Category Archives: Patent

You can look at Twitter’s move to their new invention assignment agreement (they are calling it an Innovator’s Patent Agreement, which has a fittingly unlegalese ring to it) from a number of different angles.

For one, it signals a growing movement in the technology space to do SOMETHING about software patents. To put it bluntly, many feel that things are out of control. You don’t have to pay too much attention to the industry to have heard about the battles between every major technology company. Patent holding companies are making a fortune off of licensing, and companies are abandoning their Business Plans! in favor of Patent Trolling!. Hell, companies are forming with business plans that consist of Step 1 Acquire Patent Step 2 Sue People. If you are into the efficient allocation of resources (and who isn’t, these days?), let’s put it this way: Nathan Myrvold is currently using his time to buy and license and sue over other people’s inventions. The patent problem is skewing incentives for the economy, luring our greatest minds from more productive innovation! Silicon Valley and it’s bevy of engineers knows something is wrong, and as the inventors of 90% of the problem patents in the country, Twitter is empowering them to do something about it. Or at least, Twitter is saying they will and taking a step towards that end.

On the other hand, think about Twitter from the business aspect. This is a company that is criticized for lacking a revenue plan. It’s the weakest “business” of the major social networks, and it’s seen many changes at the top over the past few years, plus it’s sat on the sidelines while Zynga, Groupon, LinkedIn, Yelp, Pandora, and soon Facebook have gone public. Twitter has some of the highest average salaries in the scene, and it’s a place engineers want to work, yet it has weak ad revenue compared to the company it will always be compared to in Facebook. With patents being so valuable, and social networks becoming so prevalent, and Twitter being a social network with a strong engineering team, one might think that a strong strategy for Twitter to boost revenue would be to start firing off licensing efforts of their own. Here’s the thing though: They only have one granted patent (though it’s a good one that probably reads on all mobile devices and many mobile apps). If a patent nuclear war started yesterday (oh, wait, it started months ago), they are the Melians to the Facebook/Yahoo!/Microsoft Athenians. Twitter is clearly at a bit of a competitive disadvantage in a world where patents are incredibly valuable.

So for Twitter to take this step of limiting the downstream value of their patents (ensuring that the Coase theorem dictates the patents remain with Twitter, though I’m torturing the Coase theorem a bit there [another shout-out to my resource efficiency homies!]), while also potentially cutting off current licensing revenue potential… well, it’s a tiny bit noble, but a whole lot more a Trojan horse for the rest of the patent-holding technology companies of the world. Very clever, really. Twitter is politely asking everybody to sign a non-proliferation treaty, and making a nice gesture by signing it first, but that would be like Switzerland looking to end World War II by being the first to sign a peace treaty. Twitter is hoping this international relations metaphor is a bit more Gramsci and a bit less Hobbes (If I haven’t shaken you yet with all these political theory references, then congratulations). They would love nothing more than for every company that has already invested millions of dollars in patents to sign the treaty for Twitter’s own protection as much as they would like them to for their edification. So Twitter makes this big PR gesture, they will be hailed as saviors by the anti-software patent crowd, engineers will claim this as a great reason to work for Twitter, and Twitter gets to step back and hope others give up more to gain less by doing the same.

So there you go. I’ve successfully told you why Twitter’s move today is great for software patents generally, pretty clever by Twitter itself, and not really a big loss for them in terms of what they had to give up to get some amazing PR and recruiting, all while hitting you with multiple resource efficiency, political science, and international relations references. Hopefully more entertaining than self-indulgent, but the blog does have my name at the top so maybe I can take that luxury every once in a while.

(Some other articles that helped form my thoughts for this article: 1. 2. )

After a string of recent, conflicting decisions on software patents, Judge Plager of the Court of Appeals for the Federal Circuit (CAFC) wrote this in dissent in Dealertrack v Huber:

[A]s a matter of efficient judicial process I object to and dissent from that part of the opinion regarding the ‘427 patent and its validity under §101, the section of the Patent Act that describes what is patentable subject matter.  I believe that this court should exercise its inherent power to control the processes of litigation,Chamberes v. NASCO, Inc., 501 U.S. 32, 43 (1991), and insist that litigants, and trial courts, initially address patent invalidity issues in infringement suits in terms of the defenses provided in the statute: “conditions of patentability,” specifically §§102 and 103, and in addition §§112 and 251, and not foray into the jurisprudential morass of §101 unless absolutely necessary. (emphasis added).

For some context, the recent conflicting decisions I referenced above are CyberSource and Ultramercial, opinions where the same court came to seemingly opposite conclusions on whether patents on computer-aided software functions were within the scope of Section 101 and thus patentable. In CyberSource, the CAFC described a software patent as covering purely mental steps, where the attachment to a computer was essentially superfluous. In Ultramercial, by contrast, the CAFC described a rather similar patent as good for describing a controlled interaction with a user over the internet. This all follows the infamous Bilski decision, where the Supreme Court declined to issue any concrete guidance on subject matter eligibility.

It’s pretty shocking that a judge for the CAFC, the court with jurisdiction over all patent appeals, would tell lower courts to ignore section 101 and litigate other issues instead. As the “101” might indicate, that section of the patent act is the most basic description of what is eligible for patent – a topic that has been vigorously debated in recent years, not coincidentally corresponding to a proliferation of patents in software and business methods. Now, obviously this isn’t binding – no party will be getting out of a Section 101 issue by citing this language to a District Court. But it shows the sad state of affairs of Section 101 – even a judge on the CAFC thinks Section 101 has turned into a total mess.

One other thing to consider – how do you value a patent as a company in this sort of climate? Policy advocates on every side of an issue (I’m thinking things like ACTA and SOPA recently) like to throw out numbers in terms of values and investments and jobs, but in a world where the the very concept of what is protected is still in play at the highest level, you have to question how accurate any sort of valuation on that sort of protection can possibly be.

Software patents are one of the most contentious areas of intellectual property. Check out this famous article or this website or this NPR piece, or just google the words “software patent” for a small sampling of ire towards the monopoly that is the software patent. No other type of patent draws quite the criticism that software patents draw, and it’s rather shocking how often the topic is discussed relative to how infrequently other sorts of intellectual property debates enter the public discourse.

So why is it that our society, one which generally loves the concept of property (though the music and movie industries might disagree), has such a strong aversion to patents in this specific realm? I have a few ideas:

Culturally, the creators of the subject matter covered by software patents are not considered “inventors” in the classic American sense.

When you think of American inventors, images of Henry Ford and Thomas Edison come to mind. Maybe Alexander Graham Bell, even if you forget that he was Scottish. Regardless, the cultural perception of “inventors” tends to direct our focus to, well, white men who make physical objects. They are invaluable, nonfungible assets. The adjective “inventive” implies creativity, and the concept of the inventor as a creative entity is actually captured in various parts of patent law itself. The things inventors create are tangible, useful, and sometimes amazing.

Software, on the other hand, is basically a meaningless word to most people – essentially everything that happens on a computer screen is a result of this mysterious software. And the software engineer is perhaps the most commonly misunderstood profession to the majority of Americans, with few people outside the practice really understanding what C++, Java, or Ruby on Rails even are. Ask yourself – Who are the famous software engineers of our time, and are they considered inventors? Mark Zuckerberg is hardly referred to as a famous inventor, despite Facebook’s 46 patent filings. Bill Gates isn’t usually described as an inventor either. Steve Jobs, perhaps, but only in the sense that he designed rather than coded.

And this sentiment isn’t just from the uninformed masses outside of Silicon Valley – software engineering is frequently an outsourced project even in the heart of software engineer utopia. Many entrepreneurs opine that if they could just get an engineer to perform their vision, their companies could achieve great feats. This popular perception of software engineering as a tool, as a non-creative task that can be outsourced without suffering much in terms of quality, lends itself to a view of software engineering as something less than inventive. And that the product of this work is undeserving of the title “invention”, and thus, undeserving of a patent. (Note that I don’t think software engineering is uncreative or uninventive – it just seems that many people do.)

Practically, software patents are extremely valuable, software is increasingly where the world is headed, but nobody knows when they infringe a software patent and they don’t seem to further innovation in the slightest.

There are two major sides to the practical aspect of the software patent debate, the side that sees patents as critical to covering the subject matter that is becoming central to innovation on the planet, and the side that sees patents as a hinderance to that subject matter, with the patents themselves completely disconnected from the actual innovation.

The pro-patent side of that debate would note that a problem with software patents is really a problem with patents generally, an argument I’ll credit to Paul Graham (first link of this post). Further, patents have covered innovative technologies for the history of our country, and generally they have been seen as a mechanism to encourage innovation and investment into valuable areas of research. Additionally, as software becomes more and more central to our lives as we carry more and more computers with us everyday, continuing without patents opens the industry up to the risks that threaten all fields without IP protection. Patents are credited with preventing big companies from ripping off the innovations of smaller companies and individual inventors without costs, and a world without patents would theoretically favor established companies and hurt the entry of new competitors into the market.

The anti-patent side of this debate would point to a large body of empirical work that has shown software patents in particular to be ineffective at inspiring actual innovation. Technology companies tend to load up on software patents not because they are inherently valuable to the company, but because they are tangible assets which can be shown to investors in fundraising and because they can be used defensively to ward off patent suits by competitors. Software engineers tend to see software patents as evil and unnecessary, and generally unable to capture the essence of what they created anyway after being filtered through a legalese translator. There is also a general feeling that, as fast as technology moves, rewarding a decade monopoly to the first inventor of an idea is undue compensation when the second inventor was probably just weeks or months behind.

Regardless of which side of the debate a person falls on, big companies have invested hundreds of millions of dollars each in their patent activities, be it through litigation, R & D, or simple patent purchases. Eliminated software patents entirely would be very unpopular with these companies, even if each individual in the company disagrees with the practice as a whole.

Legally, software patents tetter on the fringe of being unpatentable algorithms.

It’s been a general principle of patent law since the inception of patents that our country won’t award a patent to a mathematical formula or to an abstract idea. The extension of this principle determines algorithms to be unpatentable as well. The basic problem with software patents, then, are that they are a combination of algorithms (which are not patentable) and written computer code (which are not patentable, but are copyrightable), yet the combination of those two unpatentable concepts yields a patent, and has for the last 20 years. This is hardly well-settled law, even after all this time, and the Federal Circuit is still struggling with what makes software patentable compared to concepts, which aren’t patentable. Two recent cases, Ultramercial and Cybersource, essentially contradicted each other on whether software instructions were simply mental steps or whether they were more tangible, so we really aren’t close to a consensus on where software patents fit in the messy legal framework of patentable subject matter.

The way software is moving, maybe we don’t need patents in this area as much as we might have in the past anyway.

Two major trends in software are lessening the justification for patent protection in software – for one, software is moving to the cloud, and two, software is adding social layers. Both of these trends support the notion that patents are either ineffective in the space, or at least becoming less necessary.

For one, software served over the internet (or the cloud, or whatever metaphor you choose to use to describe a system where applications reside on the internet rather than the hard drive) is less prone to blatant copying, because the source code can’t be accessed by the user. Somebody seeking to replicate Salesforce’s specific technology has their work cut out for them as compared to somebody seeking to do the same with a program that runs on their own hard drive, with physically accessible code. If patent law is designed primarily to promote development of new technologies by assuring the inventor that there will be adequate protection, then that justification is less convincing in areas of research where the end product is never fully in the hands of the user or the public. The details of a web-based service like Salesforce or Facebook are only really known to the engineers who invented those details in the first place, and trade secret law provides adequate protection for those companies without the costs of patenting and the deadweight loss on society that patent law likely inflicts.

Second, many areas of software, including the cloud-based business solutions above, see success through their reliance on network effects. Network effects is the term used to describe the phenomenon where the power of a network (and its value) is positively correlated with the number of people on that network. It’s why we all have Facebook accounts but aren’t rushing to sign up for Google+. It’s economies of scale but with regards to social interaction more than economic efficiency. If I was to try to copy Salesforce or Facebook, patents wouldn’t be my primary obstacle – My problem would be that no consumers would want to use my network without other users. In fact, only when I became a big threat to either company would they consider leveraging their patent portfolios against me, at which point I would probably have patents of my own to countersue with, and I could spend money on litigation fighting to invalidate their patents. Only in very rare situations, then, do patents become relevant as protection for a software business model, and when they do they tend to be economically inefficient at working to provide that protection.

What’s more, our current policy on software is one of protection, and what we have seen is nothing less than an explosion of trolling organizations and patent nuclear war between major technology companies, draining millions of dollars away from actual innovation in the space. So any sort of reasonable change is probably worth a try.

Potential solutions? Not likely: Are there answers? Sure. Our country could do anything from categorically prohibiting patent protection for software, to simply lessening the amount of time the monopoly is good for, to instituting a software-specific rule where the obviousness analysis is made from a much later point in time to accomodate for the fact that most software “inventions” are obvious just a few months after invention. But with Congress just passing a patent reform bill that did little to address software patent issues, the only changes to the system are likely to come from the Federal Circuit, who probably can’t find a way to work those changes into patent law.

If you read my blog often, you know I like patent law. It’s a fascinating, convoluted mess that’s become (fortunately or unfortunately) incredibly relevant for technology companies. Major areas of law rarely receive substantive overhauls, and even more rarely does an overhaul happen in an area of law that you have an intellectual interest in, so I feel lucky to be around studying Patent law at a major turning point. The zeitgeist of the patent world/blogosphere is rather unique right now – It’s like a new season in a sport or a television show; nobody knows exactly what to expect, there are lots of unanswered questions, and everybody has an opinion on how that last season went and what needs to change.

In my opinion, the last season of Patent Law:USA went just okay. Got a little out of hand there at the end, akin to a TV show that gets a bit away from the writers in the final few episodes – sort of like LOST season 2. Everything was going pretty well in the Patent law world until we got to the late 90s, when business methods patents and the internet sort of took us in directions we hadn’t contemplated originally in terms of intellectual property rights. “Prior patent + ‘on the internet’ = bad patent” was the rallying cry of a host of critics – but those critics likely don’t see much on the face of the new act to give them hope that the problem is solved. I for one am somewhere in the middle when it comes to opinions on the last season of Patent Law – I’m not an extremist who thinks we need to blow up the whole system, but there are definitely problems with patent trolls and with software patents in particular that I think need to be addressed, as they put an impossible burden on new companies and reduce the efficiency of capital flowing to useful ends.

Anyway, enough opining on our long lost Patent season (which, as it turns out, will have plenty of support in reruns… see below). We have a new patent act that takes effect in various stages anywhere from last friday to 18 months from now, and I want to cover some of the strange aspects of this reform:

There are now two different, substantive bodies of law on patents, and there will be for the next 25+ years

Every patent currently issued and every patent currently on file (except for those filed in the last 4ish days) is subject to the “old” patent law regime. Considering that the PTO takes quite a while to grant a patent, that there are provisional patents out there (many, many filed last thursday), and that you can file continuation patents and extensions, that “old” patent law we all know and love is far from dead – it will take 25 or more years for every patent issued and subject to the “old” laws to expire. That sounds like just a cute and potentially confusing nuance until you consider that major companies will likely hold patents under both regimes – and they will sue asserting patents from both regimes. Starting in 3-4 years once we see issued patents under the new regime, we may see litigation where completely different rules apply to different patents at issue in the same case. This could be extremely confusing for juries given some of the other substantive changes to the way things like prior art are handled, with some prior art able to invalidate earlier patents but not later patents, a result laypeople will find illogical.

Similarly, there are now four different types of reexam

I haven’t tracked the timing of various parts of the bill closely enough yet, so I’m not sure if there will every be a moment in time where all 4 types are potentially going on at the PTO, but in theory there are 4 types of reexam proceedings that can be initiated in the next year or so (the current ex parte and inter partes, and the new post grant review and new inter partes). Reexam is actually getting a huge substantive overhaul, the primary changes being that it now takes place like a mini-trial with discovery in front of a 3 judge panel with a one year timeframe. That timeframe might be a huge boon to defendants, who may be able to convince judges to stay a district court case more easily if they can guarantee that the PTO will finish the reexam in a year, when a district court is often just getting to the Markman hearing. Lot of “maybe” in there – the thrill of a new patent act – but it seems that reducing the timeframe for reexam should encourage defendants to explore that option more frequently, with courts likely more willing to stay a case in the meantime.

It’s hard to imagine anybody using the new Post-Grant Review form of reexam

The new reexam regime is split into two timeframes – if you apply for review within 9 months of issuance, you do the new Post-Grant Review process; otherwise, the new Inter Partes process. The standard is either lower or higher than the standard for inter partes depending on how you interpret the statute, and you have access to more prior art to invalidate the patent, but you also risk never being able to challenge the patent again – the loser of a PGR is estopped from asserting invalidity on effectively ANY ground. That’s a pretty big risk even for a challenger who has a slam dunk piece of prior art – even if you are 90% sure you’ll prevail in that review, why not wait and bring out the prior art in court? It will be interesting to track how firms and companies strategize around the new review process, but given the incredibly high stakes for losing a PGR and the relatively low stakes of a district court ruling, it seems unlikely that the PGR will become a popular choice. And remember, PGR is only available for 9 months following issuance of a patent, which is a rather narrow window considering the planning that needs to go into filing for the process.

That’s just a few of the interesting twists thrown into the system by the new Patent Act – haven’t even mentioned changes to the joinder rules, or the odd place obviousness may be in after switching to the first-to-file-or-publish system. Lot is still up in the air, there are lots of terms in the Act (which is pretty poorly drafted, actually) that will garner significant debate and eventually litigation, and the full scope of the changes probably won’t be appreciated for many years.

It’s been a very entertaining 24 hours if you follow tech news, with the legal head honchos of Google and Microsoft getting into a very public spat over the sale of $4.5 billion worth of patents from defunct Nortel to a consortium lead by Apple and Microsoft.

First, Google SVP and CLO David Drummond went public on the Google blog with complaints of how the Nortel patents were “bogus” and only purchased as an anti-competitive play by Apple and Microsoft to try and kill the Android ecosystem by suing Android manufacturers. The blog post was initially (remember, the internet moves pretty fast) hailed as a potential opening salvo in a war against software patents by Google, and was generally praised.

Soon, though, the tide turned in the war for the media. Microsoft’s Brad Smith replied by tweeting this, which I’m sure is his most re-tweeted tweet ever:

Google says we bought Novell patents to keep them from Google. Really? We asked them to bid jointly with us. They said no

Sounds beautiful, but as we will get to in a second, it’s a red herring from the real explanation. Microsoft’s apparently a collaborative place, and realizing this was a media play by Google (and a poor one), Microsoft’s Frank Shaw jumped in, posting an email from Kent Walker, another member of Google’s legal team, to Brad Smith:

Brad –

Sorry for the delay in getting back to you — I came down with a 24-hour bug on the way back from San Antonio. After talking with people here, it sounds as though for various reasons a joint bid wouldn’t be advisable for us on this one. But I appreciate your flagging it, and we’re open to discussing other similar opportunities in the future.

I hope the rest of your travels go well, and I look forward to seeing you again soon.

– Kent

Ouch, right? How embarrassing!

Well, actually, not really. As those familiar with patent licensing would tell you, most patent licenses and especially consortiums like this come with an agreement that the members won’t interfere with the activities of other members as it pertains to the enforcement of the patents. You also usually agree not to challenge the validity of a patent you own/license in one of these arrangements. Obviously, Google would have been better served if they had anticipated Microsoft’s response, because Microsoft seems to be getting the last laugh in this one, but in reality Google would have paid lots of money to join the consortium, then been unable to protect their interests (defending the Android manufacturers from attack) anyway. So for Google, no consortium with Apple or Microsoft would have been agreeable, the only option was to own the Nortel patents outright and hide them in a closet, else they would have spent money to be contractually prevented from defending the manufacturers.

Google actually may have learned this mistake from Apple, or, actually, Google may have already made the mistake once before. Apple is currently trying to intervene in a series of suits against Apple app developers launched by patent troll Lodsys, but as Florian Mueller has noted multiple times on his blog, Apple’s hands are probably tied because they have a license to the same patent through Intellectual Ventures. Apple’s license probably precludes them from challenging the validity of the patent itself – thus they are stuck with only one strategic option, an unappealing and likely hopeless claim that the license extends to the developers. Google might be in the same position, assuming they have a similar license from Intellectual Ventures, and perhaps this explains their reticence to enter the battle, as they have thus far been quiet as it comes to the Lodsys suits against apps on Android.

So I feel for Google’s legal squad right now – their developers are being sued by trolls over silly patents, and their hands are tied because of a patent license, while their manufacturers are getting sued by Apple over silly patents (with more ammunition on the way if the Nortel deal isn’t blocked or force-licensed by the DOJ), and Google was hopeless to stop that as well. Google’s maybe in the best position ever to make a strong case against software patents right now, with their truly innovative and consumer-approved Android platform being taxed by patents. With a conveniently timed article today on Huffington Post (tl:dr version) showing how patent reform is mostly a Congressional lobbying game, maybe Google can step up and be the hero we need.

It’s been a really tough week for the biggest patent troll in the world, Intellectual Ventures. NPR had an amazing expose on the state of patents in our country last week, software patents in particular, and Intellectual Ventures was the centerpiece. If you read one article on patents this year, it’s probably a pretty good one to go with. The article focuses on how IV has built a giant software patent portfolio on a $4 billion budget, but that they only hold people who have already invented things hostage with the patents, and most software engineers hate patents and think they are nonsense. It’s a solid summary of where software patents stand today, and the story attempts to track down some of the “inventors” and small patent holders involved, mostly with results that are less than encouraging. There’s also some great facts in the piece that few probably knew about IV before – such as the fact that none of the 1,000 or so patents produced from in-house research have ever been licensed to make a real product.

The NPR piece contained another interesting wrinkle I hadn’t seen elsewhere, where the article suggests that IV might own Lodsys, the company that’s been suing tons of mobile app developers. NPR discovered that Lodsys’s primary address is the same as Oasis Research, another non-practicing entity connected to IV – suggesting that IV is gaining financially from Lodsys’s activity, and possibly funding it.

While the NPR piece was probably more damning for IV due to its wide audience and eloquent prose (it’s very entertaining), a Business Insider article from Sunday was just as bad in some ways – the article pointed out that based on recent court filings, it turns out IV is at least partly supported by money from companies like Apple, Cisco, Amazon, Sony, eBay, and Microsoft, though much of that money is probably for the right to not be sued. It is both strange and frightening that the companies most tormented by patent trolls are supporting the biggest in the business. As the NPR piece noted though, IV has made only about $2 billion on it’s $4 billion worth of investments, so the company is actually behind on trolling in some respects, which is a scary thought.

IV had a typical response to the article, as reported by Geekwire: IV strongly disagreed with NPR’s portrayal of their business, and stuck to their guns with claims that “ideas have value” and that they “provide an efficient way for patent holders to get paid for inventions they own”. Of course, IV talks right past the premise of the NPR expose – that while ideas may have value, the patents often don’t reflect the ideas, or are unnecessary to actually getting those ideas to market.