The Direct Costs from NPE (Patent Troll) Disputes

http://papers.ssrn.com/sol3/papers.cfm?abstract_id=2091210

by fpp • 14 years ago

125 66 14 years ago

papers.ssrn.com

its_so_on10• 14 years ago

This is ycombinator's hackernews, the title should read "Patent trolls created $29B of value." I don't condone it but let's be consistent.

Paul_S• 14 years ago

Come now, you can't get away with a statement like that without explaining your argument.

ktizo3• 14 years ago

You are assuming that there is an argument behind it.

That struts and frets his hour upon the stage. And then is heard no more: it is a tale. Told by an idiot, full of sound and fury, Signifying nothing.

its_so_on10• 14 years ago

all right, I'll explain it. One guy's cost is another guy's value (almost by definition - of course there are exceptions such as losing something to nature through accident instead of losing money to persons or companies [of any kind] by making an expenditure of any kind to them) - so the patent trolls "create" whatever value we add up to get to the number quoted.

I am not saying anyone supports patents. I'm saying hackernews should be more consistent - or otherwise admit that "creating value" isn't an end in itself. It's the wrong question.

Edit: I think the current title is fine. ("Patent trolls created $29B extra cost in the U.S. last year") I just want us to be clear that one guy's cost is another guy's "value".

I would love to see more cooperative-optimistic-tit-for-tat solutions to the prisoner's dilemma, so that instead of just saying "creating value" we are more specific about the whole system.

This is what (an unnamed restaurant review site) gets wrong and Google gets right, in my opinion. Google adds value whereas (unnamed) removes it.

Of course in a naive sense (unnamed) is also "creating value". Just as these patent trolls are.

We don't condone it, but let's be consistent.

ximeng2• 14 years ago

Perhaps the idea that the cost of a service should equal the value provided, rather than the cost to produce the service.

mtgx• 14 years ago

I don't think the majority of HN readers view patents in a positive way.

http://news.ycombinator.com/item?id=2552740

its_so_on10• 14 years ago

I know - and I don't either. But we need to be consistent in how we talk about companies that have a revenue stream they create at a systemic cost to everyone: this is (from the companies') perspective, "building value."

saalweachter• 14 years ago

Value is only created if patents are functioning as part of a system of disseminating ideas.

Imagine two possible worlds. In the first world, when you -- as an engineer -- have a particularly difficult problem in front of you, you first go to a catalogue of solutions, look up the problem, and see if there is a solution already. If so, you pay a nominal fee to the solver, incorporate it into your design, and move on to unsolved problems.

In the second world, you have the same particularly difficult problem, but there is no catalogue of solutions, so you buckle down and solve the problem yourself. Later, someone looks at your solution and declares that a portion of it is similar to something they wrote down in the big pile of disorganized ideas. You didn't know this, because looking in the big pile of disorganized ideas is a lot of work and rarely pays off, because most of the ideas are half-assed and don't really tell you anything you didn't already know. An exorbitant fee is then charged.

There may be some industries living in the first world; I can imagine that in -- say -- chemical engineering, it is very easy to organize the ways to produce chemicals by the formula of the desired end product, and that the standard for describing how to produce a chemical leads to a pretty useful solution.

The software industry, however, isn't.

swombat• 14 years ago

For me, the best summary of the fucked up nature of the patent system comes from two nice soundbites...

First, just yesterday, I was at an event where a patent lawyer declared (I kid you not):

"You should be careful how much you innovate on top of existing products, because you might end up falling under someone else's patent."

Seriously. I couldn't believe my ears. Incentivising innovation fail.

The other soundbite came from an entrepreneur at a TechHub meeting in London, about the Hargreaves Report on IP, last year. He said:

"I wish I hadn't come tonight. The more I learn about IP, the less I want to start a business."

I think that pretty much sums up how well the patent system incentivises innovation.

grabeh• 14 years ago

Out of interest, who was the lawyer?

Much of the time lawyers are there to present a worst case scenario to push you into using their services. I wouldn't place much store in what they say (speaking as a lawyer myself).

In terms of the entrepreneur discouraged from starting a business, I'd be interested to hear about what the business ideas were.

kintamanimatt3• 14 years ago

This is one of the strengths Europe has right now: a somewhat less maligned patent system.

rayiner4• 14 years ago

I don't think the first comment is particularly controversial, though the speaker was being diplomatic in his use of the term "innovate." It makes more sense if you replace it with "rip off."

The fact of the matter is that a lot of people paint this idealized picture of the morally virtuous techie, where the only people who own patents are big bad patent trolls, and the only people who get sued are innocent innovators who independently arrive at an invention.

That's not the actual story, or at least that's not the whole story. Like in every other field, there is a gaussian distribution of business ethics at various companies. Look at how many companies get nailed for using GPL-ed software without releasing source. You think those same companies don't also copy competitors' designs wholesale? When our company was doing business with an American telecoms supplier, a manager there mentioned that a Chinese telecoms supplier was ripping off their designs wholesale, down to the silk-screening on the PCBs.

There is a difference between "let's innovate on top of this idea" and "oh this idea is good, let's just copy it."

Now, NPE's in their current form are clearly just rent-seeking. However, I think there is a role for NPE's that create value by serving to create a market for patents. Not every innovator wants to get into the business of making products. ARM wants to design microprocessors, they don't want to design and manufacture iPads. Patents facilitate that division of labor, and NPE's can make the whole system more efficient by creating markets for patents.

btilly• 14 years ago

I agree that wholesale copying is an issue. However patents are almost never going to be the appropriate response to that for software companies. With software you can always go for copyright violation and/or misappropriation of trade secrets. By contrast, given that it can easily take the better part of a decade to actually get your patent assigned to you, you are very unlikely to have patents that cover the innovative parts of your technology.

Instead software patents seem to be mostly used to sue people who independently invented the same thing. They enable rent-seeking and provide no educational value to spread innovation. (Which naturally arises and spreads in our industry on a time scale that is too short to get patents assigned.)

How do I know this? Because the one has happened based on my work, and the other came close to happening. At one of my employers, a rogue employee cloned the code base and then took it to some Eastern European programmers to reimplement the website. It was litigated based on copyright and trade secrets - no patents were available for that lawsuit.

However a different employer of mine took out two patents based something I did when I was there. Since then a number of companies have infringed on those patents, and could be sued for large sums. By luck the patents have wound up owned by an organization that is unlikely to ever let them go to a patent troll. But I've spent years fearing that that work will get used to stifle independent innovation.

mik4el3• 14 years ago

I totally agree with the common belief that patents are the wrong way for protecting most startups... But, an interesting thought about patent trolling, I believe, is that if patents are useless then why can the trolls make $29B/year on trolling? I'm confused!

Pkeod• 14 years ago

Patents are intended to incentivize people to reveal their secrets in exchange for a temporary monopoly on the secrets. They are not meant as vehicles purely for making profit, but that is how they are being abused - by people who buy up patents and then sue anyone who infringes, or by people who patent as broadly as possible and then sue anyone who infringes. Useful for making money, not useful for the intended purpose of contributing work for the greater good of all people.

The patent system is too broken. Anyone who writes software should hate patents. Anything you write will infringe on some patent out there. If all you want is money then writing software isn't the best way to go about getting it.

A better system would be one where patents do not give protection to ideas, but do give minor tax incentives to the people who own and use a related patent in their business. Then their ideas are shared, but not using the patents gives them nothing, and they cannot block others from using the all too often obvious ideas.

pi18n3• 14 years ago

It should be noted that patents are particularly broken for software, since in that field it appears to be quite easy to convince someone at the patent office that a trivial discovery is non-trivial. Also most of it is math and shouldn't be patented anyway.

rayiner4• 14 years ago

> The patent system is too broken. Anyone who writes software should hate patents. Anything you write will infringe on some patent out there. If all you want is money then writing software isn't the best way to go about getting it.

I write software (open source on GitHub) and don't hate patents. I hate bad patents, the kind you can infringe upon just by writing software, but lots of patents aren't bad patents. E.g. IBM has a number of patents on compiler optimizations. Am I going to stumble upon Steensgard's pointer analysis by accident? No, the only reason I know about it is that IBM let him publish a paper based on the research they paid him to do at Watson.

usefulcat• 14 years ago

Part of the rationale for the patent system is that it is supposed to encourage people to disclose trade secrets that they would not otherwise disclose. However, if you can tell how a thing works just by looking at it, then according to that rationale there is no point in allowing such an invention to be patented (at least not on that basis). Unfortunately, that does not seem to prevent many completely obvious things from being patented (e.g. one click shopping).

ajb• 14 years ago

Before capitalism, "trade rights" were a property right. You could own the right to be a sell bread in a particular town, for example (and the right to exclude others from doing so). Those owning such rights made lots of money, but that doesn't mean they were a good idea.

daveungerer• 14 years ago

Your question is based on a flawed assumption. Making money is not the same thing as obtaining money - it's creation of wealth vs. transfer of wealth.

mik4el3• 14 years ago

Good point, but the common belief is that patents are worthless and therefore it's interesting that at least some (the trolls) make a hefty profit on using patents in their business model. I.e. patents can't be worthless? That was my point and some thought I should be downvoted for that but it's still my point...

JimWestergren• 14 years ago

I am a non-US person. I was very close to set up and transfer my startup to a new C Corp in the US in order to get better payment APIs and make the startup more attractive to VCs. The patent trolls in the US is one of the biggest reasons why I choose not to move my startup to the US, at least not until I get funded. I guess many others also choose to stay away of the US for this reason. The total loss of business in the US must be great.

arethuza• 14 years ago

"at least not until I get funded"

Having money in the bank means that can afford lawyers, but it also means that you are a more attractive target for litigation as you are then worth suing (if they are after cash).

[NB The startup I co-founded years ago was involved in deeply unpleasant litigation soon after getting our first round of VC investment. Fortunately our lawyers made them go away.]

kintamanimatt3• 14 years ago

I wonder if there's a legally creative way to keep the IP outside the US, but license it to a US company that acts as a reseller.

dlitz• 14 years ago

I doubt it. Look at what happened to RIM.

devinmontgomery• 14 years ago

Alternate title: "Patent trolls give $29B boost to struggling legal profession"

luriel• 14 years ago

This should be a textbook example of the Broken Window Fallacy.

Produce• 14 years ago

You bunch of commie terrorists, stop trying to break the one mechanism fostering innovation that we have!

SagelyGuru• 14 years ago

As the ancients used to say, 'those that the gods want to destroy, they first make mad'. Accordingly, I see a lot of things going down the pan in an ever accelerating spiral.

There are too many unscrupulous, unethical people about, out to make lots of money for zero real creativity, value, and effort. They are forever inventing new artifices towards this end, be it indulgences (sin forgiveness chits), fractional banking (credit out of thin air), software patents, CO2 indulgences, etc. and then getting fat on trading them.

We are so far gone that many people can no longer even discriminate between real value and these things; sinking as we all are in this sea of BS.

SkyMarshal• 14 years ago

There's also a glut of lawyers in the US, enabled by cheap student loans, law schools' statistics inflation, etc., all scrambling to put food on the table. It's not surprising that some new legal strategies and domains that arise from this demographic trend may be good for lawyers in the short term, but not for the country in the long term.

wissler• 14 years ago

It costs far more than that. What's missing is the lost wealth due to things that weren't created but would have been, not only because people were afraid or unmotivated to create them but because of the money the trolls took.

its_so_on10• 14 years ago

I just wanted to say thank you for the title change - this is far more clear and informative and makes my earlier comment moot.

Actually it also made me click through to the paper, which also has this title. This is much better.

The Direct Costs from NPE (Patent Troll) Disputes

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