Wednesday, January 25, 2012

Stifling Innovation

Created by Jessica Duensing for
A patent is a form of intellectual property. It's purpose is to encourage disclosure of innovations in return for the exclusive right to practice the invention for a period of time.  Like any other property, a patent can be sold, transferred, or abandoned.  The typical justification for patent law is that it encourages inventions to be made public; without this protection an inventor would be likely to keep the invention secret, with the possibility that the idea would be lost once the patent holder died.

In the software industry, however, patents are generally regarded as stifling innovation.  Software patents are often granted for technology that is considered obvious, such as the infamous "One-Click" patent granted to Amazon for an online shopping cart.  The U.S. Patent Office often lacks the expertise to be able to review patents based on advances in highly specialized fields of Computer Science, letting through patents where prior art should invalidate them.  Large companies buy up huge portfolios of patents to squelch competition from smaller companies or to protect themselves against lawsuits from other large companies.  Patent "trolls" purchase patents without any intention of creating a product based on the patent, but for the sole purpose of suing other companies that may infringe on the patent.  Lawsuits are often threatened for any remotely related technology, in the hopes that a large settlement and subsequent licensing revenue can be received.

If you want an informative and entertaining introduction to software patents and the problems these cause for the industry, then I highly recommend listening to "When Patents Attack!", a podcast produced by Chicago Public Media as part of the This American Life Series.  This was done in conjunction with NPR's Planet Money team, a collaboration that has produced a number of famous podcasts, among them The Giant Pool of Money, explaining how the housing crisis happened and Another Frightening Show About The Economy, doing a remarkable job of explaining the financial crisis and how credit default swaps work. These guys are really incredible at explaining complex topics to the layman.

Their show starts by telling the story of Jeff Kelling, who started a photo sharing site well before Flickr came around, developing it over many years before finally being able to turn it into a full-time job.  They soon after received a letter threatening a lawsuit by a company holding some patents they were supposedly violating.  The company had no product and wouldn't say what exactly they had done that was wrong, but it would cost $5 million to go to court so they had to settle.  These companies are patent trolls, and the podcast team goes to some lengths to track them down, get their side of the story, and examine what our patent system has become -- a weapon to squash innovation or siphon off profits, not a tool that promotes innovation.  Here's a great summary of the situation from the show:
In early July, the bankrupt tech company Nortel put its 6,000 patents up for auction as part of a liquidation. A bidding war broke out between the Silicon Valley powerhouses. Google said in press accounts that it wanted the patents purely to defend itself against lawsuits and it was willing to spend over $3 billion dollars to get them. But that wasn’t enough. The portfolio eventually sold to Apple and a strange consortium of other tech companies, including Apple competitor Microsoft. The price tag? 4.5 billion dollars. Five times the opening bid. More than double what most people were expecting. The largest patent auction in history. 
Think of that — 4.5 billion dollars on patents that these companies almost certainly don’t want for their technical secrets. That 4.5 billion dollars won’t build anything new, won’t bring new products to the shelves, won’t open up new factories that can hire people who need jobs.  That’s 4.5 billion dollars that adds to the price of every product these companies sell you — 4.5 billion dollars essentially wasted, buying arms for an ongoing patent war. The big companies, Google, Apple, Microsoft, will probably survive this war. The likely casualties, the companies out there now that no one’s ever heard of that could one day take their place.
Note, patent trolls are not only using software patents in their aresenal, nor are they targeting only large companies or those that create software.  A recent story covers a company claiming to have patents for WiFi, and they are suing coffee shops, restaurant chains, and department stores.

So what can be done?  Here are a few ideas:
  1. Eliminate software patents.  They haven't been around for very long, and it was a bad idea to create them in the first place.  There are many resources explaining why this would be a good thing for the U.S. economy.
  2. Eliminate patent trolls.  Require companies engaging in patent lawsuits to have a competitive product that is actively being built and sold.
  3. Put a shorter time limit on software patents.  The software industry moves fast, so twenty years seems like a lifetime. Shorter lifetimes will encourage patent holders to actually innovate with their patents before they expire.
  4. Place a limit on damages, so a company can't use patents to put competitors out of business
  5. Find ways for the U.S. Patent office to  engage the tech community in finding prior art, and establish looser interpretations on prior art so that new patents must be obviously providing significant advances in the state of the art.  The EFF has a Patent Busting project that does this, but it needs more funding and attention.