Patent Attorney Highlights How Intellectual Ventures Syphons Money Away From Innovation

Say That Again

from the it's-not-about-innovation-at-all dept

It’s amazing how many patent attorneys, when you talk to them, will actively volunteer how screwed up the patent system is. While there are still some who make so much money abusing the system that they don’t care, those who actually got into the business because they believe in promoting actual innovation are increasingly admitting that the system is a disaster and widely abused, and rarely instrumental in actual innovation. Venture capitalist Brad Feld has convinced one such patent attorney — who has decided to appear pseudonymously — to write his response to the recent Nathan Myhrvold profile in the NY Times that, yet again, plays up Intellectual Ventures in a very one-sided manner. Feld’s friend, who is writing as “Sawyer” rips the concept of Intellectual Ventures to shreds. The reasoning likely is familiar to our regular readers, as it’s exactly what we’ve been saying for a decade, but it’s nice to see a patent attorney speaking up.

First, he notes the lack of any evidence that patents promote innovation (he suggests there’s an exception in biotech, but the studies there are actually quite mixed). From there, he notes that Myhrvold’s goal has nothing to do with actual innovation or promoting progress, but about building a system that just gets him more money via patents:

Perhaps Mr. Myrhvold recognizes this, because in the article he says “I’m trying to get inventions that kind of respect as an economic entity.” (Emphasis added). IV apparently incentivizes innovation on…inventions? “Inventions” are actually a term of art in patent law, they are the things for which one can legally be granted patent rights. IV, therefore, seems to admit that it wants to enforce patent rights so that we can…have more patents. Mr. Myhrvold wants to create an entire economic category based on payments to entitles that don’t build, produce, sell, etc, any products, or create anything of value (i.e., that don’t innovate, at least in any useful way that advances human progress), in exchange for not being sued on exclusionary patent rights.

Let’s internalize that for a second. IV has collected over a billion dollars so that it can get more patents. They make no products. They apparently don’t funnel ideas to anyone else who makes products.

This is a huge problem if the point of the patent system is to create incentives for actual innovation, as the Constitution requires. But what’s the impact of a system that encourages patents for the sake of encouraging more patents? Well, it drives money away from actual innovation:

Now think about where this money would go otherwise. Microsoft, Apple, and Google, not to mention other large technology companies, have sizable legal departments with teams of attorneys focused full-time on managing the 50+ software patent cases they each are a defendant on. My guess is that they individually spend hundreds of millions of dollars defending and settling such suits per year. Most of the suits are backed by investment funds through shell entities. Many of these funds are backed (with no transparency) by traditional investment banks and hedge funds. What we have, then, is a net outflow, on a yearly basis, of at least several hundred million dollars, from technology companies who “make stuff” and unquestionably innovate, to speculators and investors who don’t. I don’t think that baseline fact is something anyone would question. IV dresses that up in the clothing of “invention,” but they’re really just out to capitalize on a broken patent system like every other non-practicing entity (“NPE” as we call them — they hate being called trolls). What kinds of cool products and technologies would that money be used to develop? We’ll never know, I suppose. At the very least we can presume that the pace of innovation in technology is being slowed by this net outflow of capital to non-innovating parties.

And, despite what the regular peanut gallery of patent system supporters will claim in the comments, these lawsuits aren’t just focused on big companies, but the really innovative startups that are being strangled by patent lawsuits:

One thing I haven’t mentioned is that it isn’t just big companies who get sued. Startups, especially in software, are constantly targetted by patent suits, especially by pseudo-competitors who want to kill more innovative upstarts. How many great companies have been sunk by the costs of patent litigation? Think about it this way — if Facebook had been sued on a social networking patent within a year of its existence, would it be around today? It’s doubtful.

Sawyer also points out that, contrary to claims of the system’s supporters, that “having a patent doesn’t mean that you really invented anything, or that the person you’re suing would actually infringe in a rational world.” Some of you may have seen some of the regular commenters here claim that there the only way to prove you’ve invented something is if you get a patent on it — and that anyone accused of infringing has clearly “stolen” the idea. Neither of those things are true. What Sawyer is pointing out is that getting a patent is just a sign that you were able to convince the USPTO (through a “pseudo-adversarial administrative procedure”) that you deserved such a monopoly privilege. It doesn’t mean you actually invented anything — and it certainly doesn’t mean you’ve done anything to promote the progress or innovation in general.

Filed Under: innovation, nathan myhrvold, patents
Companies: intellectual ventures