up a very important post last night titled We need an independent invention defense to minimize the damage of aggressive patent trolls. His partner Fred Wilson echoed Brad’s thoughts on his blog with a post titled Why We Need An Independent Invention Defense.
Brad’s post starts out with the following:
“Almost a third of our portfolio is under attack by patent trolls. Is it possible that one third of the engineering teams in our portfolio unethically misappropriated technology from someone else and then made that the basis of their web services? No! That’s not what is happening. Our companies are driven by imaginative and innovative engineering teams that are focused on creating social value by bringing innovative new services to market.”
It’s a fantastic description of the fundamental problem with software patents. For example:
“The problem is that the patent system has fallen way behind the pace of innovation, especially in information technology. Originally designed to protect the brilliant independent inventor of a better mousetrap, the patent system has been stretched to be applied to software. Software is a language and like any language, it can be very abstract. Everyone applying for a patent pays a lawyer to take their invention and render it into the broadest, most abstract language they can slip through the patent office. A mouse trap is a mouse trap, but a method of allowing one piece of software to talk to another (the generalized language often used to describe a software system) can be almost anything, and can, if approved, impact markets the original inventor could never even have imagined.”
Brad goes on to discuss the specific problem of patent trolls and proposes a solution to address this – that of an independent inventor defense. If you’ve gotten this far, go read Brad’s full essay on the independent investor defense.
I’m extremely excited to see Brad and Fred come out so strongly against software patents. I’ve been talking against this for a long time and I expect my rants against software patents are well known to any readers of this blog (if you aren’t familiar with them, feel free to indulge yourself if you are so inclined.) But this is the first time that I’m aware that any of my peers – other than my partners at Foundry Group – have come out so strongly in public against software patents.
I purposely limit my “special initiative” work and try to focus on a few things that I think will make a substantial difference in the world of software / Internet entrepreneurship (the domain that I’ve chosen to dedicate my professional life to.) Right now I’m deep in the effort to get a Startup Visa created but have continued to pay attention to the software patent issue while looking for the right time to scale up an effort.
That time is now. I just emailed with Brad and he’s game to lead a charge with me. I saw tweets from several friends last night including Chris Sacca who knows this issue firsthand. As with the Startup Visa there are plenty of other credible smart people who are putting real intellectual energy into this issue, such as the End Software Patents initiative and Wendy Seltzer, a well known researcher who is currently spending a year at Silicon Flatirons researching software patents and innovation (disclosure: I’m providing some of the funding for this initiative at Silicon Flatirons.)
It’s now time to get the practitioners (entrepreneurs and investors in software innovation) to get organized around this. If you are interested in helping out substantively, leave a comment on this blog with your email address as I start to get organized.
While Fred Wilson has his review of his Google Phone up already, I’m more intrigued with all the pre-CES announcements. I’ll be walking the floor on Thursday soaking it all in and I’m pretty excited this year based on all the chatter. One thing that has me particularly stoked is what I’m going to call “universal videoconferencing.”
I saw my first “videophone” around 30 years ago. It sucked but the idea was magical (and still is). Like my personal jetpack, I’ve been waiting patiently for it. Very patiently. For 30 years.
I think 2010 is the year it finally happens. Engadget has a review of Skype HD (720p) and videocalling from PCs or Internet connected LG & Panasonic HDTVs (damnit – I knew I shouldn’t have bought that new Samsung.) 720p is plenty for me on my 30” computer monitor or my 50” TV. With Skype (I’m bradfeld btw) the video / audio layer is free and broadly compatible (no more fighting with specialized hardware).
I’ve been doing low-res Skype videoconferencing for a while and now chat with my dad a few times a week. I finally got Amy using it and while she’s in Keystone and I’m in Boulder it’s almost like we are together (without the smell-a-vision). But the video quality is mediocre and it still feels limited to being in front of a computer to use.
Now, put it on a TV in your living room. In HD. On a 50” screen. The picture in the NY Times article A Venture Integrating Skype Into the Family Room is perfect.
The only thing wrong here is the remote control. There is no good reason why the 50” screen with the video camera built in can’t do simple gesture recognition to “answer”, “volume up”, “volume down”, and “hang up.” That’s next.
One of my goals in 2010 is to get HD videoconferencing set up across all of the places I live and work. My 30” screens are a good start. And – with some of the announcements coming (and stuff I expect to see at CES) I’m optimistic that I might be able to get this working with standard equipment and Skype this year.
I’m not on an airplane again until 2010 (1/6/10 to be exact when I head to Las Vegas for CES) which is a relief since I flew 87 segments 2009. Ok – not as much as Ryan Bingham in Up in the Air (very good BTW) but enough to decide to boycott United whenever possible.
One pleasant surprise on a flight from DEN to OAK on SWA was the presence of Wi-Fi. I paid my $12 and worked online for two hours instead of using my airplane sleeping superpower. Little did I know that I was on one of the four planes in the SWA fleet of 500 that had Wi-Fi according to the Gizmodo Complete Inflight Wi-Fi Cheat Sheet.
I think 2010 is the year that Wi-Fi will finally roll out across the domestic airline fleet. It’s been in the works since 2000 and I remembered waiting, and waiting, and waiting for Connexion to roll out. And then forgetting about it. Until sometime earlier this year when Virgin America started offering in-flight Wi-Fi and quickly became my (and many of my friends) method of transport between the east coast and the west coast. Todd Dagres from Spark Capital nailed it when he tweeted (presumably from an airplane) “True fact – planes with WiFi travel 2x faster than planes without.”
There is something magical about sitting on a seat in a giant metal tube that is flying 30,000 feet above the earth and playing FarmVille. It finally feels like this is going to happen in 2010. Hopefully there will be a lot more FarmVille than Skype on airplanes, although if everyone on the plane is on Skype at the same time it probably won’t bother anyone – too much.
If you are traveling on a flight using Gogo Inflight Internet, My Money Blog has published a set of promotional codes that will give you free Wi-Fi through 1/7/10. Oh – and join the Gizmodo Mile High Club while you are at it.
And one final question – is it “Wi-Fi” or “WiFi”? That’ll keep the airline marketing weenies busy for a while trying to figure out the right answer.