Patent Crisis and The Age of Open Source Ideas
We live in an age when success of innovation is mixed with unprecedented failures. On one hand we’re reinventing the web, fighting for a greener future and building genomix. On the other there are housing bubbles, credit crises and war.
The technology patent crisis is important to our future. For decades the patent law served its purpose. Inventors used copyrights, trademarks and patents to protect their work and launch their innovations. But today’s technology intellectual property system is a failure – unable to keep up with the speed of innovation, it’s fallen apart.
The result? We live in an age of open source ideas. We freely borrow and build on each other’s solutions. At first glance this may seem fine, but there are important consequences that may change the
way we innovate. What happens when a big company copies a startup? What happens when dozens of startups copy each other?
In this post we work through these and other questions, in attempting to understand where intellectual property in technology is heading.
The Good Old Patents
The word patent comes from Latin and means to lay open. Patents were established as the means by which inventors disclose their products to the public. In a typical process the inventor would write down the steps, or the algorithm, for the creation and send it to the patent office for consideration.
Once granted, the patent serves as a protection for the invention. Legally, no one is allowed to copy the invention; instead, they’re required to license it and typically pay royalties.
The patent is granted for a limited, usually lengthy, period of time. After the patent expires, the innovation becomes essentially public and now can be used by anyone. So the protection that inventors enjoy comes at a cost, for they eventually have to give up their invention.
Previously, when facing the choice between disclosing an invention or not, people did so more often than not. The reason: the time span the patent held was sufficient to make money because of the exclusivity guaranteed by the patent.
The system worked quite well when the world was slower, but the recent acceleration changed everything. With time to market being much shorter, the patent system instantly become ridiculous and obsolete.
The Patent Crisis
Here’s a simple scenario. A startup produces an innovative idea and works with a patent lawyer to file a patent. This takes a considerable amount of time (a few months at least) and a substantial amount of money ($25K+). But the startup does it anyway and after the patent is filed, people feel comforted that their idea is safe.
Right? Of course not! Not even close. Any patent filed today will take 4-6 years to approve. In the current era where a week is a long time and a year is an eternity, the time to process a patent is unbearably long. Because of this gap, filing a patent appears useless. While you can threaten based on a pending patent, people are unlikely to take it seriously.
Litigating software patents in court is expensive and often unsuccessful. The problem is that with software you can do things slightly differently and the patent becomes unenforceable. This is because lawmakers ensure patent claims are as narrow as possible. For example, if someone implements just a piece
of the whole system differently, the court is unlikely to rule in your favor.
The Age of Shameless Stealing
The problem is that while your patent is pending, competitors can copy your
ideas and build on them. By the time your patent is granted, competitors can already win the market, be profitable, or even exit out of business.
The mismatch between the time it takes to get the patent and time it takes to
copy the innovation encourages the copycats. Today’s software industry is flooded with clones.
There are dozens of me too! startups for each major technology area. All the startups are borrowing ideas, UI elements and functionality from each other. And because of the powerful technology at our disposal copying is so easy. Someone said to me once: Oh we don’t want to use your technology, my dev guys can whip out something like this in a couple of days.
Sadly, the age of open source ideas is actually the age of shameless stealing.
Who Wins?
Startups copy each other, but the problem doesn’t stop there. It gets worse when web giants copy startups. Once your idea gets incorporated into a big company’s offering, things get tough.
A recent example is new Google browser Chrome. No doubt, it’s a spectacular piece of software – elegant, simple, probably the browser of the future. A lot of the ideas in Chrome are not original, but taken from other browsers and add-ons.
Is this fair? Not really. But in today’s tech world, the word fair has been replaced with the phrase fair game. Luckily for startups, most big companies are not good at execution, so it isn’t that easy for them to copy. But when and if a large company comes out with a clone, the match is unfair.
Resources and distribution certainly matter when it comes to tech adoption, so the patent situation is strongly in favor of big companies. They can observe the market, see what ideas take off, and cherry pick what they see as interesting.
Who Really Wins
Perhaps the biggest irony in this patent debacle is that it benefits customers.
Previously a patent would create
a lock, a barrier to entry, while today innovation occurs with greater speed.
Because patents are irrelevant, companies small and large relentlessly go after each other, raising the bar, coming up with better products. At the end of the
day this benefits the users.
We’re observing an evolutionary dynamic where companies are battling for viewers. This is a street fight where the gloves are off and big money is at stake. Companies are pushing each other to deliver better software faster. In the meantime, users are enjoying the new elegant tools as well as the fight itself.
The Future of Technology Innovation
Where is all this heading? What is the future of innovation and intellectual property around it? The status quo doesn’t make sense. The laws need to be useful, and current patent laws are obsolete and inadequate. Is there a middle ground between old patents and no laws at all?
Brad Feld, who has written a lot on this topic over the past years, thinks the answer is no:
“After wrestling with software patents for 15 years, I’ve concluded there simply is no middle ground. If we continue on the path we’re on, patents will increase in their overall expense to the
system. Everyone will feel compelled to apply for as many (and as broad) patents as possible, if only for defensive reasons.”
In a related post, Fred Wilson writes a cliche of the week: Patents are like nuclear bombs, you just got to have some. He continues:
“I have never seen patents make a business, but I have seen lack of patents hurt a business on many occasions. IP battles are like the cold war. Those who have patents can keep others honest because nobody wants to start a war that might end in everyone’s destruction. But those who have no patents are sitting ducks and don’t have the weapons to keep others honest.
My advice to entrepreneurs is always file a bunch of patents. But don’t expect they’ll ever do more than keep others at bay.”
It doesn’t seem satisfactory either way. To not have patents at all means that at the end of the day big companies will always absorb all the best innovation for free. Filing patents just for the sake of having weapons that you’re likely never to use seems costly and wasteful.
Is there a middle ground? What would you like to see happen in the future with software
intellectual property?
If you innovate a new technology, its better to keep on improving it and adding to it. Because when your competitors copy it, you still have the better product by that time far ahead of them.
But I do understand how difficult it is in the present times when everybody fast enough to come up with new ideas.
hitesh sahni
December 2, 2008
[...] Patent Crisis and The Age of Open Source Ideas « Alex Iskold Technology Blog. Written by marshal in: Uncategorized | [...]
MarshalSandler.com » Patent Crisis and The Age of Open Source Ideas « Alex Iskold Technology Blog
December 3, 2008
Alex,
Thanks for good article. I am a frequent reader of your posts and happens to be an inventor myself. I agree with you on most points.
Even though I think you simplified the picture a bit by not recognizing how diverse is the spectrum of “inventions”. To say that “software patents” are not enforceable and become outdated before they can be issued – is to narrow the field to algorithms and interfaces. These are controversial to begin with since they may not always meet a legal definition of patentable idea. A lot is written on that subject.
But if claims are sufficiently broad, they should not become outdated so quickly. 4-6 years required for obtaining a patent should not be enough for any company (large or small) to bring new idea to market. And 20 years life of patent should be sufficient to pay back for risks taken.
Innovation is not equal to invention! The original purpose of patent is to provide incentive for inventor to share his ideas and to actively seek help from society, or rather – help society to realize it as quick as possible for common benefit. Not every innovation needs so much help that it must mobilize large amount of resources. Some innovations can be realized quickly by start-up, or even by someone working for large company, in a such as way that it would benefit all parties involved. This is not the original area of application for patent (in fact, in some countries innovations are qualified using fine grain categories of “improvement”,”invention” and “discovery”)
I am not sure that original patent system was intended for enabling quick improvements to technology. Nor do I think it can be adapted for broad purpose of helping innovation. Its narrow purpose is to mobilize massive resources when needed. There is indeed a crisis in patent system, but its nature is not a lack of efficiency of US patent office. The law itself must be changed to allow fine grain distinction and adequate incentives for different types of innovation.
lenyabloko
January 4, 2009
@lenyabloko
Thank you for your thoughtful comment!
While I agree that 4-6 years time frame is reasonable given the 20 year lifespan of a patent, I am struggling to see how 4-6 years can stand up in our day and age.
Specifically, suppose a startup comes up with a unique idea and then it gets repeatedly copied by other startups and big co’s. And it actually is not even in the business in a few years, eventhough it did file a patent. How can this system work?
alexiskold
January 4, 2009
Alex,
The answer to your question depends on how disruptive “unique idea” is. If it is an incremental improvement, then patent system may not work at all for reasons you mentioned. The inventor still can get some benefits from disclosing it though. And in many cases it is impossible to know ahead of time how useful or difficult to implement the idea is.
A case where patent system is really needed is new and disruptive idea, which requires substantial investment to bring to market. In that case to copy it means to assume risk of losses. Even if implementation is successful, there is a risk of law suites resulting from issued patent. Inventor, on the other hand, can benefit from relatively small investment he/she had made in pursuing the idea. There is nothing wrong about someone copying your invention, as long as you can claim a part of benefit.
In fact – it good for inventor when idea is copied many times. Patent law gives strong incentives to settle possible infringements before investing in any new idea. If invention is that good as to be copied many times, then the inventor can make a new business plan based on licensing fees alone.
lenyabloko
January 4, 2009
This is a good article on software patent issues. I’m convinced that it’s time to eliminate the software patent process, and simply use the existing copyright and trademark protection for software. See my article on blog.startupprofessionals.com titled “Software Patents: Time for a Change” for specifics.
Marty Zwilling, Founder & CEO, Startup Professionals, Inc.
martinzwilling
January 16, 2009
Nice article. Some more food for thought:
I can’t help but relate this to numerous other changes in business and society. Especially the music industry.
In this book I’m reading called ‘the Black Swan’ the author is talking about two kinds of professions: scalable and non-scalable ones. A wage worker is an example of a non-scalable profession, you get your salary and it will never grow exponentially. The scalable occupation is the one where you have some form of exponential return based on success (and luck). The author names the examples of: stock trader and artist.
After reading that I started to think about those artists. I think artists and inventors can almost be a third category: “doing something once and be settled for life”.
Now that music can be freely copied, artists cannot get huge returns after one lucky recording – they will have to work their ass off for the rest of their life (the value will rise for the things that cannot be copied: authenticity, human interaction etc.)
It’s the same with ‘invention’. You cannot just have an idea and expect to get royalties the rest of your life. No, you have to work very very hard to keep improving (and evolving) your technology in order to keep ahead of your competitors. This will have an interesting impact on society, since it will hyper-catalyse innovation.
dominiek
January 19, 2009