State of Innovation

Patents and Innovation Economics

When This American Life Attacks Patents

This American Life presented a story entitled “When Patents Attack.”  This is a rambling story that touches on many points.  I will review some of issues raised in this story below.   I will suggest some other stories that would have been more relevant than the ones they chose to tell.

Issues

FotoTime, Due Diligence and Property Rights: They start out by telling the story of a company called FotoTime.  This business was started in the late 90s and provides a service for sharing photos.  According to the podcast, it took until 2005 or 2006 before the founders of this struggling company were able quit their day jobs.  Shortly thereafter they were sued for patent infringement in a mass lawsuit for infringing USPN 5771354.  The story then suggests that this is unfair to FotoTime.  However, they never ask whether FotoTime did their due diligence to determine if they might be infringing anyone else’s property when they started building their product.  It is common advice to not do a patent search because it might make you subject to 3X damages if sued.  However, if I build a building, I first have to make sure I own the rights to the underlying land.  The failure of companies to undertake even basic due diligence, hiding behind the 3X damages issue, is negligence.  They should be vilified for this failure, but instead, everyone acts as though this is too onerous.  In a time when we have to comply with numerous tax regulations and numerous other government regulations just to start a business, it is absurd to complain that you should have to actually worry about whether you are infringing someone’s property rights.  During this segment, at no time does the producer interviewing Fototime, ask why Fototime didn’t explore if someone else had already patented what they were building a business around.

Prior Art

The producers suggest that the patent, USPN 5771354, should never have been issued.  The reporters talk to some company (EmCam?? – could not locate it on the Internet) that is supposed to be an expert on patents.  The company purports to have software that can analyze a patent and determine how many other people created the same invention.  According to their software, over 5000 patents cover the same invention.  This appears to even stretch the credulity of the reporters, who suggest that this might be overstating the case.  Then the show talks to another patent attorney who also concludes after looking at the claims, that the patent is clearly invalid because of prior art.  A quick review of the patent shows over two pages of prior art were cited (hopefully reviewed) as prior art.  There are broad statements about how the patent seems to cover everything to do with the Internet.  However, the reporters of This American Life are not patent attorneys.  Do they know how to read claims?  Far too many people read patents as if they are reading prose, including some patent attorneys.  Reading a patent claim is like reading an equation, every word has meaning.  The first claim has seven steps and is over 200 words.  That does not meet the normal definition of an overly broad claim.  Claim 25,the second independent claim, is also over 200 words.  There are only two independent claims.  For This American Life to suggest that this patent is overly broad and there are 5000 other patents on the same invention is just plain absurd.

 

Explosion in the Number of Patent Lawsuits

The story then suggests that there has been an exponential increase in the number of patent lawsuits.  However, Judge Michel,  former head of the CAFC, the court which hears all patent appeals, points out that the number of patent suits filed each year has remained constant at less than three thousand.  Only about 100 of these suits ever go to trial.  In a technology based economy with over 300 million people and 1 million active patents this is trivial.  The show failed to even undertake a basic fact check on this propaganda.

 

Software Patents

The story says basically all (80%) of software programmers believe that software should not be patentable and it was a mistake when the courts allowed patents on software.  I’m not sure where they came up with the 80% number- my practice must represent all of the 20% remaining right here in Colorado Springs.  Arguments against software patents have a fundamental flaw.  As any electrical engineer knows, solutions to problems implemented in software can be realized in hardware, i.e., electronic circuits.  The main reason for choosing a software solution is the ease in implementing changes, the main reason for choosing a hardware solution is speed of processing.  Therefore, a time critical solution is more likely to be implemented in hardware.  A solution that requires the ability to add features easily will be implemented in software.  As a result, to be intellectually consistent, those people against software patents also have to be against patents for electronic circuits.

The show also argues that software patents inhibit progress.  However, they do not examine the number of programmers who recreate products and code that has already been created.  The purposeful ignorance of what has already been created results in a huge waste of creative talent and a resulting lack of innovation.  Once the courts made it clear that software was patentable, there was an explosion in  the amount of investment in software startups, an explosion in the number of software products, and an explosion in the number of software programmers.  Only with the attack on software patents, starting around 2000, has there been a slowdown in these three parameters.

 

Intellectual Ventures

The show attacks IV as a patent troll and suggests that none of their inventions are actually in the marketplace as real products.  They suggest that the fees IV has collected are equivalent to  “a tax on innovation”.  They deride IV for demanding payment for people using their property rights.  Adam Smith wrote that the division of labor is a critical way of increasing a nation’s wealth.  Only if inventors can be paid for inventing, can they specialize in their profession.  The only way inventors can be paid just for their inventing is if people respect their property rights.  Note that Edison almost never practiced his inventions.  He licensed almost all of his inventions and sued if people would not pay.  Edison was not paid even a small percentage of the value he created in this world.

The show suggests that there is no evidence of inventors not getting paid for their inventions by attacking whether IV has successfully licensed any independent inventor’s patents.  This is an attempt to go from the specific to the general, while ignoring that IV does not represent the whole cross section of independent inventors.

If This America Life had broadened their research, at one point they say they were chasing down ONE inventor for 5 months, they might have found the Data Treasury story, where Wall Street has stolen the check clearing invention of its founder.  See the Data Treasury story.  They could also have looked at the story of the inventor of the intermittent windshield wiper which inspired the movie Flash of Genius.  There are numerous other examples that the show could of found with broader and impartial research.

 

Stories the Show Could Have Done

 

Underfunding Patent Office/Pendency Time

This American Life could have done a story on how Congress has stolen over $1B in user fees over the last decade.  They could have told the story of companies that waited for years to obtain a patent, which caused them to not be able to obtain funding.  However, the failure to obtain funding meant that they were unable to hire employees.

 

Data Treasury Story

They could have told the bizarre story of how Wall Street banks stole this company’s check processing technology that saves banks billions of dollars a year.  They could have focused on how Wall Street used their lobbyists to change patent laws in anticipation for losing the court battle  for infringement so they will not have to pay Data Treasury for stealing this invention.

 

Not Invented Here Syndrome

They could have done a story about how large companies are unwilling to license patents from independent inventors.  This is completely different than the 19th century when most patents were licensed or assigned to manufacturing entities.  For more information see Great Again.

 

Patents and the Industrial Revolution

They could have done a story on how the advent of the patent system and the advent of the Industrial Revolution not only coincide but are related.  Increases in our level of technology is the only way to increase our standard of living.  Property rights in inventions provide the incentive and security to invest in creating new technologies.

 

Theft of Our Inventions by Foreign Companies

They could have done a story of how companies in foreign countries steal American inventions.  They do this legally because we publish our patent applications and patents are only enforced in the country in which they are granted.  However, the value of the invention is not geographically limited.

 

Summary

This American Life’s story clearly was incorrect on several of the facts and it appears they started with the Open Source community’s bias against patents.

 

This American Life, “When Patents Attack” originally aired 7/22/2011.

 

 

 

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July 26, 2011 - Posted by | Patents | , , , ,

10 Comments »

  1. Dale,

    I had never bothered to listen online to the radio show.
    But it showed up on my FM radio and I was shocked.

    This is definitely a clever swift boat attack.
    A hokey, folksy, awe shucks strawman guy to tell his story in a way that pulls on the heart strings.
    A calm, soft talking narrator to make it sound like he is being rational and sound.

    But not one interview with an inventor on the other end stick.

    Comment by step back | July 30, 2011 | Reply

  2. Stepback, What do you expect from people who make their money at the point of a gun (taxes)? Who (NPR) clearly does not believe in property and the free market?

    Comment by dbhalling | July 30, 2011 | Reply

  3. See also this TechDirt post re the NPR run story:

    http://www.techdirt.com/articles/20110729/04405515316/intellectual-ventures-response-to-this-american-life-oh-those-crazy-reporters-dont-understand-disruption.shtml

    According to MM of TechDirt:

    Dozens of studies on the history of the patent system have shown that patents have a negative impact on innovation.

    Comment by step back | July 30, 2011 | Reply

  4. TechDirt, has been carrying this torch for a long time and they are impervious to all facts, logic, and reason.

    Comment by dbhalling | July 30, 2011 | Reply

  5. in your opinion, could Stephen King apply for a patent reserving to him all rights to “arrange words in such a manner as to make the reader feel loathing, fear and dread, and imprint those words on paper, in the correct order as to effectuate the aforesaid feelings for entertainment purposes”?

    I’m not a computer programmer, but that’s what the sections of the patents discussed on the radio show sound like to me. Would it be too much to ask the “inventors” to submit a CD with code that they are patenting? Or require that the complaint state exactly what part of the patent is being infringed, well in advance of the trial?

    Comment by Walt | August 29, 2011 | Reply

  6. Walt,

    No Stephen King could not get a patent and you do not understand how computer’s work if you think they are the same. A computer program is a way of wiring a electronic circuit. The computer language is converted by a compiler into electronic signals that tell the computer which switches to open and close. This is an electronic circuit just like any other circuit.

    Comment by dbhalling | August 29, 2011 | Reply

  7. It seems then that software patents should require the inclusion of what computing hardware they apply to as different hardware would create different circuits. The electronic circuit idea should also then leave open the idea that I could produce software that accomplishes the same result but in a different order as this would create a different circuit. Those that create discrete circuits can patent say, an audio amplifier of a specific type. Others can come along and develop similar audio amplifiers but with different components and accomplish the same task without infringement. How are software patents different in that they can be so broad sweeping and cover any circuit that accomplishes a particular task without even knowing what that circuit is or might be?

    Comment by Mr. Clean | September 9, 2011 | Reply

  8. Mr. Clean, the question is whether it is clear how to create the software or hardware based on the patent disclosure. If the new amplifier circuit is clear based on the patent of the old amplifier circuit and the claims are well written, then the new amplifier circuit infringes the patent. Hardware patents need not be so narrow as to include just one specific implementation.

    For instance, Edison invented a high resistance, incandescent light bulb. Later inventors came up with a way of creating a specific filament, such as a “M” shaped filament. These inventors were infringing Edison’s patent. However, these inventors were also able to obtain patents for their ideas. Patents give the right to exclude, but not the right to practice. If this were not the case, then either Edison or the later inventors would be in a winner takes all situation. By having only the right to exclude, all the inventors who helped create an invention have a right to part of the financial return.

    Comment by dbhalling | September 9, 2011 | Reply

  9. So, an audio amplifier patent could be for say, a certain audio response profile and any amplifier design that produced that profile would infringe?

    In the case of Edison and the filament, Edison would have been precluded from producing an “M” shaped filament?

    In this case, let me take this to a crazy hypothetical conclusion. An idea is patented and is relevant. Others come along and are savvy enough to identify every progression of the idea and patent them. Time passes and the original idea is no longer relevant and the idea must progress to still be productive, but others have all the patents on those variations. Would this be a situation where the original idea and patent are stalled if agreements could not be made with the variation patent holders? Simplified; for what ever reason, nobody wanted Edison’s original filament and the only other option was the “M” filament, but the “M” filament patent holder would not come to an agreement with Edison, Edison’s filament business could be stalled?

    Comment by Mr. Clean | September 9, 2011 | Reply

  10. Mr. Clean

    Unfortunately, it is very difficult to discuss hypothetical situations. I am not comfortable with the audio amplifier example, but I can explain a similar situation for the LASER. The first LASER was a ruby rod laser and I believe the patent was very broad, since it was the first LASER. The patent covered any light produced by stimulated emission having a lasing/amplifying medium, an optical feedback system (Fabry Perot Cavity), and an excitation source. It turned out that the ruby rod LASER had very few commercial applications. Another inventor created the CO2 LASER. The CO2 LASER used a gas instead of a solid as the lasing medium, used a giant capacitor as the excitation source and a Fabry Perot cavity. It was not clear (obvious) how to build the CO2 LASER based on the description of the ruby rod laser. As a result, a patent issued for the CO2 LASER. It turned out that the CO2 LASER had a much bigger market than the ruby rod LASER. Thus, it was necessary for the two inventors to cross license for either of them to make money. This is actually a fairly common situation. The semiconductor market worked out this problem in the late 80s and early 90s. This was first solved in the sewing machine market by large cross licensing agreements called patent pools. Unfortunately, our government used antitrust law to attack these agreements of how to use their private property. As a result, we have been thrown into the chaos that is happening in the smart phone arena.

    Interestingly, using the arguments of the antipatent crowd I can show that no patent should have ever issued for the LASER. Before the LASER there was a MASER (microwave). The MASER had a similar structure, although it used fewer quantum steps, which made it easier to create a population inversion. The Fabry Perot structure was known, a ruby rod was known and a flash lamp were known. Thus according to the antipatent crowd no patent should have issued for the LASER. This is nonsense of course – reductio ad absurdum. The fallacy in their arguments is that all inventions are combinations of known elements. You cannot create something from nothing, it is called conservation of matter and energy. An invention is a new creation that solves an objective problem.

    Comment by dbhalling | September 9, 2011 | Reply


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