What the NY Times Doesn’t Understand about the Patent System
|Written by Gene Quinn
Patent Attorney & Founder of IPWatchdog, Inc.
Principal Lecturer, PLI Patent Bar Review Course Posted: October 11, 2012 @ 7:20 am
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Okay. So perhaps I oversold this article just a bit in the title. After all, it would take a multi-volume treatise to cover what the New York Times doesn’t understand about the patent system, or the things they seemingly get intentionally wrong. That being the case, I am going to confine myself to the nonsense passed off as “news” recently in The Patent, Used as a Sword.
In this “news” tale the Times tells the story of Michael Phillips, who after working in the software field for three decades co-founded a voice recognition company. Phillips’s technology was apparently integrated into Siri itself at one point. In 2008 he was contacted by Nuance and told that the company owned patents they believed Phillips was infringing. No deal was reached, which somehow seemed nefarious to the Times as if it is some god-given right to not be sued or to achieve a pre-litigation settlement. Ultimately, Nuance sued, but Phillips prevailed. In the meantime Phillips lost contracts and opportunities and allegedly cost him $3 million to defend.
Operating in an inappropriate business manner seems to be a theme among those who prefer to criticize the patent system rather than take responsibility for their own actions. In the aforementioned article the Times set the problem up excellently, but of course in their typically anti-patent fashion reached the wrong conclusion. This is even astonishing for the Times because in this case they actually ignored the evidence they themselves presented in their own “news” tale. By ignoring the facts they presented themselves they were able to reach a conclusion that is diametrically opposed by the evidence. Instead of allowing the facts to direct the reader to the truth, they indicted the patent system and software patents in particular for what quite clearly seems to be the bad business decisions of Phillips. Talk about a biased opinion filtered under the pretense of news! ***
To the Times the Phillips tale is conclusive evidence that the patent system has run amok. The article proclaims as if it is some universally known fact of the universe that software patents are evil. The article says: “the marketplace for new ideas has been corrupted by software patents used as destructive weapons.”
The fact of the matter is that software patents do not destroy the marketplace for ideas. Do you notice Apple, for example, having a difficult time innovating or getting patents? No, and there are plenty of other companies that innovate just fine, and with great volume. The fact that there are companies that succeed should be conclusive proof that the Times is wrong, but for some reason in this bizarro world where a biased media meets anti-patent zealotry the truth doesn’t matter.
For those who do care about the truth, notice the successes of truly innovative companies and then ask yourself what is it that the media and anti-patent zealots are really complaining about?
Allow me to offer two possible answers. First, they are whining about those who are decidedly NOT innovators being unable to copy without paying. Alternatively, they whine on behalf of ignorant businessmen and businesswomen who recklessly choose to forego patents and basic business insurance that would cover litigation costs. Neither the copycats nor those who lack the most basic business sense deserve to be held out as victims deserving pity — and the patent system doesn’t deserve to be bear the blame!
The parties deserving the pity, although they never ask for it, are the innovators who are ripped off or the business that does everything appropriately and still fail because of the nefarious actions of those who seek to extort with wholly fraudulent claims. But the Times never seems to do any stories about what the Federal Circuit has called “extortion like” licensing activities. Odd, don’t you think?
In any event, the Times article goes on to also lament what they call an arms race to get patents. The article explains: “The increasing push to assert ownership of broad technologies has led to a destructive arms race…” What the Times either doesn’t’ understand or is simply ignoring is that this “arms race” is unequivocally a positive development. This is EXACTLY what the founding fathers wanted to encourage, and it is EXACTLY what the patent laws have been designed to encourage since 1790. This is not an accidental or unintended consequence of a patent system run amok, rather it is EXACTLY what is supposed to happen. Either he Times doesn’t understand the fundamental rationale for a patent system or they ignore it in favor of their own predetermined narrative. Ridiculous!
Allow me to explain so even the Times can understand. With each new disclosure ideas, inventions, innovations and technologies are placed into the public stream. In a blink of an eye in real terms they will be available to the public for free, without any claim of exclusive ownership.
That’s right, in a blink of an eye. And don’t let anyone tell you otherwise.
Generally speaking, patents have a patent term that is 20 years from the earliest U.S. filing date, but to enjoy that full term, three separate and increasing maintenance fee payments must be made. Many pay the first maintenance fee payment, due at 3.5 years after the patent issues. Some pay the second maintenance fee payment, due at 7.5 years after the patent issues. Few pay the third maintenance fee payment, due at 11.5 years after the patent issues. Thus, only the most commercially valuable patents enjoy a term that goes beyond 8 years (which is the deadline to pay the second maintenance fee payment with a late surcharge).
So the patent system fosters all this disclosure, the arms race that the Times seems to disapprove of, while the overwhelming majority of patents have an exclusive life of 8 years or less? This “arms race” to disclose information and obtain patents that give rights for a limited time fosters innovation through the dissemination of information that would otherwise remain secret . Companies even today still maintain secrets — trade secrets — which they would do with much greater emphasis if there were no incentive to disclose. How do I know that? Just look at what happened prior to the creation of the Federal Circuit? When patents were rarely found valid by the courts there were far fewer patent applications filed, far fewer patents granted and most innovations and technologies were held close to the vest in the form of trade secrets. This is not a matter of opinion, it is a matter of fact. Take a look at the applications filed at the USPTO in the chart below. The Federal Circuit was formed in the early 1980s, and patents started to be worth something with claims actually be determined to be valid in litigation.
The number of U.S. patent applications filed hovered around 100,000 back into the 1960s and jumped in the early 1980s once patents had a chance to be upheld as valid in litigation. So the Times can dislike the patent arms race if they want to play the part of the innovation neanderthal, but the fact that more people have wanted patents has lead to far more dissemination of information to the public. This truth is unassailable, but one that the Times seems to prefer to ignore.
Indeed the most vital role of any patent system — the dissemination of knowledge, information and innovation for the betterment of society and to the benefit of the public — is lost on the Times, as it is lost on virtually everyone who opposes the patent system. These first-level-thinkers just assume that information would be disseminated at the same rate without a patent system, which is so ridiculous it is hard to take anyone seriously who actually professes to believe such nonsense. Can anyone really believe that? This is why it seems overwhelmingly clear to me that there is an anti-patent agenda in many newsrooms across the country. No intelligent person who has reviewed history and has any knowledge about how business works would think that businesses would randomly disclose proprietary information in the volume that occurs today absent a patent system that incentivizes such disclosure.
For crying out loud, the Times article has all the facts right there to disprove their own conclusions and prove I am correct! They talk about defensive publications so that others won’t be able to obtain exclusive rights even when there is no desire to obtain exclusive rights on the part of the party doing the disclosing. Would those defensive publications occur without a patent system? Of course not!
Of course, the proper conclusion the Times should have reached was that Mr. Phillips must have been a business neophyte or ideological zealot who simply didn’t care enough to take appropriate measures to operate his business in a risk minimizing fashion. Had anyone at the Times actually given thoughtful consideration to the story they would have understood they were telling the story of someone who went about business carelessly and recklessly, in a business inappropriate manner. Then once things went poorly he lost everything. Somehow Phillips’ poor business decisions are then twisted into fundamental problems for the patent system. The truth is Phillips is responsible for his own business decisions and failures, not the patent system. His lack of business acumen is the story, not some defect in the patent system.
You see, Phillips did not have his own patents on his innovation. Had he had patents of his own this story would have turned out very differently. Furthermore, it doesn’t seem that Phillips had any insurance to cover defense costs associated with being sued, or to cover the business interruption that goes along with being sued. So rather than accept responsibility for operating his business in a needlessly high risk manner his story is presented as proof that software patents are somehow destroying small businesses.
You can hate patents, you can think they are evil, you can believe that zero years of patent term is appropriate for software patents, all of that is fine. But if you have a software company and you are not getting software patents then you are being reckless and leaving your business open to complete and total devastation. If you are investing in a company that has software assets and software patents are not being pursued your entire investment is at risk all for no good reason. Since when does a philosophical objection make business sense or act as an acceptable excuse for doing the right thing?
Software patents, are the great equalizer and are necessary for small businesses. Small businesses will be pushed around and ultimately destroyed by larger companies that do not innovate but have the means and ability to maintain their monopoly through size, market penetration and funding required to simply outlive and pound smaller adversaries.
The business reality is this: patents are a tool, a means to an end and that end is survival. So ignore what I say if you want, believe the anti-patent advocates and listen to them pound their chest claiming that their own lack of business judgment is evidence of a patent system failure. The truth is they are wrong.
Do what you want, but the law is there for everyone to use to their advantage, so don’t be surprise when others do use it to their advantage, as did Nuance, and to the detriment of those who place what they believe should be the natural order of things ahead of business success. Patents are a business necessity and so is appropriate litigation insurance. If you operate your software business without both then you are engaging in a dangerous game that is the business equivalent of Russian Roulette.
*** NOTE: Homage to Charles Krauthammer who used a similar line the other day in a different media bias context.- - - - - - - - - -
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Posted in: Gene Quinn, IP News, IPWatchdog.com Articles, Patents, Software
About the Author
Gene Quinn is a Patent Attorney and the founder of the popular blog IPWatchdog.com, which has for three of the last four years (i.e., 2010, 2012 and 2103) been recognized as the top intellectual property blog by the American Bar Association. He is also a principal lecturer in the PLI Patent Bar Review Course. As an electrical engineer with a computer engineering focus his specialty is electronic and computer devices, Internet applications, software and business methods.