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Intellectual property gone mad

Sweeping patent changes aren't likely, but small solutions may curb patent trolls.

Friday night, I tweeted a link to a Guardian article stating that app developers were withdrawing apps from Apple’s app store and Google’s Android market (and presumably also Amazon’s app store), because they feared becoming victims of a patent trolling lawsuit. That tweet elicited some interesting responses that I’d like to discuss.

The insurance solution?

One option might be to rely on the insurance industry to solve the problem. “Isn’t this what insurance is supposed to be for? Couldn’t all these developers set up a fund for their common defense?” wrote @qckbrnfx. An interesting idea, and one I’ve considered. But that’s a cure that seems worse than the disease. First, it’s not likely to be a cure. How many insurance companies actually defend their clients against an unreasonable lawsuit? They typically don’t. They settle out of court and your insurance premium goes up.

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@mikeloukides Isn’t this what insurance is supposed to be for? Couldn’t all these developers set up a fund for their common defense?less than a minute ago via Tweetbot for iPhone Favorite Retweet Reply

If you look at medical malpractice insurance, where unfounded malpractice claims are the equivalent to trolling, I would bet that the willingness of insurance companies to settle out of court increases trolling. An insurance solution to the problem of trolling would be, effectively, a tax on the software developers. And we would soon be in a situation where insurance companies were specifying who could develop software (after a couple of malpractice cases, a doctor becomes uninsurable, and he’s effectively out of the business, regardless of the merits of those cases), what software they could develop, and so on. Percy Shelley once said that “poets are the unacknowledged legislators of the world.” But my more cynical variation is that the insurance companies are the world’s unacknowledged legislators. I don’t want to see the software industry dancing to the insurance industry’s tune. Some fear big government. I fear big insurance much more.

Fighting back?

There’s a variant of the insurance solution that I like: @patentbuzz said: “Developers need to unite and crowdfund re-exam of obnoxious troll patents. Teach them a lesson.” This isn’t “insurance” in the classic risk-spreading sense: this is going on the offensive, and pooling funds to defend against trolling. I do not think it would take a lot of effort to make trolling (at least, the sort of low-level trolling that we’re looking at here) unprofitable, and as soon as it becomes unprofitable, it will stop. Small-time app developers can’t afford lawyers, which is precisely why trolling is so dangerous. But here’s the secret: most patent trolls can’t afford lawyers, either. They can afford enough lawyering to write a few cease and desist letters, and to settle out of court, but their funds would be exhausted fairly quickly if even a small percentage of their victims tried to fight back.

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@mikeloukides Developers need to unite and crowdfund reexam of obnoxious troll patents. Teach them a lesson http://t.co/8wFkyFQless than a minute ago via web Favorite Retweet Reply

This is precisely where the big players need to get into the game. Apple has tried to give their app developers some legal cover, but as far as I know, they have not stepped in to pay for anyone’s defense. Neither has Google. It’s time for Apple and Google to step up to the plate. I am willing to bet that, if Apple or Google set up a defense fund, trolling would stop really quickly.

Blocking sale of patents?

A large part of the patent problem is that patents are transferable. @_philjohn asks “Do you think changing law to prevent transfer of patents could reduce the patent troll problem?” On one level, this is an attractive solution. But I’m wary: not about patent reform in itself (which is absolutely necessary), but because I’ve worked for a startup that went out of business. They had a small intellectual property portfolio, and the sale of that portfolio paid for my (substantial) unused vacation time. That’s not how things are supposed to happen, but when startups go out of business, they don’t always shut down nicely. It’s worth asking what the cost would be if patents and other kinds of intellectual property were non-transferable. Would venture capitalists be less likely to invest, would startups fail sooner, if it were impossible to sell intellectual property assets? I suspect not, but it isn’t a simple question.

A call to action

Patent and copyright law in the U.S. derives from the Constitution, and it’s for a specific purpose: “To promote the progress of science and useful arts” (Article I, section 8). If app developers are being driven out of the U.S. market by patent controlling, patent law is failing in its constitutional goal; indeed, it’s forcing “science and the useful arts” to take place elsewhere. That’s a problem that needs to be addressed, particularly at a time when the software industry is one of the few thriving areas of the U.S. economy, and when startups (and in my book, that includes independent developers) drive most of the potential for job growth in the economy.

I don’t see any relief coming from the patent system as it currently exists. The bigger question is whether software should be patentable at all. As Nat Torkington (@gnat) has reported, New Zealand’s Parliament has a bill before it that will ban software patents, despite the lobbying of software giants in the U.S. and elsewhere. Still, at this point, significant changes to U.S. patent law belong in the realm of pleasant fantasy. Much as I would like to see it happen, I can’t imagine Congress standing up to an onslaught of lobbyists paid by some of the largest corporations in the U.S.

One dimension of the problem is relatively simple: too many patent applications, too few patent office staff reviewing those applications, and not enough technical expertise on that staff to evaluate the applications properly. It doesn’t help that patents are typically written to be as vague and broad as possible, without being completely meaningless. (As the staff tech writer at that startup, I had a hand in reviewing some of my former employer’s patent applications). So you frequently can’t tell what was actually patented, and an alleged “infringement” can take place that had little to do with the original invention. Tim O’Reilly (@timoreilly) suggested a return to the days when a patent application had to include the actual invention (for software, that could mean source code) being patented. This would reduce much of the ambiguity in what was actually patented, and might prevent some kinds of abuse. Whatever form it takes, better scrutiny on the part of the patent office would be a big help. But is that conceivable in these days of government spending cuts and debt ceilings? Larger filing fees, to support the cost of more rigorous examination, is probably a non-starter, given the current allergy to anything that looks like a “tax.” However, inadequate review of patent applications effectively imposes a much larger (and unproductive) tax on the small developers who can least afford it.

If we can’t rely on the patent office to do a better job of reviewing patents, the task falls to the Apples and Googles of the world — the deep-pocketed players who rely on small developers — to get into the game and defend their ecosystems. But though that’s a nice idea, there are many reasons to believe it will never happen, not the least of which is that the big players are too busy suing each other.

Apple and Google, are you listening? Your communities are at stake. Now’s the time to show whether you really care about your developers.

Crowdfunding the defense of small developers may be the best solution for the immediate problem. Is this a viable Kickstarter project? It probably would be the largest project Kickstarter has ever attempted. Would a coalition of patent attorneys be willing to be underpaid while they contribute to the public good? I’d be excited to see such a project start. This could also be a project for the EFF. The EFF has the expertise, they list “innovation” and “fair use” among their causes, and they talk explicitly about trolling on their intellectual property page. But they’ve typically involved themselves in a smaller number of relatively high-profile cases. Are they willing to step in on a larger (or smaller, as the case may be) scale?

None of these solutions addresses the larger problems with patents and other forms of intellectual property, but perhaps we’re better off with baby steps. Even the baby steps aren’t simple, but it’s time to start taking them.


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  • http://brokensymmetry.typepad.com Michael F. Martin

    Very interesting post, and you’ve come up with the correct solution from a pure economic standpoint — i.e., of sharing defense costs. The problem is that ancient antitrust law authority makes it a per se violation of antitrust law for defendants to share settlement authority. A carefully crafted joint defense agreement would avoid that problem, which in any event would arise only if the FTC and/or DOJ saw a problem with a joint defense entity.

    There was a company that offered patent litigation insurance to defendants… but never paid out on a policy. There are many, many problems with offering patent infringement insurance, but at the core of them is the fact that it is cheaper for a startup to roll the dice and then pay for its own defense if/when it is successful enough to get sued by a patent troll than it is to pay (even a reasonably priced) insurance premium. And larger companies are in effect self-insured.

    But Kleiner Perkins and Charles River Ventures got fed up enough with the distraction to their porftolio companies’ management to fund RPX (now public), which is a kind of insurance company in that it will resolve patent troll disputes for its members, which pay an annual subscription that you can think of as an insurance premium (although it’s not because RPX gets to decide what cases it will settle independent of any particular members’ interest).

  • staff

    “curb patent trolls”

    Call it what you will…patent hoarder, patent troll, non-practicing entity, etc. It all means one thing: “we’re using your invention and we’re not going to pay”. This is just dissembling by large infringers to kill any inventor support system. It is purely about legalizing theft.

    Prior to eBay v Mercexchange, small entities had a viable chance at commercializing their inventions. If the defendant was found guilty, an injunction was most always issued. Then the inventor small entity could enjoy the exclusive use of his invention in commercializing it. Unfortunately, injunctions are often no longer available to small entity inventors because of the Supreme Court decision so we have no fair chance to compete with much larger entities who are now free to use our inventions. Worse yet, inability to commercialize means those same small entities will not be hiring new employees to roll out their products and services. And now some of those same parties who killed injunctions for small entities and thus blocked their chance at commercializing now complain that small entity inventors are not commercializing. They created the problem and now they want to blame small entities for it. What dissembling! If you don’t like this state of affairs (your unemployment is running out), tell your Congress member. Then maybe we can get some sense back in the patent system with injunctions fully enforceable on all infringers by all inventors, large and small.

    For the truth about trolls, please see http://truereform.piausa.org.

  • http://www.ipdataminer.com Michael

    IMHO, this is completely incorrect:

    “However, inadequate review of patent applications effectively imposes a much larger (and unproductive) tax on the small developers who can least afford it.”

    I once assisted a small software vendor in being removed as a defendant from a lawsuit of a ‘troll’ with about 4 hours of my own time, for which I did not charge (a public service) and about 4 hours of the companies time. The trolls really don’t want the small companies as defendants, mainly because the judges don’t like court resources used for small potatoes.

    So much worry over so little.

    • http://radar.oreilly.com/mikel Mike Loukides

      First, thanks for helping getting the vendor removed on your own time. That’s a help in itself.

      I’m sure trolls would rather not have small companies as defendants, but in the particular case of app developers, how many large companies are there? Even in the iOS world where customers are more willing to pay for apps, I don’t think anyone is striking it rich. I don’t think Lodsys in particular is going against big app developers; particularly since they’ve said they’ll pay $1000 to the developer if the lawsuit is “wrong.” They’re certainly not talking about a Zynga-like developer.

      In any case, the worst thing about fear is fear itself. That fear has certainly been created, and in many cases, it’s as effective as a lawsuit. More so, because it’s a lot cheaper.

  • http://www.andrewjscott.com Andrew J Scott

    The whole US tech patent situation IS out of hand, as I briefed here http://urbanhorizon.wordpress.com/2011/05/24/apples-latest-patent-proves-the-us-patent-law-is-farcical/

    Many good points in this article. A collaborative fund and/or insurance sounds like a grand idea…

  • Gary

    Insurance? You make a very good analogy/parallel with medical malpractice insurance. It’d drive up the price of software similar to the way medical costs have been driven up.

    I could see it now.

    Software up due to insurance/troll snowball.

    Software unaffordable to all, especially the disadvantaged.

    Software deemed a right.

    Enter… Obamasoft.

  • vanhellslinger

    This is also a war against copyright tyranny.
    Heres one I posted before
    God Bless The DVD Pirates

    It looks like the boys have been busy again, they busted some flea-markets in Trenton NJ this week for counterfeits and fakes, and created a good argument for their bust, with Beth DeFalco’s AP story , “Authorities crack down on flea-market fakes”. The problem as we all know is they are just flea-markets, the lowest rung on the totem pole, and most are average vendors, that just buy things wholesale, not knowing they are fake at all.
    Now we all know the Hollywood movie industry is very much like communism, except it is a very big monopoly that defies antitrust, and whatever they are technically the end result is, a total lack of competition . Movie theatres get the film first, and then the DVD and cable industries. In many way’s this is an extension of racism, as the wealthy, historically mostly whites afforded the theatre prices, and the poor and minorities waited for the DVD or cable release, a system that allowed whites to be more informed.
    If we could take their copyright protection away, we would see a renaissance of creativity, jobs, and business developments, which would end a century of black box theatres. FUTURISTIC THEATRES would be the only way to compete with the DVD and cable.
    We as a free enterprise worshipping country have stood against communism and stoically supported the right to get rich, and it appears that our leaders have hardened their hearts to capitalism so much, that they can’t see that it has gone full circle. The Hollywood monopoly, with it’s massive unions and liberal support systems have created a monster that does exactly the same thing as communism, it suppresses competition in business, and serves like a one party controller over what we see and when we see it.
    So I reiterate God Bless the DVD Pirate, the blessings of God the Father thru his Son Jesus Christ. to you that defy a corrupt and devious government that serves no good in this matter.

  • http://www.zylun.com Zylun

    I think it actually makes very good sense to require inclusion of the actual product being patented (i.e. the source code). A patent should be specific, not for anything remotely close to the invention. That is the whole point of patents, isn’t it?

  • http://blog.monstuff.com Julien Couvreur

    How about repealing patent (and other IP) laws?

    There are mounting arguments and evidence against IP laws:
    * Against Intellectual Monopoly ( http://www.dklevine.com/general/intellectual/against.htm ) presents a utilitarian and empirical analysis
    * Against Intellectual Property ( http://mises.org/books/against.pdf ) presents a principled and ethical case
    * Software patent craziness vs. fashion innovation ( http://www.ted.com/talks/johanna_blakley_lessons_from_fashion_s_free_culture.html )

  • http://lawandequity.com Tim ONeill

    The inherent problem with the current system is that infringment is now viewed as a profit center and not merely a protection of someone’s right in their own work. It has become a sword instead of a shield.

  • http://floridasecuritieslitigation.com Jay Eng

    With the recent Google acquisition of Motorola Mobility, it will be interesting to see if this is the beginning of a race to consolidate in the industry to fend off these actions.