On Tuesday evening December 8, 2015, Jay Walker, a prolific patented inventor and billionaire businessman, was named National Inventor of the Year by the Intellectual Property Owners (IPO) Educational Foundation at their annual celebration in Washington, DC. Walker, the man behind Priceline.com, began his 12-minute speech by thanking the IPO for naming him Inventor of the Year “because until now my tombstone was going to say, The Man Who Hired William Shatner.” Laughter abounded through the Old Patent Office Building, the site for this great event, which is today host to the National Portrait Gallery and American Art Museum.
Over the past several years I’ve gotten to know Walker a bit. Always on display are a sharp wit and a self-deprecating sense of humor, witnessed by his explaining to the audience that he was not wearing a tux because although he may be a genius that side of him is not always evident. His tux remained safely packed in his travel bag next to the door at home in New York, which he somehow managed to leave en route to Washington, DC.
But don’t let the humor fool you. There is a very serious side to Walker. As the 11th most patented living inventor in the world Walker has a mind that works in different ways from a technical point of view, but he is a tremendous communicator. Drawing the audience into his world, he does not mince words and there is no doubt where he stands on an issue when he has concluded.
“The public, the government and even much of the business community often hates or fears patents,” Walker told the industry audience. “The very word ‘patent’ makes them scared or angry or both. Public respect for intellectual property and the understanding of its constructive role in our economy is at an all-time low. How did we get here? To be a patented inventor used to be a great thing. You used to be like proud to have patents.”
Sadly, thanks to a public relations campaign that for far too long went unchallenged, in many corners it is viewed as a self evident truth that patents are evil and patent owners, including inventors, are nothing more than a bunch of greedy monopolists who run rough-shot over the public domain. We vilify rather than celebrate innovators who cure disease, feed the hungry, revitalize the environment, or just make life better, easier and cheaper for the masses.
“Patents started as a bargain between the inventor and society, a bargain that said if you’ll teach me your innovation so that anybody can make it I will grant you a period of limited exclusivity. It was a bargain with the public,” Walker explained. “You didn’t have to build a factory. You didn’t have to make the thing. You just had to figure it out.”
Here is where things have dramatically changed over the last decade in the United States. There are a handful of tech companies that would prefer the patent system not exist, or at the very least that a far less robust patent system exist. These companies have rightfully pointed to the handful bad actors that engage in patent litigation abuses and have demanded reform. Without missing a beat, however, they have then pivoted from these bad actors that are rightly characterized as patent trolls, to claim that the problem of abuse is with all so-called non-practicing entities, or NPEs. It has been a brilliant PR move.
When you control the linguistic high ground you control the debate. Convincing the press, the public, Congress and some Courts that patent litigation abusers, who often engage in what is properly characterized as extortion-like activity, are one and the same as NPEs was what the coup d’état. Of course, non-practicing entities include research and development companies, independent inventors, and universities. Thomas Edison would have been a patent troll if being an NPE makes you a patent troll, so too would the Wright Brothers. But then again so too would Apple, since Apple really doesn’t make anything either, choosing instead to ship manufacturing (and jobs) overseas so that workers in other parts of the world can make what they innovate.
As crazy as it sounds, U.S. patent law and policy has evolved over the last decade to a place where figuring out the innovation is not only something we don’t celebrate, but it is something that we openly vilify because you greedy innovator will simply stand in the way of some giant multinational corporation from copying what you figured out and want to get paid for your innovative contributions. How did we get here?
What difference does it make? For the small, start-up technology company it makes a huge difference.
“You know, when I created Priceline.com I created a unique way of buying something, of naming your own price and not knowing what you were going to get precisely and I received a US patent,” Walker explained. “When a very large and very respected company, a giant corporation who I like a lot infringed and just took it and put it into their product, we said you can’t do that, we have a patent and they said, we’ll see you in court, we’re giant and you’re a startup. Well, they picked on the wrong guy at that time because I wasn’t such a small startup; I had a few dollars and we sued in court and they stopped… they were a Fortune 50 company. That’s the power of the system when you have the money, the expertise and the wherewithal to make it right.”
Walker was just getting warmed up, next targeting what he described as the “elephant in the room,” which is the reality that “not only is our patent system broken but the patent itself is totally broken.” In what can only be described as an eloquent and perfectly on point tirade, Walker continued:
Patents are impenetrably complex, they’re costly, they’re confusing and they are the opposite of certain, they are uncertain. There isn’t a CEO in America who can pick up a patent and tell you with certainty whether his product actually infringes on what that patent teaches and that is nuts. We have allowed the creation of an Alice in Wonderland of rules and procedures and technical details to overwhelm the beauty of the original conception of a teaching. This system has been spinning out of control slowly and gently for the past 100 years, each year getting three or four or five percent more complex like an arterial blockage getting narrower and narrower and narrower until one day bam, you have a heart attack. We are that close, ladies and gentlemen, to an innovation heart attack. Any marketplace that cannot make a deal without filing a lawsuit in federal court is in deep trouble and that is the state of my opinion today. The results of this mess are sad and unpredictable. There is less incentive to create long-term intellectual property. There is certainly more incentive to infringe if you can figure out what infringement is. There will be more secrecy and there will be less innovation or certainly a very different kind of innovation. Because when you talk about patents in Silicon Valley they laugh at you. Laugh. They say by the time these patents come out years from now they may or may not be any good. We’re gonna be big. We’re gonna be stealing the customers and then another five years in court, what a waste. They’re wrong. It’s not a waste but the way it’s operating today I understand why they feel that way.
My first inclination is to simply say AMEN! My second inclination is to marvel at how perfectly and simply Walker has explained exactly what ails the patent system. When he talks about incentive to infringe he is, of course, referring to the concept of efficient infringement. Efficient infringement is a business decision. Even if I’m infringing there will be a subset of patent owners that don’t sue. Out of the subset that sues there will be a smaller subset that prevails. Out of that smaller subset that prevails there will be a smaller subset yet that gets anything that would approximate reasonable compensation for the damage done when you factor into the question that the infringer did not enter into a negotiated license and instead chose to infringe. An even smaller subset still will actually collect anything thanks to the infringer favorable damages laws and litigation realities.
But even if you were not inclined to engage in efficient infringement, how could you figure out what infringement is? If you look at patents issues 100 years ago they were maybe 2 pages long. Patents issued 50 years ago were maybe 4 or 5 pages long. Patents issued today on even simple kitchen gadgets that you might see for sale on QVC could easily be 15 to 20 pages or more. For a software patent application filed today that patent application could easily be 100 to 150 pages, or more, for something that is quite simple. Patent law has increasingly gotten more complex like the tax code. With every new ruling or requirement more detail is required. But the way the law works is if you say X and not Y then you must not have meant Y. But I said X, so certainly that meant all varieties of X, right? Who knows is the technical legal answer, at least today. Yet somehow 100 years ago when patents were 2 pages long everyone knew what was invented, claimed and owned.
“A world without property rights, except for the big guys, is not a world that enlarges itself,” Walker said. If we do not make the patent clearer and easier to understand “we will handicap our economy. We will handicap our ability to compete against people who do not want intellectual property.”
Walker then did a mini-pivot to discuss something I’ve heard him talk about many times before. “It used to be that inventors used to read the patents,” Walker told the audience. “Scientific American started as an organization to publish synopsis of patents. Imagine publishing in the Wall Street Journal, Forbes and Fortune and nobody in the business community would read it for fear of infringing on any of the ideas in business magazines. That’s what we have. At every major corporation they’re often told do not read patents. You are not to look at patents. It’s a fire-able offense at many companies. This is a perversion of the system we inherited.”
Walker ended his speech with a call for a new market reality, one that realizes that a system that pushes disputes into litigation is a system that is broken and doesn’t work for anyone. “Instead of treating every infringement like a crime with a trial, which is expensive and creates friction, let’s figure out how to treat them as a rational predictable cost of doing business,” Walker explained. “We are a community that recognizes what is being lost for our country. We are the community that needs to come together to encourage 100 times more innovation, 100 times more property rights that work. Think like the music industry. A million pieces of music are better than 100,000 pieces of music.”
From his lips to Congress’ ears! I can only hope.