The Case for Software Patents

It's become popular lately to call for the elimination of software patents.  Tim Lee at Forbes sounded the call last month (link), and this week Mark Cuban joined the chorus (link):

"Because of software and process patents any company could be sued for almost anything. It is impossible to know what the next patent to be issued will be and whether or not your company will be at complete risk. It is impossible to go through the entire catalog of patents issued over the last 10, 15, 20 years and determine which will be used to initiate a suit against your company."

I have a ton of respect for many of the people arguing against software patents, but I disagree strongly with their arguments.  I think software patents play an important role in encouraging innovation, especially by small companies.  The loss of them would make it harder for small companies to survive, and would discourage fundamental innovation in software.

The online debate about software patents is very contentious, and much of it focuses on philosophical issues like the nature of software and whether that's inherently patentable.  The debate also often gets mixed with the contention that all software should be free.  I'm not going to get into either topic; the arguments are arcane, sometimes quasi-religious in their fervor, and besides they've already been debated to death online. 

What I want to focus on is the broader issue of the economic role of patents and how that applies to software.  The patent system is designed to encourage innovation by giving a creator a temporary monopoly on the use of an invention.  Does that mechanism work in software?  What are the problems?  And what's the best way to fix them?

When you take that perspective, I think it's clear that there are some genuine problems with software patents.  (Actually, there are problems with patents in general, and software is just the most prominent example.)  But I think there are better ways than a ban to solve those problems.  To me, banning software patents to solve patent problems would be like banning automobiles to stop car theft.  The cure is far worse than the disease.


The value of software patents

Let me start with a personal example.  As I've mentioned before, I'm working on a startup.  When we brief people on what we're doing, one of the first questions we get is, "how will you prevent [Google / Apple / Microsoft / insert hot web company here] from copying you?"

A big part of the answer is, "we've filed for a patent."

A patent isn't magic protection, of course.  It might not be granted, and even if it's granted, patents are difficult to enforce against a really big company.  But it reassures investors, and more importantly if a Facebook or Google wanted to copy our work, the patent makes it safer and quicker for them to buy our company rather than just ripping us off.  So it helps to protect the value of our company.

Without the patent, I think it could be open season on us the moment we announce our product.

Advocates of eliminating software patents say there are other ways to protect software companies.  The first is that software can be copyrighted.  That's technically true, but the only thing copyright protects you from is word for word theft of your source code; it does not protect inventions.  For most software innovations, copyright is no protection at all. 

The second argument is that small companies should move quickly, so the big companies can't catch up with them.  The idea is that if you move fast enough, you won't need patents.  I think there's a consumer web app bias in that advice -- it works best for small apps that can be adopted quickly, or that have a strong social effect (so the user base is part of your competitive protection).  It doesn't work well for software tools that have a slower adoption curve.  The more complex and powerful the software, the slower the adoption cycle.  This is especially true for enterprise tools.  Without patents, those companies are exquisitely vulnerable to being ripped off soon after they launch, when they're just starting to gain word of mouth. 

So for companies creating new categories of software, and especially for enterprise software tools, I think patents remain the best (and really only) protection from theft.

But what about the damage being caused by abuse of the patent system?  If we keep software patents, are we then endorsing those abuses? 

I don't think so.  In the articles I've seen, there are two primary arguments for eliminating software patents: Trolls and patent warfare.  They need to be discussed separately.

Discouraging patent trolls.  The troll problem is something we all know about: patent licensing companies buy large collections of patents and then extort fees from companies that had no idea they were violating the patents.  That's the core of the problem Mark Cuban was talking about above, and it is outrageous.  These surprise lawsuits can have a devastating effect on smaller companies that can't afford to hire a lawyer to defend themselves.  Even if you're in the right, it can be so expensive to defend yourself that you just have to give up and pay the license fee.  That definitely has a chilling effect on innovation, it is contrary to the intent of the patent system, and therefore it needs to be restrained.

But I think the answer in that case is not to eliminate software patents; it's to restrict the right of "non-practicing entities" (patent trolls) to sue for patent infringement.  That would still have a financial effect on small companies -- in the case of my startup, it would make it harder for us to sell our patent if we wanted to.  But patent law exists to protect the process of innovation, not to protect inventors for their own sake.  If you can't put your patent to good use, you aren't contributing to the public good and you shouldn't get the same level of protection as a company that has built a business around a patent.

Patent warfare is a very different issue.  Several large tech companies are using patent lawsuits to slow down competitors and pull revenue out of them.  Eliminating software patents would not stop these wars; they're also based on hardware patents, antitrust law, and any other field of law that the companies can apply.  It's like one of those cartoon fights in a kitchen where a character opens up a drawer and throws everything inside it. 

 
Yeah, like that.

The underlying problem here isn't about patents; it's about the use (and abuse) of the legal system as a competitive tool.  I've had more involvement in tech industry legal wars than I want to think about: I gave depositions in the Apple-Microsoft IP wars, and I testified in Washington in the Microsoft antitrust lawsuit. The overall experience left me plenty cynical about the legal system, but it also persuaded me that big tech companies are perfectly capable of taking care of themselves in court.  They do not need our help.  You should think of lawsuits as just another way that tech companies express love for one-another.

I'm somewhat sympathetic to the Android vendors being sued by Apple, but a lot of it is their own fault.  HTC in particular has no one to blame but itself for its situation, in my opinion.  HTC was one of the first companies in mobile computing, creating PDAs for Compaq and early smartphones for Orange and O2.  I've got to believe that if HTC had been thinking clearly about patents, there are a lot of fundamental mobile inventions it could have patented.  Then it would have had a big enough patent portfolio to force a cross-licensing deal with Apple.

The same thing goes for Google.  When it decided to enter the mobile OS business, it should have expected that it would end up at war with Apple and Microsoft (heck, anyone could have predicted that).  Google should have bought up a big mobile patent portfolio (like maybe Palm's) back when they were inexpensive.

Are we obligated to change the patent laws just because Google and HTC were careless?  No.  Is it in the public interest for us to intervene anyway?  I doubt it.  Here's how the mobile patent wars will play out:  The big boys will do a whole bunch more legal maneuvering, they'll scream bloody murder, and in the end one of them will write a check to the other.  Then they'll all go back to work.

My advice: If it bothers you, stop reading the news stories about it.  Or sit back and enjoy it as theatre.  It's hardly an important enough issue to justify stripping the patent protection from every small software company in the US.


A world without software patents

If you want to understand the importance of software patents, go back and talk to the first people who patented software.  That's what I did.  Two years ago, I corresponded with Martin Goetz, holder of the first software patent (link). 

Goetz was a manager at Applied Data Research, one of the first independent app companies in the 1960s.  ADR made applications for mainframes, and IBM copied and gave away a version of ADR's Autoflow application (the first commercially marketed third party software app).  ADR might have been wiped out, but it had patented Autoflow, and it was able to successfully sue IBM.  That lawsuit, plus a related one by the US government, laid the foundations of the independent software industry by forcing IBM to stop giving away free apps for its mainframes.

The lawsuits involved a lot of legal issues, including antitrust, so you can't say that software patents alone led to the birth of the software industry.  But I think it's clear that patents helped codify the value of software independent from hardware.  If that value hadn't been recognized, the antitrust suit would have been meaningless because there would have been no damages.

So antitrust and patent law have worked together to help protect software innovation.  Antitrust helped to restrain big companies from giving away free competitors to an app (although that protection has eroded lately), while patents restrained big companies from copying apps directly.  It's like a ladder.  If you pull out either leg, I worry that it won't stand.

In his online memoirs (link), Goetz makes the case that application innovation was slow and unresponsive to users in the decade before software patents, and accelerated dramatically in the decade after.  I agree.  That is exactly the sort of innovation that patent law was meant to encourage, and so I view software patents as a success.

Without software patents, I think it would be far too easy to go back to the bad old days when the big computing companies walked all over small software companies, the software industry consisted of only consultants and custom developers, and software innovation moved at a much slower pace.

_____

More reading:  Software entrepreneur and investor Paul Graham wrote a nuanced and detailed take on the subject here.  Some of his conclusions differ a bit from mine, but the essay is well worth reading.

44 comments:

Kinny said...

Spot-on piece. Nails the facts.

I couldn’t have put it any better than this.

As always, thanks for sharing your thoughts, Michael.

Bryce said...

There are four main issues in software patents from my perspective:

1) They are for too long of a time frame
2) It costs a lot to defend yourself if wrongly attacked
3) There are a lot of obvious things being patented and things with prior art being patented
4) It is hard to actually know what patents mean sometimes, overly broad and cryptic

A partial solution to this I would see would be that firstly the time frame is reduced to a more appropriate time period for the software industry (even 5 years is a long time). Then I think that if the defendant wins they should have their costs paid by the prosecution. One issue with this is that patent trolls could still attack with no assets behind them to pay, so there would have to be a bond system payed in advance.

The main issue though I think is the points 3 and 4 above. I think the simplest solution to this is stated as being "tried by a jury of your peers". Have a trial with a jury of software engineers, if they can understand the patent, and think that it is a worthwhile patent in terms of being new / non-obvious then I think its a valid patent.

I think the defendant should have a good idea as to whether the industry as a whole would see it as a good patent or not.

RobM said...

Great Article Michael!

I love reading your blog - along with asymco and Monday Note. It is great to get a series, reflexive look at the issues behind the issues!

Ashish said...

Very insightful article. I always more on the "patents are evil" side, but this article (along with the linked Paul Graham article) made me think that there's no single answer to this question.

DanG said...

Bryce, I agree that a peer review process could actually help things considerably. The patents office is under-staffed, and cannot be expected to have all the technical knowledge to make quick, correct decisions (which slows down the whole process). Peer-review works in academia so I don't see why it can't transfer to patents. As long as we keep the authors anonymous, the patent office should be able to set up decent controls to prevent abuse.

On the other hand, I don't think that shortening the life-span of a patent would prevent patent trolls from existing. I'd favour a "use it or lose it" rule for patents (I'm not an expert in patent law; this could exist, but I doubt it). This would keep the protection where its needed and remove it where its not. Thoughts?

Scott said...

You've turned me around a little on this issue. We do need protection for the little guy.

Still, I wonder if the existing system is the right tool for the job.

Peter Daly said...

"Without the patent, I think it could be open season on us the moment we announce our product."

If that is really the case, then I don't think what you want to patent should qualify for a patient. What you said implies that your product "idea" can be patented. The key problem with that is that in software, ideas build on ideas as everything evolves. You should not be able to patent an idea, and you should not be able to patent an algorithm (math). The problem is, in software, there is a very blurry line between an implementation, an idea, and a mathematical concept.

Compete on the quality and innovation of your implementation, which is really what patents are intended to protect.

In theory, nobody can develop ANYTHING today that probably doesn't infringe on hundreds, if not thousands, of issued software patents.

Every new generation of software probably infringes on an exponentially increasing amount of patents, which is a serious problem to innovation.

Properly and fully licensed, a simple modern "To-Do List" application could easily end up needing to cost thousands of dollars per copy if every patent it infringed on needed to be licensed.

Anonymous said...

What you argued very well is that patents offer protection and allow a small fish to swim. But by avoiding the larger issue, that conversely, patents increase entrepreneurial risk since holding one patent against a powerhouse company will certainly not protect a small company unless it has access to a warchest for legal fees, you are assuming that this legal system is the only protection.

To me it seems that if you can be sued as a business tactic then the system is rotten. So why not get rid of it?

Anonymous said...

I concede that patents are useful for reassuring ignorant investors.

For protecting small companies, they're useless. A company with tens of millions of dollars in revenue (e.g. Stac) can assert a patent, since it has the resources to mount a sustained legal battle. For anything smaller, a patent is useless.

Software patents keep small companies small, because once they get big they will get sued.

Now as to this ridiculous assertion that software patents are necessary for progress: Stop for a second and think about what you're looking at. It's a web page, right? Your web browser is definitely slick technology. The web server on the other end is too. And there's a lot of intelligent software in the middle handling network traffic. All this innovation came without patent protection. Please do not waste anybody's time saying that software patents are necessary for innovation. That's totally indefensible.

Anonymous said...

Let me put this another way:

Is it possible with current technology to make a cellphone without violating a patent?

The answer is obviously no, in fact there is no way to make a cellphone without potentially violating 5,000 patents.

So how can you say that patents do not stifle innovation when they in fact stifle mere production?

The patent portfolio you would have to have to survive being in the cellphone business would cost billions.

This is wrong and must be stopped.

Aaron Miller said...

well reasoned and spot-on as usual. so what's stopping limiting the protections of "non-practicing entities" right now?

APF said...

You still haven't addressed [one of] what I consider to be the biggest issues with software patents: the great immediate cost in human time and money, upon researching one to grant it, and upon defending it once granted. For surely, these are inevitable.

The patent holder will invoke a great cost to her/himself *immediately* in defending incursions on her/his patent. Many small patent holders surely cannot afford this great cost.

Further, with (as you know) great cuts in government spending, the patent office must be slow in researching the granting and defense of patents. (Are you willing to pay extra taxes to support this endeavor and persuade your representatives of this necessity?) The patent office is already hopelessly behind in its schedule.

Never mind, whether it's right. Is it even possible?

Daniel Tunkelang said...

I commend you on a well written argument, but I strongly disagree with you.

You say "The patent system is designed to encourage innovation by giving a creator a temporary monopoly on the use of an invention. Does that mechanism work in software?"

The answer clearly is no. As I argued in an open letter to the USPTO, software patents do not positively influence decisions by companies, individual entrepreneurs, or investors to invest time, effort, or money in innovation. Software companies and entrepreneurs innovate in order to further their business goals and then file patents as an afterthought. Investors expect companies to file patents, but only because everyone else is doing it, and thus patents offer a limited deterrent value as cited above. In fact, venture capitalists investing in software companies are some of the strongest voices in favor of abolishing software patents.

A world without software patents would be a much better place for software engineers and entrepreneurs. In aggregate, the only people who would lose out are lawyers, NPEs, and incumbents who use software patents as anticompetitive weapons.

I don't deny the possibility that some highly nuanced reform could be better than wholesale abolition. But let's not make perfection the enemy of the good. Software patents as they stand are a terrible tax on innovation. We would be much better off without them.

Information Workshop said...

Michael, you've done quite a bit to clarify the situation, especially to imagine a world without them. Either way, it's essentially a challenge of figuring out a solution that cannot be gamed as severely.

We all know what happened to Google search now that it has been gamed to death. Google search is becoming worthless, filter bubbles and all.

From my information perspective, I see this topic as classic in that it's an incredibly complex, and virtually everyone oversimplifies it, and the result is persistent confusion. Makes you want to pull your hair out.

And I think we all know for a fact, that if the American congress gets involved, the forces at play will water down any legislation and it'll be a wasted effort. We live in a corporate plutocracy now. The solution should bypass congress if we hope to have anything helpful happen.

jeremy said...

As I argued in an open letter to the USPTO, software patents do not positively influence decisions by companies, individual entrepreneurs, or investors to invest time, effort, or money in innovation. Software companies and entrepreneurs innovate in order to further their business goals and then file patents as an afterthought.

I think it depends on how you define "innovation". The way I've heard it defined by Silicon Valley opinion-shapers is that innovation isn't just having a good idea. Innovation is being able to both have an idea and implement that idea at scale. Execution. Product-building. In the here and now.

And if that's the way you define innovation, then I agree -- software patents do not have an effect on innovation. People are too busy executing, to busy focusing on the here and now.

But there is another view, a more basic research view. In that view, the things that you're trying to invent do not yet have a market. Maybe you'll be able to create one, for your new idea. Maybe you won't. But until you do, it might take years to get the idea to the point where (1) it works as well as you want it to work (parameter tweaking), (2) the market develops, and (3) it's scalable.

In the meantime, if someone else sees your idea, because perhaps they've hired away someone at your company working on that idea, and are able to make it scale much quicker than you can, you're going to feel ripped off if you've got no protections on that idea. Correct?

So I am neither agreeing or disagreeing that the current state of software patents is or isn't broken. I am simply saying that if you believe in nothing but "innovation" (the concept that idea is irrevocably and inextricably tied to immediate execution on that idea), then you will of course not believe in software patents.

However, if you believe that there are situations in which there is a gap of time between idea and execution, whether because the market isn't ready, or because you've got the basic structure of the idea but haven't finished tweaking all the parameters, then it would make sense to want some sort of protection on that idea, as you necessarily slowly take it to market. Just because it takes 5 years to get there, 5 years before the idea eventually becomes the "innovation" (execution), doesn't mean you shouldn't have the right to protect the idea itself.

The protection mechanism might not have to be software patents. Again, I'm not addressing the patent issue, directly. I am simply pointing out the difference in understanding between what "ideation" and "innovation" means.

Anonymous said...

Any software company that you start can be shut down by somebody else that owns a software patent. Thus software patents do start-ups more harm than good. Speaking as one who has had their once-successful start-up killed by a patent troll.

Markusn said...

While I like your suggestions, let me disagree with the broad notion you create here.

You filed for a patent. In 2011. Because you found something groundbreaking that nobody else has thought about before?
1. There is no physical way you can find that out. The biggest problem we have today are the myriads of patents that were posted starting in the last two decades. Do you believe your lawyers when they tell you they did their "patent research" and found yours is really new? Or are they really saying "yah. They are so overloaded it will slip through"?
2. An often neglected part that causes so much furor these days is the "non-obvious" definition of a patent. In a highly connected world, it should be very tricky to come up with something so new that it is deemed "non-obvious" and yet it happened over and over again in the last decades, when the big rush happened. It is not that we have so many patents. It is that we have so many patents that shouldn't exist.
3. Let's give you full case of doubt: You came up with something so fresh, so non-obvious that nobody else ever thought of (and you still think someone will want to buy that, but that's another story ;). You will instantly violate a whole lot of existing patents, no matter what you do. And you will be outnumbered by those, they will most likely be meaningless and yet can be fully used to sting you. Do you really feel comfortable about the overall patent situation of your startup? To fight that aspect btw I love the idea of the peer review system suggested in another comment.
4. You quote a case of the seventies where patents helped an entrepreneur. Here I fully agree with you, the system has (had?) merits. But the thing is: Nobody complains about the times when patents worked and the system did not get gamed. Yes, those posts out there are hot-blooded at times but for a good reason: The system got gamed and perverted into oblivion and that happened the last two decades and not before. And it is not clear if a few small changes can really change that industrial gaming we are seeing by a small group of leeches.
5. To conclude this: It is great to hear a voice of reason and your suggestions make a ton of sense, but right now this is about public perception and if you read your comments, you should have a glooming feeling of "what have I done?". Because they echo is "ah. all not so bad. probably just media and a few guys overreacting". And that is too far from the truth.

So just my 2 cents, but I hope I was able to counter the notion that these days there is a case anymore for software patents.
Me, that is: Ramped a successful startup, got sued by a patent troll once, got two patents granted in my life that I should never have gotten granted because they were MORE than obvious. When HP bought my startup, they still took them :) Working on mobile apps now, seeing my independent, entrepreneurial, job-creating peers left and right sued and completely demotivated by trolls every week. Fearing it will all too soon be every day.

alex said...

Michael, excellently written post as usual.
I understand your point how start-ups benefit from software patents in terms of their valuation, but small companies who get sustainable business from software products?
In Europe, small companies have been a main driving force against software patents, because they say that software patents are often so generic that you need a lot of patent cover for most new software.
Big companies can afford big patent pools and licensing. A small company may have one great patent but it's not worth much compared with what it would need to license to protect its product.

So from a public interest point of view, software patents are good for some patent holders but not for others.
Does that promote innovation? Probably yes.
Could there be a more effective way (outside the fixes to the current system you suggested)? Probably yes.

Anonymous said...

Here's the best argument against software patents:

Software is, at its heart, a set of instructions for a processor to complete. Game instructions are not patentable, only copyrightable and the game is trademarkable, but the rules and instructions themselves are not patentable. Instructions that complete a task are "algorithms", and algorithms (as held by the SCOTUS) are math. Math is not patentable, algorithms are not patentable, instructions are not patentable, and software programs are not patentable.

There. No references to free/open software, no insisting that software should be free, and there is plenty of innovation in games, and there was plenty of innovation in software before people thought it was patentable.

Michael Mace said...

Ahhh, what a cool discussion. Thanks, everybody.

Before I get to the comments, I wanted to note another interesting post on this subject, by Nilay Patel over at This is my next.... I think it's a very good read.


Bryce wrote:

>>A partial solution to this I would see would be that firstly the time frame is reduced to a more appropriate time period for the software industry (even 5 years is a long time).


Interesting idea. I don't know if five would be enough (it sometimes takes years for a startup to gestate, contrary to the popular image). But ten years might do it. That's probably long enough to have the effect of stimulating invention, which is what we need from a patent system.


>>Then I think that if the defendant wins they should have their costs paid by the prosecution.

But would that make it impossible for a small company to sue to enforce a legitimate patent? Hmmm, I want to think about that some more. In practice, it's hard for a small company to sue to enforce a patent anyway, so maybe this would not cause much harm.


>>I think the simplest solution to this is stated as being "tried by a jury of your peers". Have a trial with a jury of software engineers, if they can understand the patent, and think that it is a worthwhile patent in terms of being new / non-obvious then I think its a valid patent.

I like this a lot.


DanG wrote:

>>The patents office is under-staffed, and cannot be expected to have all the technical knowledge to make quick, correct decisions (which slows down the whole process). Peer-review works in academia so I don't see why it can't transfer to patents.


Nice perspective.

I think that if we get creative about modernizing the patent system, we can do something a lot better than just abolishing patents. Getting that through Congress is a bigger problem, but in my opinion we have a better chance of redesigning the system than we do of abolishing it. Abolition would affect the value of too many companies, so I doubt it would be possible to enact.


Scott wrote:

>>We do need protection for the little guy. Still, I wonder if the existing system is the right tool for the job.


The system needs to be fixed. The creative ideas you folks are proposing here have convinced me of that.


Peter Daly wrote:

>>"Without the patent, I think it could be open season on us the moment we announce our product."
If that is really the case, then I don't think what you want to patent should qualify for a patient. What you said implies that your product "idea" can be patented.


Then I probably didn't explain it well. We worked with a patent attorney who's done a lot of startup work, and he felt it's a good filing, although of course you'd expect him to say that. Once we announce the product, you can judge for yourself.


>>In theory, nobody can develop ANYTHING today that probably doesn't infringe on hundreds, if not thousands, of issued software patents.

I don't know if your numbers are right, but yes I agree that it's hard to know when and where you're infringing.

I think it's good to distinguish between the theory of the patent system and how it's actually enforced. In Paul Graham's excellent piece, he made the point that in practice startups are rarely sued for patent infringement because there's no way to get significant damages from them. So in practice, the system has been flexible enough to give startups the room they need to grow. That's why I agree that patent trolls are a problem -- some of them are going after startups in ways that distort the system.

Michael Mace said...

Anonymous wrote:

>>holding one patent against a powerhouse company will certainly not protect a small company unless it has access to a warchest for legal fees


Actually, most big companies are very risk averse on legal issues, because they know that there are a lot of contingency attorneys who will sue them for a share of the damages.

If you want to understand why, look what's happening to Google in the Java case.


>>To me it seems that if you can be sued as a business tactic then the system is rotten. So why not get rid of it?

Anonymous, that's an argument to get rid of lawsuits, not patents. Every area of civil law can be abused in this way.


Anonymous wrote:

>>I concede that patents are useful for reassuring ignorant investors.


No, they're useful for reassuring risk-averse investors -- and in my experience all investors are risk-averse.


>>Software patents keep small companies small, because once they get big they will get sued.

No, once they get big they generally get bought. I would be very, very happy to get our startup big enough that we're a potential lawsuit target. So would our investors.


Anonymous wrote:

>>The answer is obviously no, in fact there is no way to make a cellphone without potentially violating 5,000 patents.


Actually, I think the patents you need to make a cellphone are pretty readily licensable. It's channel and marketing issues that do the most to inhibit new cellphone companies.

In smartphones, the situation is much less clear. But that's not just about patents -- it's about some companies (primarily Apple) using all techniques they can to inhibit competition.


>>So how can you say that patents do not stifle innovation when they in fact stifle mere production?

Patents inhibit competition, by definition. That's what production is.

But on the whole I think they promote innovation.

Let me flip it around, if there was no patent protection would companies invest as heavily in cellphone innovation? I doubt it.


Aaron Miller wrote:

>>so what's stopping limiting the protections of "non-practicing entities" right now?


I think the law needs to be changed. Mark Cuban made a plea for this at the end of his essay. I haven't had enough time to study this part of the debate, but I endorse that part of his post.


APF wrote:

>>You still haven't addressed [one of] what I consider to be the biggest issues with software patents: the great immediate cost in human time and money, upon researching one to grant it


Eh. It cost us far under $10k to file ours. We got a first-time discount from the attorney, and he asked me not to disclose the fee, so I won't be more specific. I think that future filings would probably cost us about $10k. That's a lot of cash, but not horribly prohibitive if you have some angel money. More importantly, you can file a provisional patent (protects you for a year) for about $300. So you do a provisional when you start work on the startup, and make sure that within a year you have enough angel money to convert the provisional to a real filing.


>>and upon defending it once granted. For surely, these are inevitable. The patent holder will invoke a great cost to her/himself *immediately* in defending incursions on her/his patent.

Nope, not inevitable in my opinion. For a startup, I think the main effect of a patent is that it inhibits a big company from copying a software invention outright. It's the risk of potential enforcement that scares them off.

>>Further, with (as you know) great cuts in government spending, the patent office must be slow in researching the granting and defense of patents. (Are you willing to pay extra taxes to support this endeavor and persuade your representatives of this necessity?)

Yes.

Michael Mace said...

Daniel Tunkelang wrote:

>>I strongly disagree with you.


That's cool. As long as folks are polite about it, disagreement equals good discussion. Besides, you signed your real name, which gives you immensely more credibility in my eyes. So please disagree away...


>>Software companies and entrepreneurs innovate in order to further their business goals and then file patents as an afterthought.

Not in my case, for what it's worth.


>>Investors expect companies to file patents, but only because everyone else is doing it,

You just described almost all behavior of investors. Nevertheless, an expectation is an expectation, no matter what the motivation for it.


>>venture capitalists investing in software companies are some of the strongest voices in favor of abolishing software patents.

Some are, some aren't. As I said in my post, I think the folks who say patents are not useful for software startups are often thinking of a particular type of startup (consumer web apps) that is popular among the VC community at the moment.

I'm not saying that's you; I'm saying I think it applies to some of the VCs making that argument.


Information Workshop wrote:

>>We all know what happened to Google search now that it has been gamed to death. Google search is becoming worthless, filter bubbles and all.


Neat analogy. So do we get rid of search engines, or try to fix them? I still get a lot of utility out of Google, but I'd love to have a better alternative, and I know a lot of companies are working on it.

Would they be doing that work if they knew they could not protect it with patents?


>>And I think we all know for a fact, that if the American congress gets involved, the forces at play will water down any legislation and it'll be a wasted effort.

If that's the case, then the folks arguing for abolition are wasting all of our time. I think we have a realistic shot at some sort of reform, but we'll need to push.


jeremy wrote:

>>I am simply pointing out the difference in understanding between what "ideation" and "innovation" means.


Very nicely put, and I agree.


Anonymous wrote:

>>Any software company that you start can be shut down by somebody else that owns a software patent. Thus software patents do start-ups more harm than good. Speaking as one who has had their once-successful start-up killed by a patent troll.


That sucks that your company was killed by a troll. It's awful, and I sympathize.

I think the best answer is to kill the trolls, not the patents. But I do not blame you for feeling the way you do.

Michael Mace said...

Markusn wrote:

>>Do you believe your lawyers when they tell you they did their "patent research" and found yours is really new? Or are they really saying "yah. They are so overloaded it will slip through"?


No, I also did my own research. A lot of it. I can't be sure that I found everything, but I'm pretty confident. The role of your lawyers, in my opinion, is to make sure you're in compliance with the law, including that your patent filing is properly written. I don't think you should expect them to do your thinking for you.


>>It is not that we have so many patents. It is that we have so many patents that shouldn't exist.

Yes. I think you and I agree on the peer review idea.


>>You came up with something so fresh, so non-obvious that nobody else ever thought of (and you still think someone will want to buy that, but that's another story ;).

Hey, I am an entrepreneur. I KNOW they will buy it. ;-)


>>Ramped a successful startup, got sued by a patent troll once, got two patents granted in my life that I should never have gotten granted because they were MORE than obvious. When HP bought my startup, they still took them :) Working on mobile apps now, seeing my independent, entrepreneurial, job-creating peers left and right sued and completely demotivated by trolls every week. Fearing it will all too soon be every day.

Thanks for sharing your pain, and I agree with you that the trolls are a serious problem that needs to be addressed.


alex wrote:

>>In Europe, small companies have been a main driving force against software patents, because they say that software patents are often so generic that you need a lot of patent cover for most new software. Big companies can afford big patent pools and licensing. A small company may have one great patent but it's not worth much compared with what it would need to license to protect its product.


Great question, and I don't know enough to answer it in detail. I'm speaking from the US experience, where (until the trolls) small companies were generally not sued for patent infringement.

I'm open to the idea of some sort of compulsory licensing program in cases where the patent coverage is tied in a knot.

By the way, this situation you describe applies to all patents, not just software.


Anonymous wrote:

>>there was plenty of innovation in software before people thought it was patentable.

Was there?

Have you looked at the rate of software app innovation in the 1950s-1960s? Have you looked at the responsiveness of software companies to customer needs before and after software patents? Goetz made a pretty convincing case that app development was a comparative backwater prior to patents, and he was there at the time. There definitely was an explosion in app innovation after the IBM unbundling decision; that is very well documented. The question no one can answer is what percentage of that effect was due to patents as opposed to other legal changes such as antitrust.

Anonymous said...

"I think software patents play an important role in encouraging innovation, especially by small companies. The loss of them would make it harder for small companies to survive, and would discourage fundamental innovation in software."

Hogwash. Do you think that your company's patent (ostensibly in the field "information management") would provide any sort of protection were a well-arsenaled market leader to target you? You observe that litigation is too expensive for a small business, yet you've invested in something that would only be useful in litigation. It's the best you can manage -- and as such, a comfort to VCs, but it is little more than intellectual property security theater.

Your personal anecdote is neither here nor there, as it is untested. Offer a real example. Show us a startup or small business that successfully defended such an assault.

Greg Minton said...

I wrote my response here: Response to a Patent System Apologist.

This post was well-written, but presented two hypotheses in the intro which you did not prove in the body of the piece.

David Shellabarger said...

I just wrote a article today on why we don't need software patents.

I agree with the protecting yourself against the big guy with physical inventions, but I don't think software patents justify the cost.

The internet levels the playing field. If you think your idea is easily copyable then you have already lost.

You can read my article at: https://plus.google.com/u/0/107534991451098430533/posts/HbcwP6MUQNW

Mark said...

The problem I have with software patents (and I'm not terribly knowledgable on the topic, and have yet to find a good, technical discussion of what makes for a valid software patent) is that many seem to be more about the mere idea of something (i.e., Amazon's one-click ordering patent) than about the mechanisms to accomplish something. In the case of the Amazon patent, I can see Amazon protecting the specific processes that make their one-click ordering system unique more effiicient (or whatever), but it seems like Amazon has gotten away with patenting the very idea of a one-click ordering system itself. That seems like copywriting the idea behind a novel (say, a love triangle in the Civil War-era South) as opposed to the novel itself (Gone with the Wind).

Scott said...

Thinking more about it, I still disagree.

1. They don't protect the 'little guy'. If I have an idea, I can't afford a patent, and I can't afford to defend one. I have to get (rich) lawyers involved and (rich) investors involved - if I can - and the chances of me actually seeing a fair return aren't great. There are no 'little guys' in this game.
2. If you're good at ideas, and someone else is good at execution, why not go the efficient route and sell your idea? If not yet, companies that fairly reward people for their ideas will win out.
3. That it might 'stifle innovation' is not an argument. Could anyone argue that we really need a lot more innovation at the moment? How about we take a moment and try to responsibly deal with some of the massive 'innovation' we've been doing in the last 200 years.

TropicalCoder said...

This is exactly the kind of argument Government buys into. I once watched a video interview of Aneesh Chopra, who at that time served as Virginia’s Secretary of Technology (and is now the first Federal Chief Technology Officer of the United States.) In the video he talked proudly of Virginia's investment in seed capital for startups "with IP". (Startups using Open Source need not apply.) This is an attitude seen by Government and investors everywhere. How do you evaluate the potential of something a nebulous as an idea?

For Government and investment purposes, evaluating a company by the IP they hold has become a shortcut to solving that complex equation.

However, it is a false economy, because more often than not, software patents represent claim staking rather than genuine innovation. Those involved have become confused, because there is no monopoly rights granted under the Constitution of the United States for the first to claim the use of an idea. There is only a monopoly granted for inventions, and this is granted for the purpose of promoting the art. These "software ideas" more often than not are ideas that any person skilled in the art would come up with, given the same problem to solve.

The false economy based on software patents has become a self-sustaining feedback loop that short-circuits real innovation. A startup comes up with an idea that can generate a lot of IP so they get the attention of investors. Soon the IP becomes more valuable than the product they set out to develop. It becomes more profitable to sell the IP than to continue to invest in the startup. Now this IP goes on to the market where it may be bought up by companies like Apple to eliminate competition, or by trolls to to put a tax on innovation. So there we have the complete perversion of the original monopoly rights granted. Instead of promoting the development of the art, it is stifling it.

Anonymous said...

i have a big problem with companies that wait for a product to become big before their patent lawsuit.

there should be a very short time limit once a product comes out for patent cases, the lawsuit should be right away.

it is simply wrong to wait for a products success and than launch the lawsuit.

Anonymous said...

"it's to restrict the right of "non-practicing entities" (patent
trolls) to sue for patent infringement."

OK, how do we do that?

"My advice: If it bothers you, stop reading the news stories about it."

Sure, because then the lobbyists will be the only ones bugging the
lawmakers, right? That's an irresponsible suggestion in my view. If you're bothered by something, you should actually read much more about it (from both sides of the issue obviously). Not ignore and pretend it doesn't impact you. This is a political issue and every vote counts, not just lobbyists...

As a customer, I care a great deal about patent warfare, if it
distracts companies that are working for my benefit and if delays
release of new products. We the society could be moving much faster
without these distractions.

"Goetz makes the case that application innovation was slow and
unresponsive to users in the decade before software patents, and
accelerated dramatically in the decade after."

The fact that innovation actually accelerated only after computer
hardware evolved enough to become affordable to companies (culminating
in the personal computer) is of no importance then?

You seem to like playing the "what if" game, and I thank you for that.
Now play it with me: what would the Internet be like today if Sir
Tim-Berners Lee had patented HTTP and HTML? Because I can tell you right now that I firmly believe that the Internet only became what it is because it was a free-for-all level playing field. Your own company probably only exists at this point because we have this wonderful invention. There were other proprietary alternatives at the time (AOL, CompuServe, etc) and even though they were successful, they would probably not have evolved as fast or reached as far as the Internet did, and would not have provided so many opportunities for innovation.

Michael Mace said...

There's more interesting stuff that I need to respond to, but one of the anonymous comments was so intriguing that I couldn't resist jumping on it now.

>>what would the Internet be like today if Sir Tim-Berners Lee had patented HTTP and HTML?

Actually, I think I can answer that one. Somebody did invent something that I think was better than HTML, years before it. That somebody kept it proprietary, and as a result it's now an obsolete curiosity.

If it had been set free, I think it would have dominated the evolution of the web.

That thing was called Hypercard.

Apple chose to keep it proprietary, and as a result we ended up with a different, open standard dominating the web. If HTML had been proprietary, like Hypercard, some other standard would have emerged.

Companies often have a choice: Keep something proprietary and make money from it, or make it free and try to set a standard. There is no right answer in all cases, but fortunately we as an industry can walk down both paths.

I don't think all software should be forced to be open any more than I believe all software should be forced to be proprietary. Let the authors choose what they want to do, and let the market sort it out.

Walt French said...

Great, levelheaded discussion. Thanks.

I think it's helpful to also see how the world worked before patents: sources I've seen suggest Trade Secrets were used, strengthening economic power into Guilds of people who agreed to keep secrets in the family. No doubt, "enforcers" took care of those who struck out on their own in that environment. Patents were apparently invented ( ;-) ) as a way of SPEEDING innovation and disseminating new ideas; perhaps the biggest problem is that software implies much more rapid innovation and patents need to expire quicker.

The other argument for them recognizes that without patents, not only would you not have disclosure of inventions, you would also have a blow to the whole notion of intellectual property. In a world without patents, Apple or Microsoft can take my idea and incorporate it into their work. Today, Reader and Instapaper are examples of such copying, and the only defense would've been, had the inventors/developers been of the mind, to have patented their clever hacks.

Finally, a rebuttal to those who think every non-trivial piece of code violates patents: every non-trivial piece of code appropriates hash lists, quicksorts, object-oriented ideas, invented by others. But although coders today take these for granted, many show the highest levels of effort and love poured into their development, effort that could only have been accomplished where the author was on a public payroll, such as a university. Today's entrepreneurs are taking social goods and using them for private gain, then complaining when other private individuals want compensation for their efforts. If today's developers want to build a base of great software and give it away, based entirely off other free work, great! But true open-source advocates are much more careful about the separation between free and private.

Clayton Long said...

As a software professional, I find it incredible (in a bad way) that software can be patented. Software is essentially just ideas. Every piece of software can be broken down into a mathematical representation. Because that's all it is: math. And what has happened with software patents is you have companies that are getting exclusive rights to what are essentially mathematical building blocks that are applied in specific ways. Could you imagine if a patent was held on the distance formula or the Pythagorean Theorem or Calculus? But that is what has happened with software.

As someone who contributes to the existing software body of knowledge, it's scary to think that there are a million different ways that I could innovate & contribute only to have some broad sweeping software patent come out of the woodwork and threaten my work for merely trying to make a contribution. That not only discourages innovation, it inhibits it.

-Clayton
http://www.claytonstechnobabble.com/

Anonymous said...

I suggest reading the article: "Why do software startups patent (or not)?", Pamela Samuelson, Communications of the ACM, vol.53 nr.11, November 2010. It summarizes the main results of an empirical study regarding this matter.

As somebody who was heavily involved in the patent committee of a large corporation, I would like to point out one issue: in today's global markets, patents are way too expensive for small corporations. If you have an invention that you intend to market internationally, or for which copy-cat competitors might arise in relevant markets, then the 10k US$ mentioned will be totally insufficient.

Once, a patent lawyer circulated an Excel sheet with the costs of filing a patent in a long list of countries, over the lifetime of the patent. I was a bit shocked to realize what the financial implications of listing those ISO 3166 country codes in our patent decisions meant. If your targets comprise the technologically advanced markets, i.e. USA, Canada, the whole of Europe, Australia, New Zealand, Japan, Taiwan, Singapore, South Korea, Malaysia, as well as the big relevant markets or originators of software (India, China, Russia, Brazil, Indonesia, plus some additional relevant countries in Africa, Asia and America), then you must be ready to disburse a million US$. All these different registration fees, translations, local patent searches, renewals, etc, add up to surprising amounts. At that time, I also had an interesting discussion with a VC. When the topic "patents" came up, he sighed. He had just a case of a startup with a very interesting innovation that looked nicely patentable -- and he was to have yet another meeting to assess whether it was strategically worth putting more money in that venture just for the sake of a patent.

Michael Mace said...

That's an outstanding comment, anonymous. Thanks for posting it.

I'll try to check out the article. It would be great to have some objective data.

You make a really good point about global patents. When I was working on the patent for our startup, the strong advice from our advisors and lawyer was not to bother with international software patents. Their advice:

"The US is such a large part of the software market that a patent here will force any big company that wants to copy you to do a deal with you instead. Besides, software patents outside the US are very hard to enforce."

That logic made sense to me, although I'm told that some VCs want to see international patents as well. They must have a lot of extra money lying around, because as you said international patents are crazy expensive. In many countries they cost more than the US, for a much smaller population base.

For a large company that wants global patent coverage, it must be a big expense (and a bureaucratic quagmire, since the rules are subtly different from country to country).

Anonymous said...

I just read about a company that claims to own a patent for posting product information to social websites.

How on earth could such a thing be beneficial for the software industry? The problem is that these patents are so wildly out of scope that anyone writing a simple PHP script could be facing a lawsuit.

Software patents do not protect startups. If anything, they are threatening their existence.

The whole thing is out of hand and needs to be dealt with, one way or another.

Jose said...

Wow!!, Michael, you are really smart and using sleights of hand to support your argument, things like this:

"Goetz makes the case that application innovation was slow and unresponsive to users in the decade before software patents, and accelerated dramatically in the decade after. I agree."

Correlation does not imply causation.I give you one more:

Today there are millions of programmers with access to computers, in the early days there were hundreds, and machine time was super expensive.

In my opinion Software patents are really a bad idea to "protect" startups and small companies, in fact is a method to protect the status quo of the big companies that could "buy" with today position absolute privileges from the state over the future, protected from smart and creative and young, and hard working but poor people.

So your new company could patent a revolutionary way of talking to computers but MS or Apple have the hundreds of patents over Windows, clicks, gestures, data structs that you need and they can sue you and bankrupt you( and force you to sell your patent to them). Who is going to win?

They could sue you over 100s of bogus patents and you will have to spend money and time and lose focus on what you are doing against it. They have a football team of lawyers and millions of dollars. You don't.

This has a name: "The perfect competition killer", if you can not compete on technical merits, just sue them and kill them.

Software and business patents are patents over ideas, and everybody has ideas.

Real patents are patents over specific methods, it is not just having ideas, but testing and work on them until they work(the hard part).You need to give all necessary paper plans and recipes that let anybody copy you just reading the patent.

On a real patent you give the state something valuable, your knowledge, and you receive back a temporary monopoly.

I read software patents, more than 95%give nothing valuable, no source code(paper plans equivalents) and they claim property over broad and obvious ideas(like web browsing ON a mobile phone).

This gives the layers the power back over technical people.

US of America had tried to make a "do nothing, get all profits" society. Someone else do the hard work, the sweating part and we reap the profits with the financial and now software patents while the "real" industry moves abroad. This only last so long until it collapses.

Seriously, read some 1900s patent and now a 2010 software patent and compare.

Torulf Jernström said...

A well argued case Michael, but I still disagree with it.

You have a good way to split up the problem between big and small companies interacting. With the same split:


*First off, the issue of small companies getting protection from large ones by patenting.

Here I'm in the camp of small companies moving quickly and hence not needing patents. For instance, it was not patents that made YouTube win over Google Video, as far as I know. Yes, I do have a consumer service bias. However, I must say that the Goetz story you cite is the first datapoint I hear about where a small company won based on patents. It would be great to find some hard data in this area on percentage of startups that get in trouble because of patents, and percentage that get real protection from patents.



*Large company patent warfare

I do think it is in the public interest that these cease as well. Our society is wasting precious minds when large companies have armies of lawyers suing each other. They're intelligent people who could otherwise be pushing civilization forward in some constructive way.

Or put another way: fewer lawyers => less overhead at corporations => either lower cost products OR higher company profits (paid out mostly to pension funds) => average people in society benefit


*A third point: Patents vs Secrecy

Patents were originally intended to document inventions in a way that others could learn from them. By now, patents are written in such a cryptic way, that no one learns anything by reading them. It's really just a legal game - not a way of documenting good ideas.

Also, if two inventors come up with the same idea independently, I think it would make sense that both inventors are free to sell their products. Only when one sees the other's invention and then copies it can we talk about 'theft'. Perhaps one solution is to let multiple people patent the same idea, if the patents are filed before the first filing becomes public. Or deem the idea obvious and not patentable in this case.

Disclaimer: I worked 5 years for Nokia, who filed some patents in my name. For 2 years I have been an entrepreneur, and have also filed for some patents now. And I can hardly understand all of my own patents if I read the patent text.

Anonymous said...

I always wondered why large companies lobby in favor of SW patents, when patents cost them so much money. I have a theory now: large companies put experts in charge of any area. For patents, that is the patent lawyers.

It does not matter if SW patents are in the interest of the large company. It IS in the interest of the patent lawyer who decides the large company's strategy in this area.

Tim F. said...

One of the strangest cases of Google dropping the ball: why did they not purchase Sun? Even ignoring beefing up a patent portfolio, it would have made them the stewards of many of the greatest OSS projects in existence. It certainly would have allowed them to avoid their biggest pile of poo at the moment. And it seems clear from emails and memos coming out of the Oracle case that they were very aware of the risk. In hindsight, it seems more baffling than the MMI purchase.

patent litigation said...

Software patents remain unpopular. But instead of advocating for getting rid of software patents altogether, perhaps concerned parties should begin discussions on how to create a software patent that works for developers. For instance, instead of the usual costly, 20-year patent, maybe it's time for an inexpensive, limited, 5-year software patent that reflects software's low overhead and rapid obsolescence? Some other countries offer multi-tiered patent systems; I think it's time the U.S. started discussions in that area.

Anonymous said...

"But that's not just about patents -- it's about some companies (primarily Apple) using all techniques they can to inhibit competition."
Michael, I cannot believe your wrote this. So it is well and good when your startup "inhibits competition" that may come from Google, Facebook or Amazon using patents. It is all in the name of innovation and justified returns for an entrepreneur. When Apple does it, you describe it in this negative, trollish tone. This is inconsistency at best, hypocrisy at worst.

In any case, how can you separate patent system from patent-trolls? Why do think your investors say "good", when you said your applied for a patent? Just "Good, that big company cannot copy us, we'll be able to sustain first mover advantage" or more like "Good, if this company does not pan out we can sell that to a patent-troll and make at least some money." Maybe, by then you'll describe that company as an IP house, instead of a patent-troll.

Overall, it may have started with good intentions, but the patent system today discourages more innovation than it encourages. More often than not, it is a tax by patent-trolls and IP lawyers arguing over vague or obvious patents OR a way for large companies to slow down or shut down smaller competition. It is time we did an ROI type of calculation. I am sure the results would be either negative or negligibly positive. Medicine may the lone exception due to long and expensive development.

Nick Reyntjens said...

I have been designing a very innovative software product for one year now.

Going from initial conception to working concepts took one year.
One year without salary, I have take a very big financial and personal risk... one year no party time... work work work. => Less friends, no GF.

This is how innovative things are created ... some guy crawled in a dungeon and after 5 months crawled back out.

I ask you... do you really think I would do that if it was not patentable? => Thats why you need patents.

Patents protect the risk that a person has taken. Not the effort it took to develop something... this effect in reality is negligible. Developing something far the fist time has risk; for the second time it does not => Not the same thing!!