Myhrvold on Patents

Following up yesterday’s Patent discussion, I noticed that Nathan Myhrvold, who spent 14 years as Microsoft’s chief technology officer, had an Op-Ed piece in the WSJ yesterday on Patents.  Myhrvold explodes the myths about the danger "patent trolls."

The section I had found most intriguing was this:

"Large tech companies do amass significant portfolios, but often not
directly related to their business model. If a rival company asserts a patent, a
company like this plays defense and threaten the asserter’s products right back.
While "defense" sounds benign, what it can mean in practice is having enough
patents that you can steal from anybody else with impunity.
Between big
companies this works like a powerful shield, much like the doctrine of mutually
assured destruction with nukes. But the shield is impotent against universities,
companies without products or independent inventors. Owners of large defensive
portfolios hate that. (emphasis added)

That’s a pretty straight forward indictment by someone who knows, right from the heart of the tech industry.

Myhrvold continues:

In the 14 years I served as Microsoft’s first chief technology
officer, I saw this firsthand across the ranks of the computer industry. Tech
companies work extremely hard to use state-of-the-art technology, and either be
first to market or a fast follower — all else falls by the wayside. Big tech
companies are happy to hire the best people from rivals, universities and small
companies. Their employees attend conferences and study technical papers to stay
on the cutting edge. But they pretend that the patents on the technology in
those papers, or from universities or small companies, don’t exist. Many of the
largest tech companies have a standing policy that engineers are not allowed to
read patents or check whether their work infringes. Why bother to look, if you
know you’ll find lots of infringement? Besides the cost, it’s a distraction that
might hurt time to market. Their strategy is simple — damn the torpedoes, full
speed ahead.

And the problem with this is . . .?

The trouble is, this cavalier attitude toward the law runs afoul
of the rights of legitimate patent holders and the big tech companies know this.
Rather than pay out a small fraction of their huge profits, they’re fighting a
campaign to weaken patent laws for the little guy. Some of this has taken place
in Congress under the banner of "patent reform." The eBay case aims to achieve
the same ends in the courts.

It’s hard to go to Congress or the courts and admit that you’re
one of the richest companies in the world, have huge profit margins and infringe
lots of valid patents held by honorable people . . . but you don’t want to pay
So naturally, these companies paint a different picture. They claim that
patents are low quality; yet there is no objective evidence of this. They claim
patent litigation is exploding; but the actual figures show just the opposite.
There are fewer patent lawsuits than copyright, trademark or other major forms
of commercial litigation.
(emphasis added)

I think Myhrvold paints a pretty compelling picture — but then again, I am biased.

Inventors Have Rights, Too!
WSJ, March 30, 2006; Page A14

Category: Intellectual Property

At the Margins

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Media Appearance: Kudlow & Company (3/30/06)

Category: Media

Rise of the Pure Patent Business Model

Back in December 2004, I wrote a column titled "Five Under-the-Radar Trends for 2005". One of the below radar trends I predicted was the acceleration of intellectual property lawsuits. That turned out to be rather prescient.

There are actually two different issues here: The first is, should the USPO
be issuing so many patents, especially those for business methods? Amazon’s One-click buying, and MercExchange’s Buy it now auction are certainly questionable "inventions." That’s an issue for Congress, who needs to adequately fund the Patent Office so they can hire many more patent examiners, rather than merely have an under staffed patent office rubber stamp applications.

The second issue is that once a patent becomes issued, who gets to use it and how? Very often, we see the first issue inappropriately raised as a PR defense in the second. I don’t get the sense that all of the financial media really has a firm grasp on this. There is an entire world of patents, innovation, USPO issues, and large corporate litigants that have not been adequately discussed. Some get it, some don’t. Compare  this story: "eBay Takes on the Patent Trolls" with this one "In Patent Case, EBay Tries To Fight Its Way Out of Paper Bag." (For some intercorporate litigation, see Apple against Apple Corps. Ltd., and TiVo’s against EchoStar’s Dish Network).

Incidentally, the term "Patent Troll" was invented by Peter Detkin when he was defending a patent case against Intel. Ironically, Detkin is now managing director with Intellectual Ventures, an intellectual property firm suing patent infringers.

If you recognize the property right inherent in patents, then the term "Patent Troll" is quite meaningless, meant to stir up political opposition to patents. How you use your property is irrelevant to the property right attached to it. What does it matter if you choose to manufacture widgets — or merely license the patent to thos ethat do? 

What is actually going on now is a massive land grab underway by large corporations, looking to keep the fruits of entrepreneurs and innovators labor for themselves. These are not meek and vulnerable entities at the mercy of lawyers; rather, these are very astute players seeking to use the patent to further their own goals — often at the expense of innovation.

Take Intel, where Detkin was vice president and assistant general counsel, for example. They are certainly no stranger to patent litigation. As the book Inside Intel makes clear, INTC used its patents as a club to thwart competition in the CPU market for decades. That’s why its taken AMD so long to become a legitimate competitor to the chip giant.

The stealing of entrepreneurial innovation by large firms is fairly common place. My own experience with patent enforcement is that it is an enormously expensive, difficult, time consuming venture, fraught with peril. Consider the case of Robert Kearns, the inventor of the intermittant windshield wiper. In 1967, he received several patents on his design, which he tried to license to the Big 3 in Detroit. They sent him
packing, but later the intermittant windshield wiper somehow found its
way into autos. Long story short, he ended up in litigation for decades before finally winning. Thats decades later.

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