Google's Schmidt: Patent Wars Harm Startups

Nerval's Lobster writes "Former Google CEO Eric Schmidt opened up to The Wall Street Journal in a Dec. 4 interview. Among the topics covered: the status of his company's ongoing patent war with Apple, as well as its attempts to make the Android mobile operating system more of a revenue giant. In Schmidt's mind, startups have the most to lose in the current patent wars: 'There's a young [Android co-founder] Andy Rubin trying to form a new version of Danger [the smartphone company Mr. Rubin co-founded before Android]. How is he or she going to be able to get the patent coverage necessary to offer version one of their product? That's the real consequence of this.'"

Comments

Funny

[WankerWeasel]

But buying up startups then killing their work doesn't?

Re:Funny

[metrometro]

Actually, it doesn't. That's a powerful incentive to start companies and build products, even if the results get incorporated (or not) into a dreadnaught like Google after four years. Venture funding banks on this, and the freely flowing spigot of VC money built most of the stuff I currently use.

Re:Funny

[mr1911]

But buying up startups then killing their work doesn't?

If startups can't get to version one, they have a tough time getting bought.

There is no perfect answer, but I'd rather have my work killed after getting bought/paid rather than squashed by patent suits and losing my investment.

Re:Funny

[Shoten]

But buying up startups then killing their work doesn't?

Arguably, no. Why do I say this? Because of two reasons:

One...the fact that the startup got bought out provides incentive for other startups to form. Let's face it...being bought out by Google is a payday. It almost always means you've hit some kind of success, and as a result you are being paid well for the company. Failed startups that are bought as they lay on their death bed are never bought by companies like Google, but rather other smaller companies who want some minor aspect of what the startup still contains.

Two...the fact that the people who started the first startup are now (after a year or so) free to start a new one. And they're MORE able to do so, because they have the experience they gained the first time around, the track record of having done it successfully before (VC's get their part of that buy-out payday too), and their own inherent financial stability now so that they don't have to worry about putting food on their table or paying the rent while they get the next venture up and running. They've made connections, made mistakes, and learned a lot along the way. I know several people who have done multiple startups, and they've all seen their original creation changed in some major way by the company that bought them out, but meh...they go on, and create something new.

Re:Funny

[yog]

Patents are definitely a big problem for start-ups. When you are big enough to have a Legal Department with an Intellectual Property specialist or three, you can maybe deal with all the patent trolls out there not to mention the few legitimate patents that may challenge your product.

But for the rest of us, it's an almost insurmountable challenge. Once when I was trying to develop a voicemail contraction (yeah this was sort of pre-cell phone and pre-Google Voice and all that nice stuff we have today) for small offices, I was astounded by the kinds of patents out there. Some guy patented a "method to push a button to record a voice". Someone else patented a "method to store voice recordings in digital format in computer memory". Was I as a one person start-up going to have to find a way around ridiculously obvious patents like this?

So if someone big comes along and offers you a million or two for your baby company, it's going to be awfully tempting. Then again, as I recall, Microsoft offered the Netscape guys about $20 million for their browser back in the early Web days. They politely declined and went on to be worth hundreds of millions. It's a tough call to make, but you do have to be a bit of a gambler if you want to really make it big.

Re:Funny

[maeglin]

You're looking at a startup as a single person or partners that share the pay from the buyout. What about the people that worked tirelessly at the small company but may not get a cut in the cash?

You're also believing that the #1 motivator for everyone is money. Many would like to see their baby grow and see the impact it can make on the world. Invent a cure for cancer, take the payoff and walk away without ever getting to see how it changes the world.

What about the people who worked tirelessly for RIM, Nokia, Diamond, Pets.com, Silicon Graphics (the real version), the HP calculator team, Commodore / Amiga, SEGA and Atari (again, the real version)? Who was or is looking out for them? Absolutely no one. At least if a founder gets bought out some jobs will transfer, some will move on to the next start-up with the same guy and the rest simply share the same fate as countless people who have poured their souls into ventures of many sizes and then have been left with nothing but a final paycheck.

One of many reasons that older employees don't constantly invest 18 hours a day for an 8 hour paycheck is because they have seen the result of not being an equity holder of the effort when the payday comes. If you're working a job as a wage earner and you think the 2 year "sprint" is going to pay off -- think again.

If you don't want to sell your baby.. Don't.

Re:As a startup owner..

[jythie]

Since most start ups lack the resources to engage in patent litigation, it is not a tool that is all that useful at this point.

Re:easy to license most of the patents

[Overzeetop]

How many hours do you think it would take to do a full patent search on a new device as complicated as a pocket computer which incorporates several difference wireless and wired communications, as well as a full-fledged operating system?

Now, add your "pennies per device" to those thousands upon thousands of hours, at legal rates ($200-$600/hr), plus add on several thousand dollars for each to ensure compliance with the terms.

Pennies per device just turned into over a million dollars before a single handset is produced. That isn't stifling?

Wrong Link; Wrong Message.

[tuppe666]

This is the link to the interview http://online.wsj.com/article_email/SB10001424127887323717004578159481472653460-lMyQjAxMTAyMDAwNDEwNDQyWj.html or maybe it only shows a summery depending who you are. I personally interpreted the article completely different; My summery would have been "Irrelevant Microsoft", but it touches on issues such as the antitrust case; owing a phone hardware company while expecting others to use your OS; The issue of Goggles relationship with Apple [Where WSJ got its title] all worthwhile topics of discussion, but as I said the thing I derived from it was Microsoft not being part of the "Gang of Four", and its products not even worth commenting on.

Remember Cyrix and Nexgen

[erice]

Semiconductor companies have long held massive patent portfolios. They crossed licensed the patents to each other so, for them, the problem that you couldn't build anything without stepping on somebody's patent wasn't big issue. But startups don't have such portfolios and would be simply be crushed. Cyrix and Nexgen wanted to build x86 compatible processors but Intel had patents critical for compatibility that could not be worked around. They tried having their chips manufactured by IBM, which had cross-licensing agreement but both eventually had to be borged into larger companies (AMD and National Semiconductor) in order to keep operating.