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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."
MOD THE PATENT TROLL DOWN!!!
...you don't feed trolls, you mod them down!
Paleotechnologist and connoisseur of pretty shiny things.
In a decade or two we'll likely see that it's impossible to build a solid economy upon intellectual "property". Unlike manufactured goods, IP has no inherent value. At least the material used to make a tangible product is often of some worth, even as scrap. The same can't be said for a patent, or a trademark, or an industrial design. The only way value can be derived from such things is through the use of artificial monopolies and the threat of civil lawsuits and/or other punishment.
A drive through Detroit, Buffalo, or most of the US midwest clearly shows how the manufacturing capacity of the United States is essentially gone. In such areas you'll see abandoned factory after abandoned factory. What's left is minimal, and even those firms are being squeezed out by foreign manufacturers. On one hand, these investment companies can only really put their money in IP. America has very little left in the way of actual manufacturing. Investing in businesses that no longer exist isn't really useful.
But eventually America will have to face the fact that it produces nothing with intrinsic value. All it takes are countries like India and China deciding to ignore American and international IP law, and the main item of production (ie. IP) of the US drops to a value of nil. China and India will exhibit strong economies, due to their actual production of goods with intrinsic value. The economy of the US, built around goods without any intrinsic value, cannot remain strong.
I'm surprised this hasn't become a Vegas sporting event. It's got to be better than off track betting. I can see the old farts waiting in the Kino lounge for three years for verdict, while the guards are carrying out the cadavers of those who couldn't hold out. What a country!
What?
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.
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?
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This doesn't suprise me in the least that there is investment in these sorts of companies. Speculators will take bets on all sorts of different aspects of the economy. This could just be a don't pass bet on patent reform, since the trolls stand to make money or be bought out if their patent portfolios aren't overturned. Having a buyout target is good because a buyout will inflate the value of the stock.
Or, there is a possibility that this is just hedging against the effects of patent trolls. With hedging the investors could being trying to remove some of the risk of the targets of patent trolls by putting some money on the troll's position. This will dampen the effect on the portfolio as a whole either if trolls get their way or if not, as it is likely the stocks of the trolls and their targets will be negatively correlated.
If it is actually billions being funneled into trolls I doubt it is all hedging though.
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.
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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.