[Date Prev][Date Next][Thread Prev][Thread Next][Date Index][Thread Index]

[ossig] Cutting Through the Patent Thicket - Business Week

Cutting Through the Patent Thicket
Greg Blonder, Business Week

For over 200 years, the U.S. patent system has catalyzed economic growth
and protected the national interest. Unfortunately, over the past few
decades, patents have become irrelevant -- even harmful -- to the
innovation process.

I say this as someone who grew up believing in the value of patents. As a
teenager, I sat raptly in the U.S. Supreme Court gallery listening to
attorneys argue University of Illinois Foundation v. Blonder Tongue
Laboratories, a landmark patent-infringement case involving my father's
company. As an inventor, I earned some 70 patents. And as a scientist, I
managed research labs generating hundreds of patents a year.

But now, as a venture capitalist, I have come to the conclusion that
protecting intellectual property (IP) with today's patents is virtually
worthless -- despite the large court awards you may read about in the
morning paper.

HIDDEN FROM VIEW.  The first problem with patents is that the entire
process takes too long: three years on average, often as long as five, and
getting longer all the time. So when a venture capitalist invests in a
company, its IP "dowry" remains, at best, provisional. How much would you
pay for a company when its assets are hidden from view?

Second, a company's most valuable IP almost always results from later
insights, gleaned by developing its early products and interacting with
customers, not from the IP it originally filed. Competitors are busy
inventing as well, and since the U.S. Patent & Trademark Office often
grants trivial and overlapping patents, IP minefields may be waiting to
explode. Or perhaps the IP is all duds. Who knows?

Third, the $50,000 to $100,000 lifetime cost of patent application,
protection, and maintenance effectively limits the number of patents a
young, financially constrained company can file. Much patentable IP is left
on the cutting-room floor, at the risk of allowing trivial variations filed
by competitors to block the originator's path to market.

Fourth, and probably most important, few venture-capital-backed companies
will ever dare to defend their IP in court. If they do, they'll risk losing
customers and squandering anywhere from $1 million to $5 million of their
precious venture funding.

REDUNDANT CONCEPTS.  So what good is owning something you can't quantify or
won't defend? Very little. It's a bluff, mere saber rattling.

The greatest value in patenting IP for a young company, ironically, may lie
in the fact that it's often essential in attracting venture capitalists --
who, I would argue, are often pursuing a misguided model of company
creation. Successful companies transform ideas into products customers want
to buy. But the existence of IP usually has little to do with that ability.

Outside of venture capital, the situation is no better. Common business
practices, obvious to anyone in the field, are enshrined in overly broad
and problematical patents that reduce competition. Patent "trolls" are
buying up dubious IP, then suing companies actually engaged in productive
activities, such as building products and serving customers. Wasteful court
cases, like the recent BlackBerry imbroglio, occur because patents are
granted for narrow, redundant concepts that courts find difficult to
unravel, and so are open to interpretation.

We need to invent ourselves out of this mess.

DEAD ENDS.  The patent system was designed to encourage the free flow of
ideas, in exchange for a temporary monopoly. Not all ideas, however, are
worth pursuing, worth defending, or worth backing financially. And this
gets to what, at bottom, is wrong with the patent system: We issue patents
too easily for trivial ideas, thus diminishing protection for true
breakthrough ideas

Patents are meant to be useful. Yet most studies show that something like
95% of all patents have never been used in any product and have created
zero economic value. Nor, as far as anyone can tell, have they ever been
used as evidence in a patent lawsuit. They are evolutionary dead ends.

Patents are government-sanctioned short-term monopolies, and not supposed
to be "obvious to those skilled in the art." Yet, anecdotally, all VCs
remember days when a half-dozen companies pitching the same idea, in the
same market, using the identical technological approach, appeared at their
doorstep seeking investment. Isn't that what is meant by "obvious"? None of
these companies should be granted IP to exclude their competitors. They
should compete instead on execution.

SCIENCE OR INVENTION?  More quantitatively, I have observed firsthand how
easy it is for experts to generate good, but similar, ideas. While at AT&T
(T) in the early 1990s, I sponsored two separate ideation sessions around a
potential new market, bringing in 50 experts each time to brainstorm for
applications. Both groups generated ideas with real commercial value.

Both groups, however, generated more than 95% of the same ideas in common.
They were "obvious" in the fullest sense of the word and would have been
commercialized with or without the incentive of a patent. But the Patent
Office found them "novel," and issued AT&T claims by the basketful. I would
argue that none of those ideas deserved a patent.

And much of what the Patent Office sees as invention is merely science
applied to a new field by equation or analogy. At AT&T, we took old
microwave patents and filed identical claims on optical inventions, which
are also radio waves, only 10,000 times smaller. We were able to do this
even though it was obvious to anyone who ever picked up a physics textbook
that once you have the ability to make things smaller, the physics just
translates over.

RADICAL SIMPLIFICATION.  The solution is for the Patent Office to set the
bar much higher for new patents. It should reject applications for ideas
anyone well versed in the art would automatically develop, once faced with
that problem. That includes minor changes in size, shape, or properties
whose impact is definitely predicted by science, as well as eliminating
entire classes of ideas that are "in the air."

The Patent Office should invite third-party comments and expert testimony
as soon as the patent filing is made public. These communities have much
greater knowledge than the Patent Office about what's truly new, and will
help raise the bar for everyone.

Such radical simplification would have a huge positive impact on both
innovation and economic growth:

o It would encourage people to work on hard problems -- without the fear
that someone else could capture the lion's share of the benefit with a
trivial variation on their pioneering idea.

o It would speed the patent-granting process, aligning business timescales
with IP timescales.

o It would give companies and their investors IP certainty they could bank on.

o It would reduce the number of patent cases that go to court -- a huge
waste of time and money for society.

INTERNATIONAL DIALOGUE.  A patent is a license to exclude others from
practicing your invention, but businesses need freedom to operate. A broad
patent would repel competitors from blocking its value with trivial
variations. Instead of applying for 10 minor patents, inventors would apply
for just one of true economic value. The flow of information surrounding
invention would accelerate -- and so would innovation.

In such a scenario, America would become the gold standard for patents.
Other countries might continue the practice of patenting the hair-splitting
and trivial. But as it became clear that a U.S. patent was the strongest in
the world -- the one that attracts capital -- the discipline would win
worldwide recognition.

Moreover, countries like China and India, which are just agreeing to
respect intellectual property, would be much easier to engage in dialogue
if infringement were clear and the number of issues reduced.

LESS IS MORE.  Patent simplification, as I have outlined it, presents some
problems. For example, the greater barriers to patents would probably
require higher upfront costs -- perhaps too much for lone inventors to pay.

But these are details that stand a good chance of resolving themselves. For
instance, a group of patent lawyers might emerge who would represent such
money-strapped individuals on a contingency basis. After all, the resulting
patent would cut a clearing in the forest, where new economic growth could

Higher standards and greater simplicity are the path to a better patent
system -- for our nation and for its inventors. In my case, probably no
more than a dozen of my 70 patents would reach this bar. Yet they would be
more valuable in the end. Sometimes more isn't better.

Regards,                           /\_/\   "All dogs go to heaven."
dinesh@alphaque.com                (0 0)    http://www.alphaque.com/
| for a in past present future; do                                        |
|   for b in clients employers associates relatives neighbours pets; do   |
|   echo "The opinions here in no way reflect the opinions of my $a $b."  |
| done; done                                                              |

To unsubscribe: send mail to ossig-request@mncc.com.my
with "unsubscribe ossig" in the body of the message