I posted this last night as well. I thought people on HN would be popping champagne corks, the FTC proposals seem extremely sensible and entrepreneur friendly. I was surprised at how strongly they came down on the side of innovation rather than IP litigants. The report is long but very well written - it makes a complex subject accessible and shows that the FTC were willing to learn from the public. Everyone here ought to read it.
I find it interesting that now both the FTC and a good chunk of the Supreme Court* have warned against vague patents. So far it has been generally hard to challenge patents on grounds of vagueness, as it can only be done in court during an infringement lawsuit. The new patent reform bill provides a mechanism for doing so through the Patent Office, and if it is enacted, it will be interesting to see how it plays out.
*In the recent Bilski case, four justices noted the "potential vagueness of business method patents." Four more justices thought that business methods were unpatentable outright.
This report constitutes a policy statement that is heartening to those seeking reform of patent abuses in that its recommendations might prove influential with the USPTO (which is at the front lines of dealing with such practical issues as how to deal with indefinite claims), with courts (which ultimately interpret challenged claims in the context of infringement fights), or with Congress (which ultimately sets standards in this area). Among its several recommendations, the report calls out the activities of "patent assertion" entities (i.e., trolls) for the adverse effects their activities have on innovation. The long-term hope is that such a report, in so persuasively highlighting the problems caused by trolling activities, will influence the USPTO, the courts, and the Congress to implement real reforms to curb the abuses.
The immediate impact on any party that is highly litigious in this area (troll or not) will be negligible, in my view. The courts will apply existing law to the pending fights and will decide the cases one way or the other without regard to longer-term policy principles. This does not mean that aggressive litigants will always win (Blackboard didn't) but it does mean they will pose difficult problems for those who have to endure their bullying tactics.
Still, it is nice to see some of the major problems truly identified and dealt with in a sharp way, as this report does. A real surprise, coming from the FTC.
My untutored impression is that their business model is more about licensing than litigation, though of course the threat of the latter affects the price negotiable for the former.
But it might not be a negative; one thing that really impressed me about the FTC report was in chapter 7 where they take an example case and examine different approaches to calculating damages. Although I'm not a lawyer or economist, I am very interested in this branch of legal theory and this seems to reflect many of the ideas that have influenced the law of antitrust and property damages in recent years.
Up to now the prevailing approach to estimating damages has been set by a case known as Georgia Pacific, where the plaintiff offers evidence about 15 different economic and legal factors of economic loss. That's fair on one level, but the problem is that the jury gets overwhelmed and tends to award enough damages to compensate for multiple injuries, not all of which necessarily happened - thus huge awards followed by expensive appeals and so on and on. The FTC report seems to favor a much more methodical approach to calculating the true economic costs of patent infringement, without worrying so much about questions of fault during this process. An economic idea known as the Coase theorem (basically) says that whether A pays B not to do something, or B does something and has to pay damages to A afterwards, the total economic costs tend to be the same in both cases, and suggests objective methods for working out what those costs are. Then the verdict is just a matter of apportioning them appropriately.
Of course I am drastically oversimplifying here. But the basic idea is to make patent litigation less of a morality play and more of a problem-solving exercise, in which the public's interest is considered along with those of the parties at suit. Although this may seem cold and mechanical, 'justice is the tolerable accommodation of the conflicting interests of society.' Addressing these problems systematically usually leads fairer results, and more predictable ones too - a big plus for any business.
The recommendations in this report are just recommendations, but they're so comprehensive and well-presented that they may be adopted and refined into a standard very quickly. Everyone is sick of the current situation and patents don't mix well with politics, so a consensus is distinctly possible.
Regarding Intellectual Ventures's business model, ultimately, seeking to license patents out loses steam unless you eventually bring litigation against unwilling parties, which Intellectual Ventures did in December, when it filed three different patent infringement suits against a total of nine companies for infringing a total of 16 different patents.
I made a confusing mistake when I wrote that - the start of the third paragraph should say '15 different factors in their financial loss.' Economic loss is something quite different. I shouldn't have posted right before sleep!
This whole situation reminds me a bit of the content farming issue with Google. Most patent farms are manifestly bad. The whole model is ripe for abuse. But there is still an extent to which some of the players contribute.
In the extraordinarily unlikely event that the patent system is reformed in the near future, it seems likely that IV in particular wouldn't have much trouble pivoting. Unlike the bona fide trolls, which are boiler room IP arbitrage operations, IV is staffed with actual smart people; whatever the new bar became for defensibility, you'd figure they'd clear it.
As for right now, I just remind myself that while the term of a new patent may seem like a lifetime, it is actually far shorter than that, and to the extent that patents incentivize people to populate the marketplace with viable implementable new ideas, shops like IV are probably a good thing.
I don't have a good sense of Myrvhold's overall stance or intention, but I was dismayed to find Neal Stephenson heavily involved in IV. Perhaps only to cure my cognitive dissonance, it occurred to me recently that perhaps IV is performing a grand reductio ad absurdum attack on software patents.
i.e. accumulate a patent army and then declare total economic war, forcing USPTO / FTC to intervene and prevent abuse
