iPhone App Developer Backlash Growing

from the openness-is-a-good-thing dept

Early on, we predicted that Apple's walled garden approach to apps for the iPhone would lead to developer backlash. Even if it was successful at first, the obvious trajectory was that it wouldn't just lead to problems that drove developers away, but it would eventually limit application innovation, just as other competing platforms were getting good enough to match Apple's. We might not be all the way there yet, but the evidence is growing that the backlash is getting serious. Slashdot noted that some respected developers are ditching the iPhone app store and reader Andrew Fong alerts us to Paul Graham's well argued explanation of why Apple's setup is bad for developers, bad for innovation, bad for consumers and bad for Apple.

To summarize, it's bad for developers because they're distanced from their users, and can't quickly make changes and updates, since each change needs to go through Apple's long, mysterious and arbitrary approval process. On top of that, by creating a very real risk that Apple might not approve an app, developers have less incentive to put in the time. It's bad for innovation because you are putting a gatekeeper in front of any innovation. It's bad for consumers, because they can't do what they want and often the apps they get are lower quality than they would be otherwise, because developers cannot rapidly respond with necessary improvements and changes. Finally it's bad for Apple because it's driving away some talented developers who are useful in making the iPhone so powerful. As those developers move to other platforms, it will help those other platforms catch up, and potentially surpass the iPhone. But, perhaps more importantly, it's bad for Apple because it risks Apple's overall reputation. It makes it harder to hire top engineers:

There are a couple reasons they should care. One is that these users are the people they want as employees. If your company seems evil, the best programmers won't work for you. That hurt Microsoft a lot starting in the 90s. Programmers started to feel sheepish about working there. It seemed like selling out. When people from Microsoft were talking to other programmers and they mentioned where they worked, there were a lot of self-deprecating jokes about having gone over to the dark side. But the real problem for Microsoft wasn't the embarrassment of the people they hired. It was the people they never got. And you know who got them? Google and Apple. If Microsoft was the Empire, they were the Rebel Alliance. And it's largely because they got more of the best people that Google and Apple are doing so much better than Microsoft today.

As for why Apple is making this mistake, Graham blames Apple's general view of the market:

They treat iPhone apps the way they treat the music they sell through iTunes. Apple is the channel; they own the user; if you want to reach users, you do it on their terms. The record labels agreed, reluctantly. But this model doesn't work for software. It doesn't work for an intermediary to own the user. The software business learned that in the early 1980s, when companies like VisiCorp showed that although the words "software" and "publisher" fit together, the underlying concepts don't. Software isn't like music or books. It's too complicated for a third party to act as an intermediary between developer and user. And yet that's what Apple is trying to be with the App Store: a software publisher. And a particularly overreaching one at that, with fussy tastes and a rigidly enforced house style.

If software publishing didn't work in 1980, it works even less now that software development has evolved from a small number of big releases to a constant stream of small ones. But Apple doesn't understand that either. Their model of product development derives from hardware. They work on something till they think it's finished, then they release it. You have to do that with hardware, but because software is so easy to change, its design can benefit from evolution. The standard way to develop applications now is to launch fast and iterate. Which means it's a disaster to have long, random delays each time you release a new version.

My guess is that there may be another reason: the perfectionist attitude at Apple. They don't want "bad" apps getting into the store, and certainly some people appreciate that. But the store has 100,000 apps right now, and most people are never going to see the vast majority of them. Having a few "bad apps" get in isn't a huge issue at this point, and certainly user-level reviews can help deal with that issue anyway. And, even if that is the biggest concern, why not at least allow non-approved apps to be viewed and downloaded, just without an official "apple seal of approval." Perhaps it made sense when Apple was first launching the store (though, even that seems questionable), but if it wants to continue to lead the market, it needs to break down that wall.

32 Comments | Leave a Comment..

The More Innovative You Are, The More You Get Sued; Yet Another Patent Lawsuit Over Shazam

from the aren't-patents-great? dept

Earlier this year, we noted that Apple and AT&T had been sued for patent infringement concerning Shazam, the popular service for identifying music. At the time, we noted how this was a clear demonstration of the difference between just the idea and the actual innovation. Shazam has been around for ages, and despite having a good idea (ability to identify music just by hearing it), it struggled for many, many years until the iPhone came along, and there was a platform on which its concept made sense. During that time Shazam kept trying out new things and improving its service. The basic concept behind Shazam (identifying music) isn't that interesting. It was all the work that Shazam kept doing over the years to find the right mix of things that consumers wanted that made it worthwhile.

But, of course, patent holders continue to insist that it's the original idea only that's important.

So, once again, Shazam's service is involved in a patent lawsuit, this time from Digimarc, who has sued Shazam directly, claiming infringement. Now, Digimarc claims that Shazam is infringing on its patents, even though Digimarc does not offer a similar service at all. In fact, Digimarc is in an entirely different business: it's really a DRM company who wants to try to stop people from sharing or appreciating content, by locking it down. More recently, Digimarc has been focused on patenting its watermarking concept (despite plenty of prior art), and going the lawsuit route.

So, we have the tales of two companies who have been around for quite some time. One is focused on providing unique and compelling solutions that make consumers' lives better. And the other is focused on locking things down and talking about its intellectual property. Guess which one's getting sued by the other? So, please, explain again how patents encourage innovation? Once more, it looks like patents are being used to prevent actual innovating by those who prefer to lock up ideas.

7 Comments | Leave a Comment..

Explaining The Innovator's Dilemma... In Two Minutes With A Whiteboard

from the out-innovate-yourself dept

As you may recall from last month, UPS recently asked us to create a series of videos, where we explain some of the stuff we talk about here on Techdirt on a regular basis in under two minutes, using a whiteboard. The first video was about the economics of abundance and got a great response. The second video is now up, and it's an attempt to explain the Innovator's Dilemma, based on Clayton Christensen's must-read research. If you're unfamiliar with it, it explains how difficult it is for many companies to adapt to changing markets, and is a good framework for understanding both why some companies are so slow to adapt. More importantly, it provides a good system for thinking about your own company and understanding how to adapt and implement new ideas rapidly:

Again, with only two minutes, I had to simplify things down a bit, but hopefully it will kick off another good discussion on the innovator's dilemma and how to deal with it. We still have one more video to go, which I believe will be posted sometime next month. And, yes, once again (though, it should be obvious), UPS sponsored these videos, though we had free rein in creating the scripts -- which should be quite obvious as the topic is one we talk about here frequently enough.

35 Comments | Leave a Comment..

Running The Clock Backwards To Judge Technological Progress

from the would-you-trade-one-for-the-other? dept

Kevin Donovan points us to a short but interesting essay by Steven Pinker, on technological progress. In it, he discusses the popularity of moral panics over new technologies, and claims by folks who say that Google/text messaging/the web/email/etc are "making us stupid." He suggests a rather simple test for determining how silly those are, which includes seeing whether or not you'd exchange what you have today for what you had in the past:

I would suggest another way to look at the effects of technology on our collective intelligence. Take the intellectual values that are timeless and indisputable: objectivity, truth, factual discovery, soundness of argument, insight, explanatory depth, openness to challenging ideas, scrutiny of received dogma, overturning of myth and superstition. Now ask, are new technologies enhancing or undermining those values? And as you answer, take care to judge the old and new eras objectively, rather than giving a free pass to whatever you got used to when you were in your 20s.

One way to attain this objectivity is to run the clock backwards and imagine that old technologies are new and vice-versa. Suppose someone announced: "Here is a development that will replace the way you've been doing things. From now on, you won't be able to use Wikipedia. Instead you'll use an invention called The Encyclopedia Britannica. You pay several thousand dollars for a shelf-groaning collection of hard copies whose articles are restricted to academic topics, commissioned by a small committee, written by a single author, searchable only by their titles, and never change until you throw the entire set and buy new ones." Would anyone argue that this scenario would make us collectively smarter?

The reason technology progresses the way it does is because it is progress. Otherwise, people wouldn't be using it. We use Wikipedia because it has many features that make it more useful. We use email/Twitter/text messaging/mp3s and other technologies for the same reason. They make life better in some way. Otherwise, they wouldn't get used at all.

19 Comments | Leave a Comment..

Once Again: The Number Of Patents You Hold Does Not Equal How Much Innovation You've Done

from the please-stop-that-myth dept

We've complained in the past when companies, the press and analysts try to use number of patents as a "proxy" for innovation. It's quite misleading -- and various studies have made that clear. You can have tremendous innovation without patents, and you can have tons of patents, without any real innovation. Yet, as reader Nick points out, a report looking at the alternative energy auto space dings Ford for "lagging" in "the alternative energy race" because it doesn't have as many patents as others.

This is a real shame, because we've discussed before how the massive patent thickets in the hybrid car space have been holding back innovation and development in that space. In fact, Ford had a big tussle with Toyota a few years back after Toyota sued Ford and the two companies wasted tons of money and time in court, until the court finally pointed out that Ford did not infringe. On top of that, Ford has been one of the earlier adopters of hybrid offerings and remains the third largest hybrid seller after Toyota and Honda. So, claiming that it's somehow "lagging" because of fewer patents is quite misleading.

17 Comments | Leave a Comment..

The Death Rattle For Non-Innovators: Asking 'Who Else Is Doing It?'

from the nobody-likes-being-first dept

Taking risks can be scary, because they can fail. But if no one takes risks, then it's pretty hard to innovate -- and that's the situation many newspapers find themselves in. Jay Rosen points us to Alan Mutter's musings on how so many innovative ideas for newspapers have been killed off by the simple phrase "who else is doing it?" Very few people want to be the first. That's why so many newspaper execs have talked about putting up paywalls, but few do (not that I think paywalls are innovative, but it does show why there's so much talk, and so little action). That's not the only thing, of course, but it does highlight that newspapers have been around for centuries without having to do much innovation at all. So, perhaps it's understandable (even if unfortunate) that they've been so slow to embrace the internet in a reasonable way.

5 Comments | Leave a Comment..

Clear And Concise Explanation For Why Software Patents Harm Innovation

from the transaction-costs dept

Tim Lee points us to an excellent discussion at The Abstract Factory blog for why software patents harm innovation (though, I'd argue that the reasoning set forth applies beyond just software patents). The writer, Cog, initially discusses the sort of story that's all too common these days, about some friends of his who build a cool online service, with plenty of important details in the execution and the implementation that make it better and significantly more useful than whatever else is out there... only to find themselves sued by a patent holder, whose own technology includes none of the wonderfulness that makes Cog's friends' product so powerful. From there, he goes on:

One thing that I find extremely frustrating about many legal scholars and economists' approach to patents it that they make two false assumptions. The first assumption is that transaction costs are acceptable, or can be made so with some modest reforms. The second assumption is that patent litigation is reasonably "precise"; i.e., if you don't infringe on something then you'll be able to build useful technology and bring it to market relatively unhindered. As my friend's story shows, both of these assumptions are laughably false. I mean, just black-is-white, up-is-down, slavery-is-freedom, we-have-always-been-at-war-with-Eastasia false.

The end result is that our patent system encourages "land grab" behavior which could practically serve as the dictionary definition of rent-seeking. The closest analogy is a conquistador planting a flag on a random outcropping of rock at the tip of some peninsula, and then saying "I claim all this land for Spain", and then the entire Western hemisphere allegedly becomes the property of the Spanish crown. This is a theory of property that's light-years away from any Lockean notion of mixing your labor with the land or any Smithian notion of promoting economic efficiency. And yet it's the state of the law for software patents. Your business plan can literally be to build a half-assed implementation of some straightforward idea (or, in the case of Intellectual Ventures, don't build it at all), file a patent, and subsequently sue the pants off anybody who comes anywhere near the turf you've claimed. And if they do come near your turf, regardless of how much of their own sweat and blood they put into their independent invention, the legal system's going go off under them like a land mine.

It is hard to think of a more effective mechanism for discouraging innovation in software. I mean, I suppose you could plant a plastic explosive rigged to a random number generator under the seats of every software developer, and that would be slightly worse.

The only thing I'd quibble with is the claim that this is the typical economists' approach to patents. Plenty of very smart economists (including some Nobel Prize winners) agree that the patent system makes no sense. But, other than that, this is quite an accurate description of the problem and the underlying fallacies from those who think the system works. Cog also points out (as we have in the past) that it's ridiculous to claim that the patent system serves a separate purpose in "disclosing" inventions such that everyone can learn from them:

At any software company with competent legal counsel, developers are instructed in the strongest possible terms never, ever to look at a patent, because the tiniest amount of documented influence could be used as ammunition in a lawsuit. The only time a sane software developer reads a patent is when your company's lawyers specifically ask you to help them prove you're not infringing on one. If you ever get wind that there's a patent even vaguely related to your work, you stick your fingers in your ears and run in the other direction. In short, software patents facilitate "conversation" about as well as poison gas bombs do.

What he's talking about is the fact that if you're found to have willfully infringed on a patent, the damages suddenly get tripled. And, showing that you looked at the patent in question is often how patent holders will claim willful infringement. The system is designed such that whatever benefits there may be from "disclosure" have been completely wiped out due to willful infringement damages.

Oh yeah. As for Cog's friends? They're basically screwed:

Now, my friend and his partner have consulted multiple IP lawyers and they've said, "Yep, the law is probably on your side." They have also said, "You're still screwed." The trial would take forever, the legal fees would be ruinous, and in the meantime nobody will invest in a company which has a litigation cloud hanging over it.

So, none of us ever get to see or use the software that they created. That's the opposite of what the patent system is supposed to do.

31 Comments | Leave a Comment..

Nokia Getting Killed In The Smartphone Market... So Of Course It Sues For Patent Infringement

from the if-you-can't-innovate,-litigate dept

Funny how this works, right? Just a week or so after it's first ever quarterly loss and an admission that it totally screwed up in the smartphone market, Nokia suddenly sues Apple for patent infringement over the iPhone. It looks like the old adage is true again: if you can't innovate, litigate! It's the same story all over again. A company that was a leader in the market but got complacent and lazy, suddenly finds that it lost its lead to a more innovative upstart. Since it's so far behind, even scrambling around doesn't help it to catch up, so it just starts suing over patents.

This story nicely highlights a few other points as well. We keep hearing from patent system supporters how the patent system is necessary because, without it, the market leader would always just immediately copy the upstart and "steal" their idea. Of course, Nokia has had two plus years to "steal" Apple's idea, and where is it in the smartphone market? It's not so easy to just copy someone else's idea -- especially if you're a huge player like Nokia, who will often view the disruptive innovator as not being worthy of paying attention to (which basically was Nokia's reaction to the iPhone).

Separately, remember how confused we were when Steve Jobs proudly hyped up the fact that Apple had over 200 patents on the iPhone concept? We've pointed out that it's hardly done anything to stop lawsuits. Apple has been sued over and over and over and over and over and over again for patent infringement. Welcome to the tragedy of the anti-commons, where it becomes impossible to do pretty much anything innovative without facing massive legal costs. Basically, if you build anything even remotely innovative these days, you're going to get sued for patent infringement, probably multiple times. It's become a massive tax on innovation, rather than a lever for innovation.

37 Comments | Leave a Comment..

CSIRO Taxes Innovators To Fund Innovators?

from the how's-that-work-now? dept

A few years back, the Australian tech research agency CSIRO was awarded a patent with several claims over basic concepts used in WiFi. While we have tremendous problems with the idea of any government agency patenting anything, CSIRO wielded this patent and aggressively fought against a bunch of large tech companies, and it recently convinced them to pay a $200 million settlement. At some point, tech firms realize it's often just cheaper to pay up than to keep fighting a bogus patent claim.

So now it's interesting to see CSIRO claim that it's taking $150 million of the $200 million and investing it in innovation (found via Slashdot). So... basically, it sued the companies that actually innovated (brought working products to market) and got them to cough up money that CSIRO is going to invest in innovation? Why not just leave the original innovators with their money to keep innovating?

48 Comments | Leave a Comment..

The Perils Of Extrapolation: Who Knows What The Next Disruptive Innovation Will Be

from the be-quick-to-adapt dept

There are all sorts of "lessons" that you hear concerning entrepreneurship, but the one that has always struck me as being the most reasonable and valuable is:

Be adaptable

People who haven't built a company think that it's "the plan" or "the idea" that matters. That's almost never the case. Look at nearly every successful startup, and their business has little (if anything) to do with their initial plan. Google was going to sell search appliances as the core of its business. YouTube was supposed to be a dating service. Things change -- and the only thing that matters is how well your company adapts and executes. That's why it's silly to be too protective of a plan or idea or to focus on things like patents or NDAs. Most of that doesn't matter. Separately, projecting out more than a year may be a fun exercise, but is generally meaningless.

Clay Shirky had a great Twitter message this past weekend that puts that point into perspective nicely:

Why I ignore all "5 year plans": 5 years ago, YouTube and Twitter didn't exist, and Facebook was only for college kids

If you go back and look at plans or predictions from 2005, of where web content would be in 2010, it's unlikely that "micromessaging" like Twitter or online video like YouTube was considered quite as central. Certainly some folks thought video was on the cusp back then, but they expected it to come from professional offerings like BrightCove, rather than a user-generated setup like YouTube. It's always difficult to predict which innovation is actually going to hit -- and plenty of companies, especially in the media space, have had to change and adjust their strategies due to things like Twitter, YouTube and Facebook -- just like how a decade ago, companies quickly started adjusting their strategy to deal with Google. Five years from now, plenty of startups will be adjusting their strategy for some other service as well... And the only way you can do that is by being adaptable.

44 Comments | Leave a Comment..

Can't Innovate? Litigate! 3Com Goes Patent Lawsuit Ballistic

from the ghosts-of-companies-past dept

Remember back when 3Com was a big innovative company coming up with interesting new products? What happened since then? Well, as we've seen over and over again, once a company runs into trouble continuing to innovate, its last ditch effort to stay in business is to start suing everyone for patent infringement. Step up to the plate, 3Com. The company set up a subsidiary specifically for suing other companies for patent infringement and just sued Acer, Apple, Asus, Dell, Fujitsu, Gateway, HP, Sony, and Toshiba. Oh, and take a guess where this "subsidiary" set up shop? East Texas... of course. All the better to file patent lawsuits apparently...

17 Comments | Leave a Comment..

Is There Any New Technology The Copyright Industry Hasn't Tried To Stop?

from the luddites-in-action dept

Earlier this year, we wrote about a long line of politicians fearing the impact of new innovations -- from video games to the waltz -- and how they would harm the morals of children. These were classic "moral panic" quotes from politicians. As a bunch of you have sent in, Ars Technica put together a similarly nice list of moral panic quotes concerning pretty much every major new technology innovation from the past 100 years. From the days of the grammophone and the player piano (which was the main reason behind much of the 1909 Copyright Act), the big copyright holding industries have pushed out fear mongering quotes about how some new technology would absolutely destroy the ability to make money from content, unless Congress acted quickly to put in place some new restriction, tax or extra right for those copyright holders. In every single case the fears and complaints from the industry weren't just wrong, but were stunningly backwards. Every technology opened up new markets and new opportunities.

And yet, where are we today? We're still listening to the RIAA, MPAA, BSA, NMPA, ASCAP and others spewing the same nonsense about the internet. And almost no elected official or reporter calls them on this. They may claim that "this time it's different," but shouldn't the burden be on them to actually prove it for once?

68 Comments | Leave a Comment..

Venture Capitalists May Be Left Out Of Burdensome Regulations On Private Equity

from the good-news dept

Last month, we were a bit worried that an admittedly clueless Congress might lump venture capitalists in with other private equity firms in putting forth new regulations. Venture capital is quite different from basic private equity, and the proposed regulations would be quite burdensome for VCs without having any benefit. These "systemic" risk rules don't make sense for VCs who aren't investing in public investment vehicles for short times, but instead do long term strategic investments in private startups. VCs have been pushing Congress on this, and it looks like they finally got through to someone, as it appears that Barney Frank is looking to exempt VCs from any such regulation. This makes a lot of sense as venture capital and traditional private equity are very different animals, and putting them both under the same regulatory rules makes little sense. Putting VCs under systemic risk regulations makes even less sense, considering how unlikely it is that VCs investing in startups are involved in any sort of systemic risk issues.

5 Comments | Leave a Comment..

CEA Announces Apps For Innovation Developer Contest

from the go-for-it dept

The Consumer Electronics Association has been building up its excellent Innovation Movement effort -- designed to help educate people (most importantly: politicians) to be aware that regulations can have a serious (and potentially negative) impact on innovation. The goal is to get people to really think through the potential impacts on innovation of any new legislation. Given how rarely anyone in DC seems to really think about how all the legislation they pass will impact innovation, this is an important effort.

As a part of that, CEA is now launching an Apps for Innovation Developer Contest. The goal is to get developers to create one of two kinds of useful apps:

1. Apps that illuminate with data how innovation and entrepreneurial activity are at work across America.

   Examples: An app that mashes up Federal Communications Commission broadband data over a Google Map to show the need for high-speed Internet deployment in rural areas. Or, perhaps an Apple iPhone app that uses Department of Commerce data to let people track how international trade agreements impact the U.S. GDP. Another option would be to create an app that measures the number of venture-backed start-ups in cities across America (hint: the National Venture Capital Association keeps that data).

2. Apps that will help the members of the Innovation Movement advance policy goals that support innovation.

   Examples: This could be an app that allows members of the grassroots movement to better communicate with members of Congress -- or perhaps its an app that allows members to see how members vote on various policies that protect or hinder innovation. Points are awarded for creativity!

There are a variety of prizes, including thousands of dollars and a free trip to CES in January. It's a cool program, and I'm thrilled that CEA asked me to be one of the judges in the contest. I'm hoping to see some really creative and innovative apps!

1 Comments | Leave a Comment..

The iPhone Is Not The End Of Innovation

from the it-keeps-on-going dept

There's just something when we see a dominant technology out there that makes people assume that no one will ever out innovate it, and then fear that we're stuck with the dominant player forever. Adam Theirer has a post discussing this concept in relation to a recent paper by Robert Hahn and Hal Singer, Why the iPhone Won't Last Forever and What the Government Should Do to Promote its Successor, which highlights how dominant platforms often appear insurmountable, but often quickly are defeated from unexpected sources. Thus, worrying about things like exclusive arrangements or if the platform is too closed off may be a waste of time. Eventually, the market ends up taking care of it. The paper points out that previous technologies are often declared the "end of innovation" as well, such as the Motorola MicroTAC flip phone (I had one, ages ago), which Fortune described in 1989 by saying:

Portable phones won't get a lot smaller than this one. After all, they have to reach from your ear to your mouth.

Take a look: And no more innovation ever happened in mobile phones over the past twenty years, right?

55 Comments | Leave a Comment..

Is It So Crazy For A Patent Attorney To Think Patents Harm Innovation?

from the not-at-all dept

I know a fair number of patent lawyers and copyright lawyers who are quite skeptical of what's become of patent and copyright law -- and who readily admit that the law has gone way beyond what is reasonable or what the law was designed to do (i.e., "promote the progress..."). And yet there are some in the patent or copyright legal business who somehow seem to think that it's traitorous for a patent or copyright lawyer to ever dare question the idea that patents and copyrights work. I had a patent lawyer argue with me the other day that of course patents encourage innovation, because the Constitution says they do. This sort of logical blunder blows my mind. How can otherwise intelligent people assign such backwards logic to things? Do these same people also believe that when Congress passes any law, it automatically achieves its goals?

I have a good friend, who has recently made it through law school. Since he spent over a decade as a computer scientist, the law firm he went to work for made sure he did a rotation in the patent group (but of course). He was telling him how sick the experience made him feel. He said the stuff he was working on was disgusting. Helping companies patent blatantly obvious ideas, and using those patents to sue other companies who were innovating. Even worse, he said that many of the partners in the group seemed gleeful at how they were abusing the system, solely because of the amount of money such projects bring in. None of them bothered to consider that the overall impact of what they were doing wasn't "promoting the progress" but was harmful to society as a whole.

So, I can understand how lawyers can be on both sides of the equation (though, it says something to me about how they view the world). And, yet, there are still some IP attorneys who seem to think that it's somehow ridiculous that a patent attorney could ever find patents a net negative on society (leaving aside the many, many recent studies done by lawyers who have shown exactly that). Stephen Kinsella, a patent attorney who is against patents has responded to one such claim by a patent attorney, explaining why of course a patent attorney can disagree with the patent system, and still do his job. He notes plenty of patent attorneys who have become skeptical of the patent system.

But what's really stunning are the claims of the patent lawyer, Gene Quinn, who prompted Kinsella's claim. He was actually writing in response to a Techdirt post, where he makes numerous odd claims that don't make much sense. He assumes that it's factual that patents must promote innovation based on "the basic laws of economics." This makes me wonder which laws of economics Quinn is talking about, seeing as the laws of economics I know say that monopolies almost always lead to suboptimal societal benefit. He claims that "all the evidence" say that patents increase innovation. Except that's not true at all. We can start listing off all the studies that have shown the contrary, but I've yet to see one that actually supports Quinn's position. In response to that, Quinn amazingly claims that the studies that prove him wrong don't matter:

Would you please stop reading studies and look at history! Studies are done by academics with an agenda, are based on thought experiments, do not take into consideration important factors and are preconceived in order to come out with a particular answer.

That's a neat trick to dismiss the actual evidence (after insisting all the evidence was on his side), but it's flat-out, almost 100% wrong. And provably so. Because most of the studies I was talking about aren't "based on thought experiments" but are "looking at history." And, among those "biased academics" are at least two Nobel prize winning economists (Maskin and Stiglitz) and someone who was a very successful entrepreneur before moving to academia (Bessen). Besides, most of the academic studies that Quinn dismisses as irrelevant was peer reviewed. There are problems with peer review, of course, but to claim that these are far out ideas, while insisting that "the basic laws of economics" supports patents is simply not supported.

There are plenty of reasons why people might believe patents increase innovation -- but they're the same theories of the mercantilists in the 18th century, who believed that monopolies on other products spurred more development in those businesses. That theory was debunked and is considered laughable by pretty much any economist today. And yet, when it comes to patents, why do people automatically reject what economists realized two hundred years ago? Monopolies may temporarily benefit the monopolist, but at the expense of society as a whole. And, if Quinn wants to look at history, let's take a look at people who did actually look at the history, from Eric Schiff (showing rapid innovation and industrialization of the Netherlands and Switzerland without the use of patents) to Petra Moser (showing no less innovation in comparable countries with no patent laws to those with patent laws) to Lerner's work (comparing various countries before and after they changed patent systems, showing that stronger patent laws do not lead to greater innovation) to Qian's research (patent system changes across countries in the pharma industry, showing stronger patent laws did not lead to greater innovation, and, in fact, that weakening IP enforcement often led companies to become more innovative to stand out from the competition) and onward (there are a lot more where that came from). Hell, even the World Intellectual Property Organization (which usually is pretty damn supportive of IP) has noted that there's been no real evidence that IP protection leads to any economic payoff.

Quinn says to ignore the studies and look at the history, but the history says exactly what he claims it doesn't.

Those who insist that patents must lead to innovation fallback on a few, rather basic, logical fallacies. They point out that countries with strong patent laws tend to see much greater innovation. This is what Quinn means by "look at the history." But they are mixing up correlation with causation -- not recognizing that the stronger patent laws almost always post-date a period of much greater innovation, and then the patent system gets strengthened, not to promote more innovation, but to limit competition from those who innovated in the past (and, in fact, research by Park and Gigante found evidence of this very thing in looking at "history"). Or, they claim that since we still see some innovation, then clearly patents don't hold innovation back. But compared to what? The argument we're making has never been that patents stop all innovation cold. Of course innovation still occurs. But the question is at what rate? As we've seen in countries without patents or with much weaker patent systems, you tend to have much greater competition among smaller, more nimble firms. Since competition is a great driver of innovation, it's no surprise that there would still be great innovation in such societies. Separately, the fact that there may be fewer major innovations coming from societies with weaker patent laws today is again, not evidence that patents work. There are numerous factors that influence innovation -- and picking a country with poor infrastructure or widespread poverty, isn't exactly an apples to apples match with someplace like the US.

But just thinking logically, you can realize why the argument that, without patents, there would be no innovation, is provably false. When it's easy to copy someone copying losing all value by itself. Just being a copycat is pretty useless, because anyone else can do it. So, the real value is not in copying, but in leapfrogging. And that leapfrogging is (*gasp*) innovation. It's only in a world with patents where copying has value. That's because those patents create monopoly rents -- and thus, there's an artificial profit bubble, that others want access to. That creates a societal net loss.

Given all of this, it makes plenty of sense why patent attorneys could certainly recognize the harm that patents can cause. In fact, I would think such individuals are a lot more trustworthy on patent issues, since you know their position is not influenced by the fact that they make money off of the system. So, no, there's nothing odd about patent attorneys who find problems with the patent system. They're people who recognize the simple fact that just because a system is set up to do one thing, it doesn't mean that it automatically occurs. They're people who recognize that innovation is not synonymous with patents, and are able to take a step back and say what is truly best for innovation.

61 Comments | Leave a Comment..

The Myth Of Crowdsourcing... Or Misunderstanding Crowdsourcing?

from the it's-the-latter dept

A bunch of folks have sent in this silly opinion piece at Forbes, claiming that crowdsourcing is a myth. The reasoning? Because there are individuals in the crowd. Except... um... did anyone say anything different? Of course there are individuals, and the point of crowdsourcing isn't that everyone in the crowd is equal, but that they each get to contribute their own special talents, and something better comes out of it. Every example that the guy dismisses as not crowdsourcing -- Wikipedia, the Netflix prize, open source developing, etc. -- actually does involve crowdsourcing. The problem is that this guy defines crowdsourcing in his own way -- that if any individual contributes a greater amount, there's no more crowd. Say what? The fact that a few determined individuals help craft a specific Wikipedia page, doesn't take away from the fact that it's the overall crowd that made Wikipedia so useful. It's many of those determined individuals together who made the entire Wikipedia so useful. He then goes on to mock the Netflix prize... even though it disproves his entire thesis:

The Netflix contest is a prime example of individual virtuosity at work. One team was clearly in the lead and then a consortium of teams that had worse performance joined together and combined their innovations to create an algorithm that won the contest. For most of the contest, individuals toiled to figure out a solution. At the end, a consortium was formed. None of the invention happened through a crowd.

The problem -- yet again -- is that this guy (a consultant) seems to again be confused about the difference between invention and innovation. Yes, some individuals came up with different ideas. But what made the Netflix prize so interesting was that they weren't able to really achieve the necessary breakthrough until they collaborated. That's what pushed them over the edge. That's what added that real value to take it to the necessary next step. A crowd is always made up of individuals. That different individuals contribute different parts doesn't change the value of crowdsourcing at all.

21 Comments | Leave a Comment..

EU Worried About IP Harming Innovation... But Gets It Backwards

from the sigh dept

Rob H alerts us to an article that starts out sounding reasonable... pointing out that politicians in the EU are meeting because they're worried about intellectual property laws holding back innovation in Europe... but then it goes off the rails. You see, they're not worried that the laws are holding back innovation because they're too strict, but because they're too weak. As you look, though, you realize that these politicians have basically been lobbied by businesses that want protectionist policies. The "report" they discuss talks not about how to better incentivize innovation, but how to "better favour business." What that means is they went and spoke with a bunch of incumbent businesses, not innovative startups, and those businesses said they want more patents. Someone should send them a copy of Boldrin and Levine's book...

12 Comments | Leave a Comment..

What Kind Of Innovation Do Patents Encourage?

from the if-any-at-all dept

We've highlighted numerous studies that have shown how patents tend to hinder overall innovation, but there's no doubt that giving out monopolies may encourage different kinds of activities. Petra Moser's research comparing innovation in countries with patents to those without patents has shown that countries without patents tend to be just as innovative, but that the innovation takes different forms. Thus, patents tend to divert from the natural market of innovation to areas that are more easily "protectable." Whether or not that's actually "good" for progress is an open question. A while back, Stephen Kinsella posted a thought-provoking post from Prashant Singh Pawar examining how patents distort innovation incentives, based on a longer thesis he wrote up comparing "horizontal innovation" to "vertical innovation." Pawar's basic premise is that patents encourage "horizontal innovation" -- a totally different way of doing the same thing -- vs. "vertical innovation" -- building on what's been done before:

So, I finally came up with the terms 'Horizontal innovation', and 'Vertical Innovation'. Horizontal Innovation is when a parallel technology is discovered (usually to avoid patent infringement). For example if a company develops a flying car using (say) hydrolic expansion, and they get a patent of it, another company develops (or has to develop) a flying car technology by using Thermo-plazma radiator engine. Both these technologies achieve the same end, they enable a car to fly, so this is horizontal innovation. This is what patent proponents talk about being squashed when they say innovation will be reduced when patents are removed. There will not be Google G1 phone,Blackberry and iPhone if there were no IP rights.

Vertical innovation is when a technology is built top of another technology merely by adding a new element to it. For example if you develop a Car which can travel on water, and I take that car, and add a Sail to it to make it use wind then that's called a vertical innovation. With patents, only the patent holder can think of adding a sail on the boat-car and sell it, without patents, innovations will be done all over the world by every kind of boat and car enthusiast. There will be only one smart phone in this world, but it will be having numerous variants, such as a Google gPhone (synced with google services), a Microsoft mPhone (synced with microsoft services), and so on.

Patents promote horizontal innovation, but restrict vertical innovation. Without patents we will have more vertical innovation but less horizontal innovation.

It's an interesting theory, and it would be great to see some further research done to see if it's supported by the evidence. Of course, it also fits with what we've discussed in the past about the difference between invention (coming up with something new) and innovation (successfully bringing something to market such that people want it). Studies have shown over and over again that true innovation is an ongoing process, of continuing to build on what's come before, making it better and having it better serve the market. That is the sort of thing that we regularly see held back by patents -- it's the type of "vertical innovation" that Pawar is suggesting. Is society better off with a totally different type of flying car? Or are we better served by having lots more resources put towards making the flying car better serve our needs? I'd argue the latter, but would be interested to hear from people who argue the former.

123 Comments | Leave a Comment..

Canadian Law Professors Insist Banning The Sale Of Word Is Good For Society & Innovation

from the really,-now? dept

Rob Hyndman points us to two Canadian law professors, Michael Trebilcock and Edward Iacobucci, insisting that patents are "the mother of invention" in an article that mostly spends its time trying to defend the silly injunction (already put on hold) barring Microsoft from selling Word or Office, because it supposedly violates a patent, 5,787,449, on XML editing of a word processed document. There are all sorts of problems with the column, kicking off with Hyndman's question as to how law professors should be considered experts on innovation...

But, let's dig further into the details.

Patents are essential to the modern system of innovation. Once produced, information can be transmitted at zero cost. In the absence of patent protection, would-be inventors become vulnerable to competition that would drive the value of their discovery to zero, leaving them with no compensation for the costs of producing that information in the first place.

This is the usual story. And it sounds good. But there's no factual evidence to support it. That's because it ignores reality. Yes, information can be transmitted at zero cost, but that does not mean that implementation is assured, or that the market stands still. Besides, I'm curious as to the claim "vulnerable to competition," as if competition is a bad thing. Most people recognize that competition drives innovation -- and yet, these law professors are suggesting the exact opposite. That you need less competition to drive innovation.

Furthermore, they are wrong in claiming that in the absence of patent protection "the value of their discovery" is driven to "zero, leaving them with no compensation." They say this as if the compensation is for the idea, rather than the implementation. That is simply wrong. No one compensates you directly for an idea. If you have a good idea, you need to bring a product to market and sell it. If someone else copies that idea, you still have a large first mover advantage and you understand the market better. On top of that, you should be ahead of the curve in terms of improving on the concept for the next iteration. That's competition. It doesn't mean the value of the idea is zero or that there's no compensation. Claiming such makes no sense.

Again, beyond common sense, the historical evidence suggests that these law professors are simply wrong. Countries with no or weak patent protection have seen tremendous innovation over time. And it's because it's competition that's the mother of innovation, not a lack of competition. For well over two hundred years, economists have recognized that monopolies that remove competition are bad for innovation. These lawyers are insisting that the opposite is true, and present no proof.

Microsoft objects that the injunction ordered by the trial judge goes too far. (It has been put on hold until after the appeal, which is to begin Wednesday.) But injunctions are almost always ordered to prevent continuing infringement, and for good reason. To simply order money damages for future infringement would be to force i4i to license out its technology at a court-imposed price.

This is misleading. While it is true that in the past injunctions were the norm, since the US Supreme Court's MercExchange ruling more than three years ago, courts recognize that injunctions often do not make sense. The reason they don't make sense is because they require stopping the sale of an entire product (or lines of products) due to a single infringing feature. That makes no sense, and the courts have recognized this. I'm not sure why these law professors do not.

Just as there are good reasons not to compel citizens to sell or rent out their homes at prices set by judges, there are very good reasons in general to avoid compulsory licensing of intellectual property. Court determinations of the value of intellectual property are necessarily somewhat conjectural, yet damages awards require courts to act, in effect, as price regulators. By contrast, injunctions do not prevent a licensing deal from being done, but rather cede to the owner of the property the authority to set a price. Just as giving homeowners the right to decide whether to sell or rent out their houses does not destroy the housing market, in terrorem arguments about the death of Word under this injunction are without merit.

Again, this is quite misleading. It implies that an injunction leads to the natural market setting the price for licensing, but nothing could be further from the truth. If someone is pointing a gun at your head and negotiating over how much you have to pay to stay alive, that's not exactly a fair and open economic transaction that both parties enter into under their own free will. Claiming that this is somehow a more accurate market is pure folly.

Meanwhile, Microsoft has vociferously argued that despite the trial judge's careful vetting of the evidence, i4i did not establish at trial a firm basis for its damages claim for past infringement. This claim about the speculative nature of past damages sits uncomfortably with Microsoft's opposition to injunctions. Given the complexity of measuring supply and demand for a unique product, it must be true that there is some empirical uncertainty about the precise level of past damages. But if patents are to have value, this uncertainty is unavoidable: A damages award is the only available remedy for infringement that has already taken place.

Again, I have to admit confusion over these claims, which seem to have no basis in reality. It is not "the patent" that has value. It is the product. For sale in the market. And it's the consumer who values it. The fact is that many more people seemed to value a complete package of Microsoft Word. They were not buying it because of i4i's silly and questionable patent. They were buying it because Microsoft Word is a useful product. The difference in sales for Microsoft Word if it had not included XML editing would likely be negligible at best. There is no evidence of damages. If i4i and these lawyers are claiming that the "damages" are i4i's inability to sell its own product, again, that is difficult to square with reality. Competition happens all the time, and it's as good thing. i4i's inability to come up with a product or marketing plan that people wanted is its problem, not Microsoft's.

Also, the lawyers, in claiming that there was "careful vetting of the evidence," conveniently leave out that this was done in East Texas, which has a long history of vetting in favor of patent holders. Don't ask me, ask the bull that TiVo bought.

Protecting i4i's patent protects incentives to invent and the competitive process. In this case, the trial judge wisely offered such protection, while recognizing the court's own institutional limitations, by ordering damages for past infringement and injunctions going forward. While the decision was not a good one for Microsoft, it was clearly in the best interests of society.

Really? So, completely banning the sale of an entire office suite offering because one tiny, rarely used, feature might infringe on some random other company's products is "in the best interests of society"? That seems wholly without support. That would mean making every user of Microsoft's office suite suffer, for the benefit of a small 30 person company that developed a rather obvious concept. How is that possibly in the best interests of society?

45 Comments | Leave a Comment..