Tuesday, March 3, 2009

Patent reform needed more than ever



After the last time I blogged about patent reform in late 2007, the House went on to approve the Patent Reform Act. The bill unfortunately got bogged down in the Senate the following year. Since then the problems of the current system — and the need for reform — have only grown.

Consider this: Of the 20 patent lawsuits filed against Google since late 2007, all but two have been filed by plaintiffs who don’t make or sell any real product or service — in other words, by non-practicing entities or “patent trolls.” Most of these cases seem to feature the same small set of contingent fee plaintiff's lawyers asserting patent claims against the same small set of companies. We've also noticed a more disturbing trend: in many of these cases, the patents being asserted against us are owned by — and in a surprising number of cases, are even “invented” by — patent lawyers themselves.

Unfortunately, the temptations and opportunities for abuse have gotten too high. Lawyers and plaintiffs have seen the potentially huge payoffs available in patent litigation. Before 1990, there had been just one patent damage award of over $100 million. Since 1990, there have been at least 15, with at least five topping $500 million.

That's why I'm excited that patent reform legislation is slated to be reintroduced today by Senators Patrick Leahy and Orrin Hatch and Representatives John Conyers and Lamar Smith. Once a driver of creativity, our patent system now poses a hurdle for innovation. All too often, Google and other companies face mounting legal costs to defend against questionable patent claims from speculators gaming the system to reap windfall profits. And those lawsuits make it more difficult and costly to introduce the next revolutionary product.

I wrote a bit last Congress about the reform provisions that Google cares the most about. The most pressing of those is ensuring fair damage awards. The current system too easily allows damages to be assessed based on the value of the whole product often containing many features — not just the value of the innovation of the allegedly infringed patent — which means the threat of potentially massive awards forces defendants to settle. Balance should be restored by requiring damages to be based on the value of the innovation's contribution to the product.

As members of the Coalition for Patent Fairness, we're optimistic that patent reform faces better odds in 2009 than it has before — not least because President Obama has pledged his support. Passage of patent reform is long overdue.

18 comments:

Michael F. Martin said...

The forum-shopping problems seem substantially solved by the VW, TS Tech cases.

I wonder whether many of these issues aren't better addressed through common law rulemaking?

Daniel said...

Small businesses are the innovators of the American economy as they obtain many more patents per employee than larger firms, according to a study released by the Office of Advocacy of the U.S. Small Business Administration.
See < http://tinyurl.com/6og3ld >.
Moreover, their patents outperform larger firms on a number of measurements, suggesting that small firm patents in general are more likely to be technologically important than those of larger firms.

Yet small business did not have a seat at Sen. Leahy's table when patent reform was being negotiated. Where is our SBA Administrator?

Guy said...

Two of the large proponents of this so-called Patent Fairness are Google and Microsoft. Let's take a look at these companies financial situations:

Google:
-Profit margin=20%
-Profits=$8billion per year
-Cash=$15billion

Microsoft:
-Profit margin=28%
-Profits=$20billion per year
-Cash=$20billion

Seems that the large software companies have had very little problems competing in today's environment. How much more profitable do they need to be? Or is this more a result of soul-less corporations relentless search of increasing their profits?

These same large corporations love to throw around the term "patent trolls" but it is difficult buy their story that the small inventor is hurting or impeding them.

In fact, the last time they tried patent reform many small inventors spoke up AGAINST such a reform citing that the world is already tilted against them - and such reforms would only increase the leverage the large companies already have. Many small inventors are unable to get any traction when approaching the large software companies in selling their innovation.

In fact - small software inventors have found that their only chance to introduce their innovations to the marketplace is by trying to get a license deal rather than compete with a Google or Microsoft or even much smaller corporations. Many inventors ask for a small fee of almost always less than 1% but we don't hear Google's or Microsoft's point out how little the innovations actually cost.

There is plenty of proof that innovation occurs at the small companies (in fact, the Google's of 10 years ago, and the Microsoft's of 30 years ago).

Large companies would love nothing more than get rid of patents and then simply monitor competitors for the best innovations and then incorporate those into the next service pack or website update.


Interesting how large companies like Google have the resources for people like Michelle Lee and "Head of Patent Strategy". You think the small inventor has time or resources for this?

Dias Dias said...

The only intention of a patent should be to motivate innovations. Patent reform act should figure out a way to reward the original inventor. Such rewards would be much smaller than what would be given to an enterprise or a team of lawyers. Companies employment terms should exclude rights to patentable inventions of employees. Employees should be able to file patents on their own or as a team. Employer would simply be the preferred licensee.

Ted Lemon said...

Dias, the fact is that in the software world, inventors are busy inventing, not patenting. The main driver of innovation in the software world is the problem, and the solution to that problem is usually obvious once you see the problem.

So for serious programmers, patents are a nuisance - we may be asked by our employers to try to come up with things to patent for defensive purposes, even though we know that what we are patenting is neither novel nor non-obvious. This is a huge waste of time.

The main value in a software product is in the quality of the implementation. Patents create monopolies that prevent us from doing quality implementations. I work for a small company, and we are no more in love with software patents than large companies like Google and Microsoft. This is not a case of the little guy versus the big guy - this is a case of the productive guy versus the leech.

zoobab said...

Patent reform is still driven by the Patent department of Google.

What should be done is to replace the decision makers at Google by the engineers, most of them hate software patents and wants to see them go away. They are a nuisance and a replacement for R&D.

Lawyers says you have to comply with patent law, which means prior to writing wode you have to read and understand zillions of claims, which nobody in the software industry does.

Unfortunately, the patent "reform" won't make patent trolls go away, especially when they are threatening products.

Drew LeSueur said...

I agree. There should be reform. What can we do to help?

zoobab said...

For the time being, it is important that soft patents, including patents covering non-inventions like software, business methods, games or mental acts are excluded from patentability.

You have the opportunity to submit an Amicus Brief to the Supreme Court for the Bilski case:

http://www.patentlyo.com/patent/2009/03/bilski-v-doll-round-i-of-amicus-briefs.html

Ivan said...

If a company is really against software patents, it should sign the European Petition against Software Patents

bosson said...

Bilski is a good start. Next I'd like to see limits to information claims, like on publication of software.

Patents should be about sharing knowledge, not locking Internet down using software claims.

Botbot said...

Interesting.

spider said...

Is "patenting the look of Google's home page" the kind of reform you're talking about? God forbid anyone should "steal" the idea of "a search box on a white page with some buttons and links near it".

http://valleywag.gawker.com/5350982/google-patents-worlds-simplest-home-page

zoobab said...

By patenting its homepage, Google should not complain about lawsuits for patent infringement.

The patent departement of Google makes a bad image of Google by patenting such things, creating barriers of entry for other players such as small companies.

Who read your claims by the way?

Chris said...

Patent reform, indeed.

http://yro.slashdot.org/story/09/09/03/1223207/Google-Patents-Its-Home-Page

David Sundin said...

I came here to say what Spider has posted. The patenting of a search page gives a lie to Google's stated wish for patent reform.

And I wish to take issue with the characterization of non-practicing entities as "patent trolls". I own a small chemical manufacturing company. I've developed several excellent products and reaction pathways that would require far more capital equipment than I could ever muster to build. So what should I do - simply forget that I had the idea because I can't afford 10 or 12 million dollars for the specialized distillation or reaction equipment needed? Of course not - I patent the product or process and try to sell it to a larger chemical firm. Patent troll, my ass...

Sentry said...

Consider this

Google takes an opinion about patent law. But they themselves use a patent.

Likewise if you were trapped in a room full of individuals presented with a challenge: escape from the room at all costs. You have a series of challenges ahead, each one requiring team work and cooperation. With one catch: everyone has a gun in hand at the onset of the challenge.

When such cooperation is necessary, wouldn't the guns collectively be a hindrance? You may argue this. But would you throw away your own gun?

Google may argue that patent law should be changed. This does not mean that google should never use patent law in its current state to its own advantage. To forfeit such options would be foolish. Like throwing away the only weapon you have in a room full of men with guns. As much as you may stand against the idea of the gun, to forfeit your defense unilaterally is impractical.

zoobab said...

Large companies wants the advantage without the disadvantages of software patents.

Software patents are like 'cold war' for large companies. Large companies view positively the potential to nuke competitors from the market. With cross-licensing deals they recreate a level playing field that resembles the situation without a patent system for members of the club. But weight in trolls, litigation costs, damages, royalties, product removal risks, and a shift of resources from the R&D (Research&Development) to the P&L (Patents&Litigation) department.

softwarevisualization said...

I assume it goes without saying that software patents are a destructive abomination. I want to point out that for individual developers who have a good idea but are- quite rightly- afraid that someone somewhere with a patent will take it all away from them, it's possible to simply elect not to sell software in jurisdictions which permit software patents.

Those jurisdictions are always changing but right now the big ones are the US, South Korea, Japan, Singapore and Australia and probably some others I am leaving off.

More to the point, the EU does not permit them and the EU by itself is a market quite large enough to sustain an independent software developer or any sized company. New Zealand is also distinguished as software patent free as is Canada and probably others.

You don't HAVE to risk losing everything you worked for or diverting hundreds of thousands of dollars that would have otherwise gone into serving your customers, promotion and development.

Software patents exist in order to line the pockets of IP lawyers and to protect large companies from having to compete on value with small innovative companies.

Nothing is compelling anyone to participate in the software patent extortion regime, except perhaps a certain way of habitually framing the problem.

It's not a new idea to prevent sales into certain countries. Every US company is currently compelled by law to NOT sell to North Korea, Iran Syria and a few other countries. It's not hard to write a EULA that prohibits downloading to target countries and to block such downloading by screening by IP address.

No one needs to do business in jurisdictions which are fundamentally hostile to them. That includes you.