Slashdot Mirror
Investment Companies Backing Patent Trolls
greenbird sends us to Forbes for an account of billions in investments flowing to US patent troll companies. One example is DeepNines, who is suing McAfee over a patent that covers combining an IDS and firewall in a single device. The patent was filed on May 17, 2000 and issued on June 6, 2006. No prior art for that, no siree. DeepNines is funded by "an $8 million zero-coupon note to Altitude Capital Partners, a New York City private equity firm, promising in return a cut of any winnings stemming from the lawsuit. The payout is based on a formula that grants Altitude a percentage that decreases with a bigger award."
Newsflash: investments flow to companies that stand a chance at making money.
The problem is with current patent laws and the incompetence of the Patent Office with regards to IP. Companies exist to make a profit within the bounds of the law. The law is what we should be focusing on here, not the obvious fact that investors want to...wait for it...get a return on their investment.
Computer software geeks meet the Big Drug companies. If you Google enough you will find that the lawmakers were in bed with Big Drug Companies who wish that Patent rights laws were stronger.
As opposed to software and other user generated innovations that build upon the writings and methods of those who have gone ahead in the discovery game.
Computer development is linear, you can see how each company leapfrogs another and soon the king of the hill pushes everyone off of their mountain.
Drug companies claim that they discover a certain formula and test the hell out of all side effects before coming to market. They spent all that money and want to be reimburst for the money spent on failures and developments.
Two industries with different methodologies and financial successes yet both are in the same patent boat. There ought to be a law but a King Solomon hasn't decided nor is likely to solve it soon.
If too much money from institutional investors or hedge funds gets tied up here, it could be really, really bad. The sort of thing that can make economies collapse. The LTCM mess in 1998 is a good example - there was a massive bailout organized. It couldn't be allowed to fail - it would've taken too many things with it. So, why not? If you're a big enough fund, you get bailed out. If you're not, you're never on the hook for more than a small percentage of what you grabbed. So when I hear about this stuff, it just seems like an amazing gamble. Barely better than investing in lottery tickets, really. Geez, bet people feel good about those 401k/403b fund right now.
But we'll be dead by then, so screw it. Take the money and run, while there's still time.
Dead in ten years? For most of us, that's doubtful.
We only need to look to India and China to see how quickly their economies have grown, even in just the past decade. Their economic growth has been immense. This is because those nations have begun to produce virtually all of goods that are then exported around the world. But their growth has, as mentioned earlier, essentially destroyed the manufacturing base of the US. Europe may not be far behind.
The extremely rapid rise of the economies of Asia may very well be mirrored by a similarly rapid decrease in the economies of the West. And this IP nonsense may even accelerate the process. As the standard of living (and thus the cost of production) rises in areas like India and China, bringing production back to the US may start to look financially viable. But if the producers have to face attacks from these so-called "patent trolls", then the cost may be far too great, and they'll continue to produce in India and China. This in turn will further push America towards an IP-based economy, which will no doubt place even more emphasis on IP litigation.
In essence, it will create a cycle where the lack of a solid manufacturing base will move the American economy towards intangible IP "production", but this increase in IP litigation will further reduce or inhibit the growth of the manufacturing sector, which in turn will push the US economy further towards an IP-based economy, and so forth.
That's crap. Lossy compression algorithms, for example, are clearly valuable, or people wouldn't use them. Intrinsic versus extrinsic is not at issue, but enforceability and the external consideration of profitability of research v. the public good of free information.
Just as the tractor replaced the plow, automation replaced the assembly line worker, so purely intellectual goods will replace tangible goods.
I predict just the opposite of parent. As China and India develop research regimes, they'll want the same IP protections that the US and Europe demand; they are violating IP now because it is expedient. As long as there is scarcity at all in our economy, IP will be with us.
Soon you'll be an IP wasteland, completely bereft of innovation as those with ideas seek other countries in which to make their money, out of desire to avoid US patent litigation.
First you export your manufacturing labour. Now you're exporting your brains. WTF do you think you're going to do for business in the future?
--
Don't like it? Respond with words, not karma.
But your entire business model hinges on the patent office not reforming. I think this scheme was invented by the lawyers, them being the ones who will ultimately profit the most from this.
I think the real problem is Patents. No we shouldn't abolish them, but we should stop giving frivolous ones. http://www.freepatentsonline.com/crazy.html http://www.newscientist.com/article.ns?id=dn965 Google Ridiculous Patent for more Honestly we should have some common sense. Yes you can patent the lightbulb, or A new motor, but some of this stuff is ridiculous.
"The quickest way to end a war is to lose it" -Orwell
Up to now only the big guys could enforce patents. Patents were ignored in new designs. Portfolios of patents were accumulated to use as cross-licensing bargaining chips when another big player squalked.
This innovation - financing the suit for a cut of the potential payment via a bond - lets anybody with a patent play in the enforcement game without putting the rest of their operations at risk. A little guy can enforce a patent on a big guy. The investors take the loss if he loses, a cut if he wins. Meanwhile his capital is safe and his ongoing operations (if any) can continue. Risk is assumed by people with enough money to survive losses and experience in spreading it appropriately and balancing risk and reward to achieve reasonable investment income and security.
Of course that will change the game entirely: A player financing his suit this way has little incentive to agree to a payoff in the form of a cross-license. And the less operation he has for a counter-suit to disrupt the less opportunity there is for counter-blackmail. (Limiting case is for a "patent troll", of course. But for a small enough operation taking on a big enough opponent it might be a better deal to respond to a counter-claim by folding the actual operation and living off the proceeds of the patent suit.)
The result, of course, is that a large number of patents held by little guys that are being blatantly infringed by big guys will now become enforcible and trigger an explosion of such suits.
Possible fallout:
- The big guys have to pay all the little guys for all the patents they've been blatantly infringing for years.
- Companies (ESPECIALLY large ones) will have to start paying attention to patented prior art.
- IP law gets rewritten to abort this scenario.
All of these - except SOME forms of the last - seem like they might end up being a good deal for the little guys.
Meanwhile the little guys have shallow pockets and aren't at significantly more risk from this than they already were from the big guys and the existing patent trolls.
Bantam Dominique roosters crow a four-note song. Once you've heard it as "Happy BIRTHday" you can't NOT hear it that way
so purely intellectual goods will replace tangible goods. I predict just the opposite of parent. As China and India develop research regimes, they'll want the same IP protections that the US and Europe demand; they are violating IP now because it is expedient. As long as there is scarcity at all in our economy, IP will be with us.
"IP" laws are designed to create scarcity and the laws enforcing them will always be oppressive. A country that tries to build an economy on, "you can't do that because I say I thought of it first" is doomed. There will always be morally repugnant cases like life saving medicines that other nations will use as an excuse to exercise their freedoms. The "IP" nation will be forced to ever more hysterical and anti-social enforcement. Don't even bother with China and India as examples, first world nations want their freedom too.
The easiest example is software. M$ and other US companies would like to shut down or tax every other software company on Earth. They intend to do this with bogus patents and DRM'd hardware. If you think the rest of the world will allow themselves to be subjugated that way, you need to think some more. The US can threaten trade embargo and other measures, but it's not going to work.
Even in the most cynical case, where every country has it's own oligarchies, the competition between companies and industries will ruin any kind of "IP" empire. Such an arrangement would be devastating to the world economy and I can only hope we go towards free competition and away from government granted monopolies. The IP world you envision will be a dark age, where news is censored, history lost and technology stagnates for centuries. Taken to it's limit, you get a Byzantine system where everything is obsessively regulated but utterly lawless and a few constantly squabble for control of an ever shrinking pie. It is the death of civilization.
Friends don't help friends install M$ junk.
The issue is incentivizing the research behind innovation.
I think he did read your post and you're talking past each other.
He is pointing out that bits can be copied for free. You are pointing out that to prevent that we need robust laws to stop people from copying bits for free. I'm pretty sure he understands your point. He just thinks you're wrong.
Material goods are easy to protect from copying because they are relatively hard to copy. "IP" is inherently copyable at almost zero cost, and therefore has no market value unless that value is created by an artificial scarcity produced by extremely expensive laws, with all of their outrageous secondary effects like the creation of patent trolls. There is no evidence that "IP" when so protected can ever generate sufficient wealth to pay for the legal infrastructure required to maintain the required artificial scarcity, much less support the parasitic growths that that legal structure will necessarily attract.
It may be possible to generate sufficient artificial scarcity at a low enough overhead cost to create a primarily "IP" based economy, but it would be extremely foolish to bet the future of your country on it.
Blasphemy is a human right. Blasphemophobia kills.
I think it would be a good idea to pass a law which would revoke patents from companies where most of their active income wasn't produced from actually selling the product or service which is covered by the patent. That is - companies have to actually sell the product or service which they patented, if they don't, they can't sue anyone else for using it. As long as they actually sell the product or service which is patented, then they can sue other companies and collect royalties on the patent - but these royalties shouldn't exceed their own revenues for their own product. A law like this would make it impossible for the patent troll companies like Acacia Technologies [http://en.wikipedia.org/wiki/Acacia_Technologies] to exist.
Since patents were created to protect inventors and encourage innovation, not discourage it! Patents aren't all bad, but software patents aren't really needed IMHO because copyright and trademark offer fair and reasonable protection I feel.
Website Just Down For Me? Find out
The problem with that is, there are companies who obtain patents for the sole purpose of ensuring that the technology is available for people to use. Apple does a bit of this, as do a number of other FOSS related companies. If you enforce patents to be used by their owner, you will actually hurt a number of groups with good intentions who help the community a great deal.
As an example, Novell, IBM, Phillips, Redhat, and Sony formed a company called The Open Invention Network, "The Open Invention Network (OIN) is a company that acquires patents and offer them royalty free "to any company, institution or individual that agrees not to assert its patents against the Linux operating system or certain Linux-related applications""
I think a better answer to all of this is to make it MUCH harder to get a patent, and narrow the definition given in the patent as much as possible. That seems to be the real problem, patents are routinely granted that cover things the entity applying for the patent didn't even come up with.
You can say that, but for how long will this be the case? I don't think copying something is very hard right now, and the barriers seem to continue to go down.
;)
For the foreseeable future at least. You can give me the complete specs on a Core 2 Duo chip, and I still won't be able to make my own for less than what it would cost to buy one.
Even the desk in my office, which I probably could 'copy' if I were really inclined to probably isn't worth it once you factor in the time, material cost, and tools cost.
What happens when anyone can copy anything?
Well then we live in "star trek utopia land", and everybody is happy and free; and we can all run pointless creole themed restaurants and serve food to people who got tired of asking the replicator for it themselves.
I'm trying to figure out the economic consequences of that when it is carried out that far. It doesn't seem as if a person can make money using their talents to improve on something. I'm skeptical that the equivalent of tip money can make it worthwhile, it would seem to turn artisans, engineers and designers into beggars like many OSS projects seem to be these days. I suppose musicians can make money with live performances, but would that actually be a money draw? Recorded media seems to have reduced the desire for live bands. Heck, if the wedding market is any indication, services like DJs are simply being replaced with the likes of playlists.
If somehow energy and matter could be had in limitless quantities such that we could just run off a copy of anything we wanted from our replicator box, we wouldn't really need money because there'd be no reason to buy anything. Musicians would create music because they wanted to, or perhaps to pursue fame and celebrity. Artisans, engineers, and designers will create buildings for the same reasons.
At least that's the star trek version of such an "economy". Or maybe the whole thing will be reduced to a mad rush to obtain supplies of dylithium crystals, or Tiberium, or Melange....because that's the only thing left with any scarcity and value.
Personally I think if you give the average person limitless energy and the power to copy whatever they want, sooner or later someone will destroy the planet.
Despite enormous international pressure, software patents aren't enforceable in most countries and (cue gasps of astonishment from US slashdotters) there's actually a huge IT industry outside North America. Unless the whole world introduces software legislation, this is how I see the future:
In the next decade, a huge tranche of software will be developed that can't legally be used in the USA. Meanwhile, US software will become less innovative (due to fear of legal reprisals) and more expensive (due to legal costs and licensing fees) than software available in the rest of the world. Costs to US businesses will rise, as they'll be denied access to the most economical and innovative software. Often, two versions of critical business software (databases, operating systems, CRM systems, etc) will be produced - the full-featured world version and a crippled, feature-deprived US version. Mainstream US businesses will realise that they're at a competitive disadvantage and will begin lobbying against software patents. Finally, patents will be removed and the cheaper, better foreign software will flood the US market. US software companies will be as helpless as bowling pins and will drop even faster.
The process will take 10-20 years, so sit back and enjoy the show. Europe, India, Russia and China, please note: patents are the US software industry's suicide note.
Imagine if Henry Ford could have patented the concept of a 4-wheeled vehicle powered by an internal combustion engine. How about if Sam Morse owned the rights to the concept of sending intelligible messages over a wire? GM wouldn't exist and we wouldn't have had telephones until the 1930s.
Patents exist for the protection of innovation. Putting two programs on the same machine is not an innovation.
If the likes of MS or Adobe are the ones doing the reverse engineering, the answer is "not much". A patent only gives you the ability to sue others for using your invention. It doesn't mean you are going to prevail when the large corporate drags things out for years. Don Lancaster has a different take on being anti-patent than the typical slashdotter. He basically maintains that for most inventions it isn't worth it. Because of the legal costs of defending it even a "million dollar idea" isn't worth patenting. A 50 million dollar idea MIGHT be worth patenting.
http://www.tinaja.com/glib/casagpat.pdf