The Electronic Frontier Foundation Still Believes in Fairy Tales

“An early stage investor takes more risk per dollar than any other person in the entire innovation ecosystem. They take a longshot bet at the highest point of risk that the startup will ever have…. With no patent protection, the risk is too high to invest.”

Joe Mullin, a policy analyst at the the Electronic Frontier Foundation (EFF), recently penned a misleading article about the Inventor Rights Act (H.R. 5478). He says it will promote and protect patent trolls. To unravel what he really means, it is first necessary to understand early stage investment, and from there, to define what a “patent troll” truly is.

Scary Stories

Through organizations like EFF and their companion organization, Engine, Big Tech often writes scary stories about how patent trolls hide under bridges for no other reason than to utterly destroy innovation.

Very scary stuff.

Scary because this fantasy has misled the courts, Congress, and multiple administrations, convincing them to change the law in ways that destroyed America’s startup engine. Scary because early stage investment is fleeing to China at the expense of American startups. Scary because it has created perpetual Big Tech monopolies with no allegiance to the United States that are immune to American competition and taxes. These forces now control what we read and say, how we vote, and even what we believe to be true.

Even today, trusted political staff, craving a Big Tech big money lobbying job, whisper patent troll fairy tales into the ears of their lawmakers. Lawmakers, most equipped with neither tech nor startup experience, hear the lies over and over as they echo through the halls of Congress, fueled by Big Tech big bucks. The lies are now the reality that lawmakers believe. Lawmakers today refuse to fix what they broke, leaving startups, innovation, economic growth, and even our national security in clear and present danger.

Now is the time to leave fantasyland and rejoin reality.

A Tale of Pillage and Plunder

Little guys are easy to knock off when they first start commercializing a big idea. Big Tech multinationals prowl for new technologies that create a competitive edge, open a new market, or protect their market share. Since little guys historically invent the most important new technologies, they are the hunted. These monopolies have huge markets, deep pockets, engineering, manufacturing, distribution, and many other resources, including political and industry connections, none of which the little guys have. These resources are brought to bear on the little guy to steal their inventions. These monopolies are modern day marauding hordes of medieval horsemen plundering small villages.

A little guy must build a wall to protect the invention from raids by powerful corporations. Not so long ago, patents provided that barrier. They forced the powerful to deal with little guys. If they wanted to loot the village, they had to remain outside of the gates and ask for permission. This drove acquisitions, mergers, licensing and much more. But since 2006, the patent system has been gutted for little guys. Today, it is arguably a CEO’s fiduciary duty to their shareholders to plunder startups and litigate them into oblivion.

No one is an expert in all things, and little guys don’t normally have any resources, so they need investors to buy the resources they lack, like prototyping, market research, engineering services, and connections to make deals for market access and distribution. They need early stage investment to start up the startup.

No one invests in a great idea that can be easily stolen. This is like hanging a satchel of silver coins on a pole outside your hut. Someone will come along and take it. Likewise, if you don’t protect your big idea and it has market value, it will be plundered. Investors know the hypercompetitive nature of free market competition means that investing in unprotected technology risks losing all that is invested.

What Patents Were, Once Upon a Time

Patenting inventions once provided this protection and encouraged early stage investment. A patent once was a legally enforceable exclusive right that allowed you to halt the raid. It was also a private property right that could be collateralized for investment. These things encouraged early stage investment because they lowered the risk of huge multinationals plundering the tech. It also created a way for investors to recoup investment because if they raided the startup and burned it to the ground, the investor could take control of the patent. Then they could sue the thieves and collect damages, or sell the patent to someone else better armed and equipped to sue the thieves.

Early stage investment has now gone to other countries like China and Germany because we no longer protect inventions here and they do there. An early stage investor takes more risk per dollar than any other person in the entire innovation ecosystem. They take a longshot bet at the highest point of risk that the startup will ever have. The technology is not proven, potential competition is powerful and entrenched, the market is unknown, and the management team in many cases does not exist and will have to be built, and there are often no assets to collateralize other than a patent. With no patent protection, the risk is too high to invest.

The EFF recognizes this in a different article saying patent trolls “are firms that failed years ago, and now exist as shell companies that hold and assert patents. Or companies that never got a product off the ground, and now focus instead on litigating patents in court. And some patent owners never tried at all—they are simply individuals who acquire patents from the U.S. Patent Office for the purpose of making infringement accusations against others.” They don’t explain these infringers are being sued because they are believed to be actually infringing valid patents. If the patent holder sues under false infringement contentions, they will pay the other side’s costs. That fact alone is strong evidence that the invention is useful, novel, sufficiently disclosed, and infringed and therefore cannot be a “bad patent”, the new trendy fairy tale also invented by Big Tech.

An early stage investor is the most important person in the entire innovation ecosystem. Without early stage investment, the startup doesn’t start up. But according to Mullin, an early stage investor is really an evil patent troll who must be destroyed.

The Ending EFF Wants

The best way to discover the true intent of the EFF is to replace the phrases “patent troll” and “patent owner” with “early stage investor.” You will see that what they really want is to wipe out any startups that pose a threat to Big Tech monopolies. Here are a few examples:

“Certain [early stage investors] just can’t get enough of the monopoly power patents bestow.” Without an “exclusive Right”, infringers never settle. It is smarter to drive litigation costs into the stratosphere so early stage investors cannot stay in the game. In most cases since eBay v. MercExchange ended injunctive relief, litigation costs exceed the value of infringement. Investors simply cut their losses and the thieves are never held to account.

“H.R. 5478, hijacks the positive associations many of us have with “inventors” to radically tilt the patent system in favor of [early stage investors].” It is impossible to disentangle inventors from early stage investors, or even from those better positioned to fight infringers who buy their patents. The dynamics of startup funding and a failed patent system aligns their fate. By attacking one party as an evil cartoon, Mullin’s rhetoric is an attempt to bifurcate that relationship and then destroy it in the public eye.

“[early stage investors] make money by threatening people over everyday activities, not by inventing, building, or selling anything of value.” (Engine’s language is virtually identical) This is a display of naivety – or malice – I don’t know which. The early stage investor’s funds bought the startup’s needed resources and without those resources, nothing would have been built or sold. If the EFF instead means to disparage the investors who purchased patent rights from an early stage investor, it is also a display of naivety – or malice – for the same reasons. But the consequences are worse because the patent sale enabled the early stage investor to recoup losses sooner and that returned capital can then be reinvested in another startup sooner.

“H.R. 5478 will give enormous new litigation powers to a select group of patent owners, which will include many [early stage investors].” Mullin may believe these powers are new, but they were defined in over 200 years of legislation, case law, and Constitutional law. Only in the last 14 years has the Supreme Court become entranced by fairy tales and joined the effort to kill startups by twisting the plain meaning of the words of law. This judicial misdirection of public policy has resulted in entire swaths of technology moving to China.

Getting Back to Reality

Now you know what these very scary fairy tales mean in the real world. The EFF and their coconspirator, Engine, clearly intend to destroy the startup ecosystem by crashing early stage investment in startups. The effects are intended to perpetuate Big Tech monopolies—the same Big Tech monopolies that fund EFF and Engine.

If you don’t yet believe me, take a closer look at Big Tech business models. Big Tech monopolies control markets larger than most countries and control access to those markets by taking power reserved for sovereign nations. They have their own proprietary patent systems. Big Tech rightly views the U.S. patent system and its protection of startups as a threat to their monopolies, and wrongly desires to kill both.

They have already succeeded. We need to reject the EFF, Engine and Big Tech fairy tales and take a close look at the real world, or we need to accept the consequences that early stage investment in new technologies will continue to move to China, Germany, and other countries where patents still matter.

H.R. 5478 is only a first small step in restoring the foundation of our innovation ecosystem—our startups. H.R. 5478 encourages early stage investment by providing minimal patent protection for startups. The result will be to increase American innovation by driving the demand for huge multinationals to acquire startups, license technology and create other mutually beneficial relationships. Early stage investors will see a path to get investment returned and will start investing in American startups again.

Image Source: Deposit Photos
Author: stuartmiles
Image ID:6496641

Paul Morinville Paul Morinville is the Founder and former President of US Inventor, Inc., which is an inventor organization in Washington D.C. that advocates strong patent protection for inventors and startups. Paul [...see more]

Warning & Disclaimer: The pages, articles and comments on IPWatchdog.com do not constitute legal advice, nor do they create any attorney-client relationship. The articles published express the personal opinion and views of the author as of the time of publication and should not be attributed to the author’s employer, clients or the sponsors of IPWatchdog.com.

Join the Discussion

24 comments so far.

Night Writer
May 29, 2020 10:29 am
I have a lot of experience in all these matters from being an inventor, product manager, member of a start-up, VC, patent attorney, and so forth.

Lots of things are true. Big companies take little companies tech if they don’t protect it and if it makes sense to take it. We did that at a big tech company.

It is hard to deal with attacks from the patent system when you are a small company.

The “reforms” of the patent system are absolutely to help SV. They have destroyed the patent system.

And so forth.

I would say that as someone that has done patent litigation that the core problem is that it costs more to defend against patent litigation at the onset then it does to file a patent infringement suit. That is the core problem. You have to put together all your invalidity arguments right at the beginning which can run 100’s of K or millions. The P can do almost nothing.

That is why the problem happened with people suing and writing threatening letters. Maybe IPRs would be OK if they afforded the patent owner more rights.
Model 101
May 29, 2020 08:40 am
Paul – “Tillis does not want to fix it. He wants the status quo. What a sham. What a shame. What a coward.”

You left out “CROOK”. This was the key word I heard at the 101 hearings.

============= All of them are CROOKS ===============
Anon
May 28, 2020 08:01 pm
Paul @ 19.

entirely agree

We need someone in Office willing to actually fix the problem.
mike
May 28, 2020 06:54 pm
@anon:

“the basis for [my] disagreement with [your] Divide and Conquer stratagem?” and “why [I] think that this historically proven powerful device would be ‘off the table’ here?”

1- Like I previously provided, I am and stand with you.
2- Save a time machine or the knowledge of God, it is not possible to predict the future with 100% accuracy.

Your suggestion of my position being the enemy lends itself to a Divide and Conquer stratagem. Nevertheless, I will stand with you.

Paul is right. You are right.

As Paul notes, and I agree, patent laws do not apply evenly today. A generation of inventors are being denied access to the courthouse, whereas larger entities can buy justice. This legislation allows all entities to get their day in court.

I vow to not leave it at that.
Jacek
May 28, 2020 06:09 pm
Expose bastards to the public. Inventors need media outlets publishing their side of the story. Nothing will happen without it. Today in IAM I was reading a story about the trojan horse of democracy “The Guardian” publishing an article ( “Could a patent get between you and a Covid-19 test?) sponsored by “Big Tech” and promoting their agenda. This is not the first instance I could notice that “The Guardian” (of half-truths) plays a good fellow most of the time, then they suddenly switch sides for important agenda fooling the reader into believing that they are still telling the same side of the story. An old technique of manipulators. Wolf hiding in sheepskin. Like Mr. Tillis.
Paul Morinville
May 28, 2020 04:19 pm
Model 101, Tillis emphasized that US Inventor would continue to have a seat at the table during my testimony in the Senate hearings.

We offered a compromise to the legislation on the table. We are willing to accept the changes to 101 that eliminate all judicially created exceptions as long as the proposed changes to 112 and 100 are taken out. We remain willing to accept this compromise.

We heard nothing back from Tillis, except that the parties need to compromise. We obviously made a good faith effort to compromise, but Big Tech did not respond or offer any other compromise. They instead behaved like an insolent teenagers refusing to testify and working (bribing) the other judiciary committee members to undercut any solution.

Then Tillis shut down discussions. “You kids need to work it out and get back to me”. (paraphrasing) This left Big Tech winning everything after not even trying to compromise and left US Inventors with no access to justice, as it was before the whole process started.

If Tillis is trying to honestly fix this mess, he would not position the negotiations by ensuring that US Inventors never have any leverage in the negotiations while granting BIG Tech all of the leverage, which is exactly what he did.

Tillis does not want to fix it. He wants the status quo. What a sham. What a shame. What a coward.
Model 101
May 28, 2020 03:42 pm
Mike – too little, too late. The SCOTUS and CAFC will live longer than the last generation of American inventors. I think it’s funny that Google, Microsoft, Apple, etc…. are trillion dollar companies who Senator Tillis invited to the 101 hearings and then said, by not attending, were “complicit” in 101 reform efforts.

Bologna!!!!
Anon
May 28, 2020 11:26 am
mike,

I am not sure that I understand the basis for your disagreement with my Divide and Conquer stratagem.

Can you flesh out why you think that this historically proven powerful device would be ‘off the table’ here?
Anon
May 28, 2020 09:20 am
Mark, I had to pause for but a second, but I would regard the technicality as superficial and that a genetic logical fallacy may well BE a form of ad hominem logical fallacy.

But my counter is different anyway: my counter is that NOT all ad hominem attacks are ‘bad,’ merit-less, or a fallacy in the strictest sense of THAT word.

Sometimes, a person’s character (or to be as precise as you choose to be, their ‘genetics’ in the sense of their history) IS relevant TO the message that they are delivering.

I would also point out that this is a second time in short order that you have chosen to “give” on a feelings side of the coin. I notice that you have not returned to discuss the AI thread, and now with a second venture from you in a feelings arena, I am tending to discount your posts.

It should be clear that this is NOT merely because of the employment of ‘feelings.” Heck, I employ them all the time. Feelings are real and are powerful. Rhetorical tools are built to move people based on feelings (as well as based on facts, and the feelings about facts).

But if you only ‘give’ feelings, but excuse yourself from the ‘get’ of returns, then you are NOT engaging in a dialogue.

I hold those that wish to merely climb a soapbox, say what they want to say, then climb down and NOT listen to anyone else in especially low regard.

And this view is ascribed objectively across BOTH sides of the aisle of pro- and anti- patent.
mike
May 28, 2020 04:25 am
Anon, I agree with your position on defending innovation and patent property. I disagree with your views on a Divide and Conquer strategem in that thread — I stand with you in your fight. And all inventors will. We should not leave a generation of inventors behind, nor should we forfeit momentum.
Mark Summerfield
May 28, 2020 03:19 am
Anon, technically the logical fallacy in my comment was genetic, rather than ad hominem. But it wasn’t really intended as an argument against the EFF article at all, just some background on Mullin and where he comes from that some might find interesting if they haven’t encountered him before. Paul’s done the hard yards in setting out the flaws in the article itself. My opinion is based on some years of observation, but it’s still just an opinion with only peripheral relevance to the substantive issues at hand.

If Mullin would care to join us here, I’m sure we’d all be very happy to debate him objectively on the merits of the article’s content, without regard to any qualities that the author may or may not possess.

But, then again, maybe not.
Anon
May 27, 2020 05:50 pm
Paul,

As to your last comment, I could not disagree more. See the thread I linked to and note therein the “Divide and Conquer” stratagem that is noted there.
Paul Morinville
May 27, 2020 03:05 pm
Anon, I did say it is only a small first step. The dynamics of the industry will bring the rest of the changes you and I both seek.
jacek
May 27, 2020 02:18 pm
The question is: How to put the message upfront of the public eye. This blog reader is just a fraction of a subfraction of people who should know the truth?
Does anybody know somebody in any media outlet?
PTO-Indentured
May 27, 2020 01:43 pm
Not just a Believer in Fairy Tales — a top Fairy Tale fool, ignorantly a lead ‘town crier’ of a baseless lie no one with a hint of concern about the US patent system believes is true for a second. Largely because no Fairy Tale fool — for over a decade now — has ever credibly-substantiated a Kool Aid myth they’re intoxicated with but believes those with a kid’s worth of intelligence / concentration will gladly continue to drink.

Their veil has worn thin and it reveals “troll” = BIG MONEY. Short, concise, anxiety-inducing (sans reflection), too many plates spinning to take time to even scratch the veil — perfect. An ironic ‘something more’ (unexamined) ‘practical application’ that meets a ‘101’ level of patent mindlessness — having a staying power that boggles. Intended outcome: patent paralysis.

Shame on all decision makers bearing down on the US patent system, gaga over a handful of oligarchs and multi-national corps who don’t give a hoot about, nay delight in the denigration of, the U.S patent system, because to those few, it = BIG MONEY.
Jorge Maass
May 27, 2020 01:22 pm
On November 7, 2019 I responded to EFF’s false story written by science fiction writer Joe Mullin about our company Price Setter LLC where he makes reference to a patent bill under consideration in the senate “The Stronger Patents Act Would Make Bad Patents Stronger Than Ever”. I believe that the only thing achieved by Mullin’s story was to put on notice millions of application developers on the possibility of patent infringement by making public our “Notice of Potential Infringement”

See response here:
https://pricesetter.net/price-setter-responds-to-electronic-frontier-foundation/
Anon
May 27, 2020 01:13 pm
In complete agreement with you here Mark – BOTH the ad hominem and the reasons behind the ad hominem.

Sometimes the ‘attack on character’ of the person saying the piece ARE pertinent.

This is one such case.
anonymous
May 27, 2020 12:10 pm
Dear EFF:

You raised three objections to this bill.

First, you want no injunctions, instead belittling inventors as “do-nothing companies” who should be content with ongoing patent infringement. The Supreme Court disagrees with you. The Supreme Court made clear in eBay that “some patent holders, such as . . . self-made inventors, might reasonably prefer to license their patents, rather than undertake efforts to secure the financing necessary to bring their works to market themselves. Such patent holders may be able to satisfy the traditional four-factor test [for injunction], and we see no basis for categorically denying them the opportunity to do so.” eBay, 547 U.S. at 393. Thus, there is NO CATEGORICAL RULE FROM EBAY that injunctions are not to be granted. Lower courts are mis-applying eBay. The irreparable harm prong can still be met where there is only an affront to the “right to exclude” because inventors “might reasonably prefer to license their patents.”

Second, you don’t want an inventor to be able to sue in the district where he or she lives. Instead, you want the infringer to always have home field advantage. Inventors seek fairness, not undue advantage. Efficient Infringers only seek undue advantage.

Third, you don’t want inventors to have jury trials. We trust juries. Juries are integral to our system of justice. A right to trial by jury is a constitutional guarantee. Juries handle complex matters all the time. Patent cases should be no different.

Mr. Morinville is correct that Big Tech writes the script in an attempt to influence policy. The EFF’s fairy tales do nothing more than try to convince you that a jury trial is bad and that the Supreme Court is wrong when it says “self-made inventors might reasonably prefer to license their patents.” Inventors are good. Juries are good. Innovation is good. Investment in innovation is good. These are bedrock principles. Constitutional principles.

Congress, wake up! Amazon just mislead you directly in hearings of the antitrust subcommittee, with a bipartisan group in the House saying Amazon’s statements “appear to be misleading, and possibly criminally false or perjurious.” Do not be mislead into believing more Big Tech lies and fairy tales.

When Amazon literally scripts the “news”, we can all see Amazon is feeding the public and Congress misinformation. https://couriernewsroom.com/2020/05/26/11-local-tv-stations-that-pushed-amazon-scripted-segment/

Congress, don’t be fooled any longer.
Mark Summerfield
May 27, 2020 09:55 am
Joe Mullin was a hack ‘journalist’ at Ars Technica who spent years writing biased and misleading articles attacking the patent system. I once wrote a lengthy critique of the numerous factual errors and inaccuracies in an article he wrote in which he essentially painted Australia’s leading public scientific research organisation, the CSIRO, as a patent troll (https://blog.patentology.com.au/2012/04/five-reasons-why-ars-technicas-savaging.html).

It is disheartening, but hardly surprising, that Mullin has managed to parlay his reputation as a partisan bootlicker into a nice cushy role at the EFF. The organisation was founded to defend individual liberties online, but somewhere along the way was persuaded – doubtless by zealots at the fringe of the free software movement – that the patent system is somehow a threat to freedom. And so Mullin gets to take a step up to the lofty title of ‘policy analyst’.

The irony, of course, is that the companies whose interests the EFF now best serves, namely tech behemoths like Google, Facebook, Amazon et al, represent one of the greatest threats to online privacy and freedom in the world today. Individual and small business innovators, who might offer us alternatives to handing over all of our personal information to the mega-corporations, are powerless against the market dominance of these monsters in the absence of strong, enforceable, IP rights.

Kudos to the EFF and Joe Mullin for so effortlessly selling out the constituency they purport to serve!
Anon
May 27, 2020 09:29 am
With all due respect Paul, you appear to have not read my position.

This only cements the first wrong in place and does NOT provide help for ALL of those “little guys.”

My “requirement” is most definitely not satisfied.

I will not stand for a Chamberlain-like “my little piece in my time” Trojan Horse.

Cost of justice issues ALSO should be the aim of universal court access — and certainly not circumscribed to the patent realm.
Paul Morinville
May 26, 2020 09:26 pm
Anon, I agree with you. The principle that the same law applies to all in the same measure should be the primary driver of any legislation. Unfortunately, we do not live in that world and little guys don’t have the resources to affect lawmaker’s false beliefs in fairy tales.

It’s important to note that patent laws do not apply evenly now. Little guys are denied access to the courthouse. Any large entity can open those doors whether they are a Big Tech infringer or the company that buys patents to sue them. This legislation opens the door for small entities, so your requirement is effectively satisfied in that all entities can get their day in court.
Anon
May 26, 2020 07:39 pm
If there are legitimate fixes in the bill, then apply them universally to all innovation regardless of the patent owner.

Anything else is merely a second wrong which cannot — and will not — fix the (major) first wrong, a wrong promoted by the very same people who are the target of this article.

(similar discussion points on a thread, now about to drop to page 4 of the blog: https://ipwatchdog.com/2020/05/05/senator-thom-tillis-ip-stakeholders-cant-find-consensus-congress-cant-help/id=121262/ )
Jam
May 26, 2020 07:07 pm
Interestingly, enacting this bill may cause big corporations as well as assertion entities to assign patents back to inventors, take out an exclusive license, and then subrogate the assertion of rights, thereby bringing real people (inventors) back into the loop. No wonder big tech is against the bill. Perhaps someone should write an opinion piece about how big tech doesn’t think that even their own inventors deserve rights.
Robert Valsay
May 26, 2020 06:00 pm
My company does not need external ‘investors’.

And my company cannot afford legal defense against this unjust patent system, you wonder for whom is the patent system for.

If the patent system was designed with small companies in mind, it would not exist.

No sane mind would accept to respect all this legal garbage.