I love audio, and I've posted thousands of things online that are audio-related. Every once in a while, a friend will ask why I don't do it for a living. And my answer is simple - there's no money in it. So I work in technology, because it pays the bills, and do audio as a hobby.
So today's episode of "This American Life" was very interesting, as it seems that lawyers have figured out a great way to pay the bills, which is to buy up patents and then sue the crap out of companies left and right.
For instance, a patent troll bought up patent 7,620,565 and proceeded to sue Electronic Arts, Square, Atari, and the team that did Angry Birds.
Here's the patent in question, granted five years ago. It seems to me that they patented something which already existed, didn't they?
A network, including a product sub-system that interacts with a user, gathers information from the user, communicates the information to the product's vendor, and receives new pre-programmed interactions from the vendor for future interactions with the user. The sub-system is in or attached to a product. Further components include a data processing system for constructing and downloading pre-programmed interactions to the product sub-system; a communications sub-system for transmitting the data from the product sub-system to the vendor's computer; a communications apparatus for reading the product sub-system's data, transmitting it to the vendor's computer, and downloading new pre-programmed interactions to the product sub-system; a data processing system residing in the product sub-system for conducting interactions with a user; and a data processing system residing in the vendor's computer for analyzing and reporting information gathered from users.
Customer-based product design module - Google Patents
I think the part about this that's particularly chilling is that patent trolls discourage innovation in a huge way. For instance, I've often daydreamed about writing a software program, because every millionaire that I've ever met got rich off of software. Software seems to be one of the legitimate ways to attain the American dream. Sure, there are tons of companies that fail, but when you succeed in software, the jackpot can be millions.
But what's the point of software innovation if a patent lawyer can drag you into court and say that you infringe on an existing patent? The issue becomes particularly acute if you read the patent above, because you'll notice that the patent granted was on something which already existed.
Taken to the extreme, I wouldn't be surprised to see a financical instution collaterize patents, similar to the way that mortgages were collaterized into CDOs
So today's episode of "This American Life" was very interesting, as it seems that lawyers have figured out a great way to pay the bills, which is to buy up patents and then sue the crap out of companies left and right.
For instance, a patent troll bought up patent 7,620,565 and proceeded to sue Electronic Arts, Square, Atari, and the team that did Angry Birds.
Here's the patent in question, granted five years ago. It seems to me that they patented something which already existed, didn't they?
A network, including a product sub-system that interacts with a user, gathers information from the user, communicates the information to the product's vendor, and receives new pre-programmed interactions from the vendor for future interactions with the user. The sub-system is in or attached to a product. Further components include a data processing system for constructing and downloading pre-programmed interactions to the product sub-system; a communications sub-system for transmitting the data from the product sub-system to the vendor's computer; a communications apparatus for reading the product sub-system's data, transmitting it to the vendor's computer, and downloading new pre-programmed interactions to the product sub-system; a data processing system residing in the product sub-system for conducting interactions with a user; and a data processing system residing in the vendor's computer for analyzing and reporting information gathered from users.
Customer-based product design module - Google Patents
I think the part about this that's particularly chilling is that patent trolls discourage innovation in a huge way. For instance, I've often daydreamed about writing a software program, because every millionaire that I've ever met got rich off of software. Software seems to be one of the legitimate ways to attain the American dream. Sure, there are tons of companies that fail, but when you succeed in software, the jackpot can be millions.
But what's the point of software innovation if a patent lawyer can drag you into court and say that you infringe on an existing patent? The issue becomes particularly acute if you read the patent above, because you'll notice that the patent granted was on something which already existed.
Taken to the extreme, I wouldn't be surprised to see a financical instution collaterize patents, similar to the way that mortgages were collaterized into CDOs
Those that can't innovate--litigate. I look for companies that use that as a model; Bose for instance--and I don't buy their garbage. Same way with computers, Apple has turned into a sue everyone walled garden--time to dump them off at the alter of trash can companies. Litigation is a nice short-term gain but once you are a hated company, that is what you're left with. The last choice company to deal with.
On the positive side of things, China will surpass the US as the world's largest economy in 2015/2016--they won't put up with patent trolls. Default to the golden rule on that one. Getting into a trade war with a larger economy than you that holds over a trillion in your treasuries is not a wise move.
So relax, the solution is coming in a few years so I expect rather large changes in the US/Euro ideals of politics, business, legal and defense matters. I'm looking forward to China and India driving the world around for awhile...then we have to clean up our act with tort reform, political reform, balanced budgets, patent reform and actually compete on a more level playing field.
Real patents that are innovative will survive--patent trolls and lawyers will die on the vine. I've noticed that China is very picky about what patents they pay attention to--this might be a good thing? At least it is a wake up call at the very minimum.
On the positive side of things, China will surpass the US as the world's largest economy in 2015/2016--they won't put up with patent trolls. Default to the golden rule on that one. Getting into a trade war with a larger economy than you that holds over a trillion in your treasuries is not a wise move.
So relax, the solution is coming in a few years so I expect rather large changes in the US/Euro ideals of politics, business, legal and defense matters. I'm looking forward to China and India driving the world around for awhile...then we have to clean up our act with tort reform, political reform, balanced budgets, patent reform and actually compete on a more level playing field.
Real patents that are innovative will survive--patent trolls and lawyers will die on the vine. I've noticed that China is very picky about what patents they pay attention to--this might be a good thing? At least it is a wake up call at the very minimum.
Sadly all a patent is worth is exactly what you are willing or able to pay an attorney to protect it.
Once the attorney's own the patent, yikes, I don't even want to think about it.
Patent litigation can be drawn out for decades and become one of the most vile and destructive "legal" situations imaginable. Read the book Man of High Fidelity about Edwin Howard Armstrong, one of audio's brightest stars and see if that doesn't make you just sick!
Were headed to hell on a handkart if this becomes the norm.
Once the attorney's own the patent, yikes, I don't even want to think about it.
Patent litigation can be drawn out for decades and become one of the most vile and destructive "legal" situations imaginable. Read the book Man of High Fidelity about Edwin Howard Armstrong, one of audio's brightest stars and see if that doesn't make you just sick!
Were headed to hell on a handkart if this becomes the norm.
I work in software and dabble in audio, but my real passion is economics. We have a situation here that's created a moral hazard.
But first, a definition:
Moral hazard occurs when a party insulated from risk behaves differently from how it would behave if it were fully exposed to the risk.
Moral hazard arises because an individual or institution does not take the full consequences and responsibilities of its actions, and therefore has a tendency to act less carefully than it otherwise would, leaving another party to hold some responsibility for the consequences of those actions.
Divorce law is a good example of a moral hazard. In 1975, 71.4% of divorces were initiated by women. Thirteen years later, the percentage had fallen to 65%. I would argue that the moral hazard created by divorce law had declined because women's incomes had risen, therefore they stood to gain less in a divorce. (IE, if men and women both stood to lose equally in a divorce, there would be no moral hazard.)
There are over a million lawyers in the United States, and a significant percentage of them are divorce lawyers. Therefore, it's safe to say that there is money to be made in divorce law.
Patent trolling seems to hinge on a similar moral hazard, and I have a feeling that a lot of lawyers are going to make a lot of money off of it. The upside of a successful lawsuit is just too great to ignore.
Depressing really, because it will certainly stifle innovation, and the business of patent trolling seems to be in it's infancy.
But first, a definition:
Moral hazard occurs when a party insulated from risk behaves differently from how it would behave if it were fully exposed to the risk.
Moral hazard arises because an individual or institution does not take the full consequences and responsibilities of its actions, and therefore has a tendency to act less carefully than it otherwise would, leaving another party to hold some responsibility for the consequences of those actions.
Divorce law is a good example of a moral hazard. In 1975, 71.4% of divorces were initiated by women. Thirteen years later, the percentage had fallen to 65%. I would argue that the moral hazard created by divorce law had declined because women's incomes had risen, therefore they stood to gain less in a divorce. (IE, if men and women both stood to lose equally in a divorce, there would be no moral hazard.)
There are over a million lawyers in the United States, and a significant percentage of them are divorce lawyers. Therefore, it's safe to say that there is money to be made in divorce law.
Patent trolling seems to hinge on a similar moral hazard, and I have a feeling that a lot of lawyers are going to make a lot of money off of it. The upside of a successful lawsuit is just too great to ignore.
Depressing really, because it will certainly stifle innovation, and the business of patent trolling seems to be in it's infancy.
Not so sure about that. Parasites are quite successful really. Humans have been around for 200K years, and mosquitoes have been around for four hundred times as long. If I had to place a bet on humans or parasites, my money is on parasites!
Two things wrong with that patent IMHO: it does not describe a mechanism but only an idea, and it is an idea which has been in use for many years. I don't think you would stand a chance of patenting that in Europe.
Patent law is written by lawyers, although at some point it had to be passed into legislation by politicians (also lawyers in many cases). Lawyers, like many 'professionals', are very good at establishing and maintaining closed shops. The crazy thing is, many people assume scientists and engineers are up to the same game when we say things that 'ordinary people' don't understand. We bend over backwards to make difficult things sound easy, while they seem to make simple things sound difficult.
Patent law is written by lawyers, although at some point it had to be passed into legislation by politicians (also lawyers in many cases). Lawyers, like many 'professionals', are very good at establishing and maintaining closed shops. The crazy thing is, many people assume scientists and engineers are up to the same game when we say things that 'ordinary people' don't understand. We bend over backwards to make difficult things sound easy, while they seem to make simple things sound difficult.
If I had to place a bet on humans or parasites, my money is on parasites!
Now, now. No need to talk about the legal profession like that.
If I ruled the world it would be much different. If a patent was taken out, and nothing using that patent by the company or individual holding it was released, say, within five years, (to allow for R&D), then that patent would be annulled, and free for anyone to use. Simple.
This is the thing that's so fascinating about Myrhvold I think.
Here's a guy who used to do "the daily grind", and worked as Microsoft's CTO. And then somewhere along the line he realized that there's a giant pile of cash to be made by suing technology companies. So he buys up all these patents and seems to spend most of his time winning trophies for barbecue and writing cookbooks.
From one perspective, it's completely evil. Getting sued stinks.
But from another perspective, he's kind of "living the dream"
And one can argue that he didn't invent the idea of patent trolling, and if he didn't do it someone else would.
Here's some info on the relationship between the owners of the patents and the people getting sued (it's not as direct as one would expect)
http://jacobinmag.com/blog/?p=752
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This is an area where I have some familiarity, having been an expert witness on both sides. The reality is that if you're a little guy, a patent troll isn't coming after you- there's no gain in it, you have no money. The "victims" are all large companies and their insurers. The beneficiaries are the attorneys (on both sides), the expert witnesses (what Microsoft paid me as an defense expert bought my last two cars), and the nominal litigants.
Whether or not a patent will stand up in court, the cost of getting to that point is millions of dollars. So when a patent troll goes after (say) Microsoft, they have no intention of ever getting to court, they just want to make it expensive enough to defend that they'll get paid go-away money. The US does not have a loser-pays system, so there's essentially no hope of recovery of costs for the defendant; paying a few mil in blackmail is part of the cost of doing business and won't bankrupt megacorps.
Whether or not a patent will stand up in court, the cost of getting to that point is millions of dollars. So when a patent troll goes after (say) Microsoft, they have no intention of ever getting to court, they just want to make it expensive enough to defend that they'll get paid go-away money. The US does not have a loser-pays system, so there's essentially no hope of recovery of costs for the defendant; paying a few mil in blackmail is part of the cost of doing business and won't bankrupt megacorps.
YES! I agree with you 110%. And I think your description of the situation is why we've only seen the tip of the iceberg.
My comparison of patent trolls to mosquitoes was quite serious. Writing a check for a few million dollars is about as traumatic as a mosquito bite, but the incentive is significant enough to encourage an entire army of lawyers.
The bigger picture, and the one that worries me as an "armchair economist" is that it will discourage innovation in the United States.
I think that forty years of divorce lawsuits have permanently altered social dynamics in the United States, and I can only imagine what the landscape of innovation will look like in 2040 if this patent trolling continues.
Not sure why this is a good example. It seems totally based on assumption. Do you know how much women's income rose between '75 and '88? And I could argue that a divorce is never truly "equal", otherwise there would be no reason for divorce. One spouse or the other feels "on the sh... short end of the stick."
But from a purely economic viewpoint, I would expect the patent situation to self-correct. Introducing politics is a Pandora's box, and forum no-no.
I'm not familiar with the phrase "moral hazard" but what you describe sounds to me like what I'd call the "I want the authority. You keep the responsibility." character flaw that is all too common across demographics.
Without the patent system I could not be doing my development work. I hold an American patent with other patents pending, and not all large industry is evil. Since 2008 I receive license fees for the use of my patent from Jeh Big Loudspeaker company. No litigation involved. Now, the recently deceased owner of that company was a real gentleman, so that helped. In part thanks to that money, I can fund my R&D. Just last week filed a patent in an unrelated field.
Wouldn't be doing that without the US patent system, would I, which still is the best in the world as far as I am concerned. This including lawyers that would take on a solid case on a no cure no pay basis. And while I am at it, one last notion. Not all lawyers are evil either.
Wouldn't be doing that without the US patent system, would I, which still is the best in the world as far as I am concerned. This including lawyers that would take on a solid case on a no cure no pay basis. And while I am at it, one last notion. Not all lawyers are evil either.
I didn't read the previous links, but the NPR report was interesting. Thanks, Pete. What a mess they've created... a lot of it sounds like "sleep with the dogs, wake up with fleas" to me though. A patent on buying things via smartphone app? Really? And there's evidence of SY's extortion theory (if you require any). I disagree with his plaintiff/defendant statement above, because to me that is just the result of risk/reward, investment/return economics... a symptom at worst. But something sure smells rotten in Marshall. The judge and jury should chuckle and send these folks back to their yachts.
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