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What the NY Times Doesn’t Understand about the Patent System


Written by Gene Quinn
President & Founder of IPWatchdog, Inc.
Patent Attorney, Reg. No. 44,294
Zies, Widerman & Malek
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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

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.

 

18 comments
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  1. Gene,

    Obviously a biased article. I noticed that the only judge quoted was Posner who is definitely anti-patent. They should have interviewed former Chief Judge Michel, but that would have shot down the premise for this article.

  2. EG-

    Yes, Judge Michel would have given a very different perspective. But remember, he was interviewed for the Ars Technica article and Timothy Lee then editorialized something like — obviously he doesn’t get it.

    That a reporter who knows nothing about patents could say that about Judge Michel is breathtaking.

    -Gene

  3. Very interesting graph. Are we five times as innovative as in 1975?

  4. 2 related points:

    from: http://www.technovia.co.uk/2012/10/did-apple-and-google-really-spend-more-on-patents-than-rd-yes-but-its-not-all-it-seems.html?utm_source=wordtwit&utm_medium=social&utm_campaign=wordtwit

    “and unusually big-dollar patent purchases ”

    from: http://samradford.com/linked/apple-and-google-spending-more-on-patents-than-rd

    “So yes, Google and Apple did spend more on patents in 2011 than R&D. But that’s very likely to be a one-off, simply because 2011 was an unusual year which saw several highly-desirable patent portfolios come on the market. What the NYT didn’t say is that Apple also increased its R&D spending in 2011 by 33%, and that Google’s R&D spending continues to trend upwards massively, with the company spending a whopping 12% of all its revenue in R&D last year.”

  5. Paul-

    I think we are certainly more innovative not than in the 1970s. I’m not sure about 5 times more. What seems relatively clear, however, is that innovation is much more likely to be disclosed today than in the 1970s. When the Supreme Court continually invalidated patents, as did so many of the regional circuits, there was little incentive to seek a patent so much innovation was driven underground in the form of trade secrets.

    -Gene

  6. Power of Trade Secrets…
    Driven underground…

    AIA…

    Now where did I put my disco shoes…?

  7. Gene –

    Major error in your premise. The article appeared in the NYT under the byline of the writers. The article was the view of the writers, not the NYT. Had the article been in the lead editorial slot, you might have a case. The NYT has had a long history of opening its pages to opinions and articles from many quarters. Consider that over the years Willam F. Buckley, George Will, Patrick Buchanon, and others from the political right found space on the NYT. The NYT hired conservative David Brooks to write for them. Would you attribute all that Will wrote in the NYT to the NYT? Of course not. The NYT is more a forum than a house organ, qua Fox News.

    No argument that the authors do not get the point.

  8. Okay, so I have personal interest in the development of speech services such as Vlingo and Siri dating from 2000, but I do think the article’s authors missed or omitted significant parts of the story they used to top-and-tail the more general anti-patent piece.

    Michael Phillips founded SpeechWorks (a speech recognition company) in 1994 that got acquired by ScanSoft in 2003, becoming its CTO and having access to the lab’s. Scansoft acquired Nuance Communications (a speech recognition company) in 2005 and changed it’s name to Nuance. Michael left Nuance in 2005 and co-founded Vlingo in 2006, which in turn was acquired by Nuance in late 2011. So there is definitely more to this aspect of the NYT story than they indicate.
    I suspect that Mike, like many enterpreneurs, is angry because he had a business opportunity and the battle with Nuance took it away from him, but at the same time he is probably annoyed with himself for not cutting a deal years ago with Nuance that could of be beneficial, hence welcomed an approach by journalists to say his piece …

    Just picking up on a couple of things from both the NYT and your article. Whilst insurance etc. can be helpful we shouldn’t forget that litigation is very disruptive to a business and specifically to a start-up where there are a few key people juggling running the business and doing the innovation.Similarly on complex systems (and services like Vlingo and Siri are very complex) you have to involve and trust key suppliers – on my projects Nuance had very good access to our ideas etc. and effectively it was a matter of trust that they would not exploit this knowledge (yes we had NDA’s etc.); however, I’m not sure if we would of had any real comeback if they had – for all I know some of the patents Nuance were asserting against SpeechWorks could of had their genesis in the problems my projects were encountering…

  9. The other aspect of this case not mentioned is Nuance’s CEO’s reputed approach to acquisitions.
    This Bloomberg Businessweek article gives a flavour: http://www.businessweek.com/magazine/content/11_22/b4230037736600.htm

  10. Hi, Gene,

    Thanks so much for writing this article in response to the article in the NY Times. Not surprisingly, and unfortunately, the writer of the NY Times piece is now being showered with undue attention, despite the lack of coherence in his article and unfounded conclusions. Here’s a link to a 1/2 hour segment that ran on Fresh Air yesterday on NPR, featuring an interview with the writer of the NY Times article:

    http://www.wbur.org/npr/162717373/in-digital-war-patents-are-the-weapon-of-choice

    Gene, what do we need to do to get you on NPR?

    Best regards,

    Kevin Drucker

  11. Gene,
    Excellent points on the benefits of the patent system. You focus on the disclosure benefits of the patent system but miss its other (and most important) purpose – to incentivize risky investments in developing and exploiting new inventions which would otherwise not be made but for the security of exclusivity. Our founding fathers understood that when they directed Congress to “promote the progress of the useful arts” by “securing for limited times to … inventors the exclusive right” to their inventions.

    Moreover, as so many other patent bashers, the NYT authors appear ignorant of other ways our patent system promotes competition and accelerates the “progress of the useful arts.” Without the patent system there would be no motivation for others to continue finding new alternatives to existing solutions. The need to invent-around extant patented inventions often unleashes new technology fields that empower consumers and fosters vigorous competition. The example of the invention around Edison’s incandescent lamp patent in the 1890’s is apt: Edison did not assert his patent for more than a decade after it issued. Increased competition in the electric lamp industry took place only after Edison began enforcing his patent. Due to design-around solutions, lamp prices declined by a factor of 2; these effects and the resultant collateral discoveries of other technologies are detailed in a recent working article at http://bit.ly/Inventing-around-Edison.

  12. “The need to invent-around extant patented inventions often unleashes new technology fields that empower consumers and fosters vigorous competition.”

    Ron,

    Very astute point that all too often gets “lost in the sauce.”

  13. Kevin-

    I’d be happy to appear on NPR or anywhere else. While my writing is very easy to find on the Internet it seems that most in the popular press gravitate to a different point of view. If anyone has any connections please let me know. In the meantime, I’ll keep pointing out the misrepresentations whenever I see them. I can tell you people do read and are influenced.

    This leads me to another matter… if anyone wants to contribute as a guest please let me know. If necessary to protect anonymity we can publish under a pseudonym.

    -Gene

  14. BD-

    OMG. I can hear the music in my head. LOL.

    -Gene

  15. Did not know we would run into each other like we seem to be. Love IP Watchdog!

  16. I don’t disagree that the software industry is swimming in the patent pool and it’s foolish not to pursue them when you can.

    However, the problem with software patents is that the societal benefit is non-existent because disclosure is ALREADY happening when companies bring the software to market. No one is going to seek patent protection for non-public software — think mostly financial/trading software systems. But even if you think there is some nominal amount of disclosure value, it’s entirely wasted since software patent specifications do a piss poor job of disclosing the software they purport to claim. Software specs are often little more than flowcharts detached from the technology of the time when they’re granted — perhaps not when they’re filed. It is likely a minority of patent application that could ever help a software developer actually develop that which is disclosed (if it wasn’t already painfully obvious from the commercial embodiment). I would also wager good money few, if any, developers monitor the patent filings of their competitors for competitive insight and software develop tricks.

    So what do you get?
    1. Really crappy, often duplicative, disclosures.
    2. Resources wasted on patent acquisition
    3. Resources wasted on patent enforcement of lagging patents
    4. Incentive to avoid market-based innovation — such innovation largely driving the field anyway.

  17. mmm-

    You say: “Software specs are often little more than flowcharts detached from the technology of the time when they’re granted…”

    The trouble with that statement is that it is just false. Like so many other critics you are basing your beliefs today based on what happened OVER a decade ago. There are no patents being granted on software that are just flowcharts detached from the technology. That is simply false. It doesn’t matter how many times the falsehood is repeated — it will always be false.

    Anyone who makes this claim is not at all familiar with the patent law as it relates to software and has developed since 2002.

    -Gene

  18. mmm
    “I would also wager good money few, if any, developers monitor the patent filings of their competitors for competitive insight and software develop tricks.”
    I would totally agree with you, however this doesn’t mean that the developers couldn’t benefit by monitoring software patent filings – it is changing the way I perceive what is and isn’t patentable (by the USPTO) and the value add of some parts of the work I do for clients.

    This doesn';t mean that all software patents are equal, as there are plenty that I look at and ask myself why was this ever considered patentable; there are others, probably more directly related to my experience that I can look at and say yes that was original and innovative in it’s time.