I don't think the first comment is particularly controversial, though the speaker was being diplomatic in his use of the term "innovate." It makes more sense if you replace it with "rip off."
The fact of the matter is that a lot of people paint this idealized picture of the morally virtuous techie, where the only people who own patents are big bad patent trolls, and the only people who get sued are innocent innovators who independently arrive at an invention.
That's not the actual story, or at least that's not the whole story. Like in every other field, there is a gaussian distribution of business ethics at various companies. Look at how many companies get nailed for using GPL-ed software without releasing source. You think those same companies don't also copy competitors' designs wholesale? When our company was doing business with an American telecoms supplier, a manager there mentioned that a Chinese telecoms supplier was ripping off their designs wholesale, down to the silk-screening on the PCBs.
There is a difference between "let's innovate on top of this idea" and "oh this idea is good, let's just copy it."
Now, NPE's in their current form are clearly just rent-seeking. However, I think there is a role for NPE's that create value by serving to create a market for patents. Not every innovator wants to get into the business of making products. ARM wants to design microprocessors, they don't want to design and manufacture iPads. Patents facilitate that division of labor, and NPE's can make the whole system more efficient by creating markets for patents.
I agree that wholesale copying is an issue. However patents are almost never going to be the appropriate response to that for software companies. With software you can always go for copyright violation and/or misappropriation of trade secrets. By contrast, given that it can easily take the better part of a decade to actually get your patent assigned to you, you are very unlikely to have patents that cover the innovative parts of your technology.
Instead software patents seem to be mostly used to sue people who independently invented the same thing. They enable rent-seeking and provide no educational value to spread innovation. (Which naturally arises and spreads in our industry on a time scale that is too short to get patents assigned.)
How do I know this? Because the one has happened based on my work, and the other came close to happening. At one of my employers, a rogue employee cloned the code base and then took it to some Eastern European programmers to reimplement the website. It was litigated based on copyright and trade secrets - no patents were available for that lawsuit.
However a different employer of mine took out two patents based something I did when I was there. Since then a number of companies have infringed on those patents, and could be sued for large sums. By luck the patents have wound up owned by an organization that is unlikely to ever let them go to a patent troll. But I've spent years fearing that that work will get used to stifle independent innovation.
> I agree that wholesale copying is an issue. However patents are almost never going to be the appropriate response to that for software companies. With software you can always go for copyright violation and/or misappropriation of trade secrets
Only if software is the product you're selling. I worked at two companies that had patents on software algorithms, but our software was just a reference implementation. Explain to me how a company like ARM would operate relying on just copyright and trade secrets. I think ARM represents a great and valuable business model, and patents enable that business model.
> Instead software patents seem to be mostly used to sue people who independently invented the same thing.
I don't think you can point to any statistic to back this up.
>> Instead software patents seem to be mostly used to sue people who independently invented the same thing.
>I don't think you can point to any statistic to back this up.
I think that was already clear from the word 'seem'. To me, the same thing seems to be true, actually. That /might/ be caused by the number of software-patent cases I see that fall into this category, or are about trivial inventions, while I simply don't see the cases that do have some merit.
On the other hand, I've never yet seen a software patent related case where I could actually relate to the suing party.
Much of the time lawyers are there to present a worst case scenario to push you into using their services. I wouldn't place much store in what they say (speaking as a lawyer myself).
In terms of the entrepreneur discouraged from starting a business, I'd be interested to hear about what the business ideas were.
I am a non-US person. I was very close to set up and transfer my startup to a new C Corp in the US in order to get better payment APIs and make the startup more attractive to VCs. The patent trolls in the US is one of the biggest reasons why I choose not to move my startup to the US, at least not until I get funded. I guess many others also choose to stay away of the US for this reason. The total loss of business in the US must be great.
Having money in the bank means that can afford lawyers, but it also means that you are a more attractive target for litigation as you are then worth suing (if they are after cash).
[NB The startup I co-founded years ago was involved in deeply unpleasant litigation soon after getting our first round of VC investment. Fortunately our lawyers made them go away.]
As the ancients used to say, 'those that the gods want to destroy, they first make mad'. Accordingly, I see a lot of things going down the pan in an ever accelerating spiral.
There are too many unscrupulous, unethical people about, out to make lots of money for zero real creativity, value, and effort. They are forever inventing new artifices towards this end, be it indulgences (sin forgiveness chits), fractional banking (credit out of thin air), software patents, CO2 indulgences, etc. and then getting fat on trading them.
We are so far gone that many people can no longer even discriminate between real value and these things; sinking as we all are in this sea of BS.
There's also a glut of lawyers in the US, enabled by cheap student loans, law schools' statistics inflation, etc., all scrambling to put food on the table. It's not surprising that some new legal strategies and domains that arise from this demographic trend may be good for lawyers in the short term, but not for the country in the long term.
It costs far more than that. What's missing is the lost wealth due to things that weren't created but would have been, not only because people were afraid or unmotivated to create them but because of the money the trolls took.
Value is only created if patents are functioning as part of a system of disseminating ideas.
Imagine two possible worlds. In the first world, when you -- as an engineer -- have a particularly difficult problem in front of you, you first go to a catalogue of solutions, look up the problem, and see if there is a solution already. If so, you pay a nominal fee to the solver, incorporate it into your design, and move on to unsolved problems.
In the second world, you have the same particularly difficult problem, but there is no catalogue of solutions, so you buckle down and solve the problem yourself. Later, someone looks at your solution and declares that a portion of it is similar to something they wrote down in the big pile of disorganized ideas. You didn't know this, because looking in the big pile of disorganized ideas is a lot of work and rarely pays off, because most of the ideas are half-assed and don't really tell you anything you didn't already know. An exorbitant fee is then charged.
There may be some industries living in the first world; I can imagine that in -- say -- chemical engineering, it is very easy to organize the ways to produce chemicals by the formula of the desired end product, and that the standard for describing how to produce a chemical leads to a pretty useful solution.
when a company claims to have "created $50m of value" they mean that that's what they're producing is "worth" as valuated by their customers. For lean companies like those featured here, their cost doesn't enter the picture.
all right, I'll explain it. One guy's cost is another guy's value (almost by definition - of course there are exceptions such as losing something to nature through accident instead of losing money to persons or companies [of any kind] by making an expenditure of any kind to them) - so the patent trolls "create" whatever value we add up to get to the number quoted.
I am not saying anyone supports patents. I'm saying hackernews should be more consistent - or otherwise admit that "creating value" isn't an end in itself. It's the wrong question.
Edit: I think the current title is fine. ("Patent trolls created $29B extra cost in the U.S. last year") I just want us to be clear that one guy's cost is another guy's "value".
I would love to see more cooperative-optimistic-tit-for-tat solutions to the prisoner's dilemma, so that instead of just saying "creating value" we are more specific about the whole system.
This is what (an unnamed restaurant review site) gets wrong and Google gets right, in my opinion. Google adds value whereas (unnamed) removes it.
Of course in a naive sense (unnamed) is also "creating value". Just as these patent trolls are.
You're free to argue that patents are a net positive to society, but to argue a priori that $29B of wealth transfer = $29B of wealth creation, almost by definition, is completely broken thinking.
By your standard, Bernie Madoff created $18B in value.
HN as a group may have many contradictions and blind spots in its general wisdom, but you haven't identified one of them.
There is a previous transaction though - the patent trolls acquire their patent portfolios from, in the long run, inventors. They "bought" and "own" them, and are now asserting those rights, to the expense of $29B to other companies who should be licensing the rights.
Nobody blames landlords of costing businesses billions of dollars a year - they own property and businesses pay rent. Nobody builds a business using a landlords property without paying rent, then plausibly claims their legal costs defending themselves against landlords asserting their rights are somehow an unexpected and unfair imposition. (Well, actually food carts probably do exactly that, but nobody writes academic papers claiming billions of dollars worth of cost for them…)
I haven't read the whole paper, but I wonder about two other numbers - 1) how much money did the NPE's pay to the inventors of the patents they're defending (who under the current system have every right to choose "selling their patents/IP" as their means of monetizing their inventingwork)? and 2) how much would licensing the existing patents (instead of running up legal bill later) have been, compared to the $29B losses described here?
I'm not saying the current system is "right", but it is reasonably well understood. I can only assume the $29B cost is accepted as a "cost of doing business" by companies who know (or even just suspect) they may be infringing patents? (or perhaps it's not an assumed "cost", and many businesses choose to gamble that they'll never be held accountable?)
Here is the thing: small business folks love free stuff. They love shifting costs onto other people. They think everything they have to pay for is a huge drain on the economy and everything they get for free is a justified incentivization of entrepreneurship.
Now don't get me wrong, I love small tech companies. The engineering companies I have worked at have been exclusively small tech companies. They're great. But most in the industry have constructed this idealization of the morally virtuous startup founder. Everyone likes free things, sure, but big companies at least seem to acknowledge the fact that they're inflating their profits at the cost to someone else. Small company culture doesn't do that. The AirBnB debate recently was a great example. People were decrying regulations that could undermine AirBnB, but it didn't even register to people that a lot of the "value created" by AirBnB was actually just costs that were shifted to the other residents of the building/surrounding community.
I see the same sort of thinking when patents come up on HN. There is this presumption of the morally virtuous innovator. Therefore, every $1 he must spend paying NPE's must be $1 of dead weight loss to society. There is no conception of the fact that some part of that $1 represents money he would rightfully have had to pay to the original patent holder, because (statistically!) he's not morally virtuous 100% of the time.
If wealth creation happens at any step, it's when an invention that is beneficial to society is created, and the patent system exists to account for that.
If the invention is junk (like the Lodsys patents), it doesn't matter how wealth has been transferred around; no value has been created. Any rent sought on those patents is an economic distortion and (in my opinion) immoral.
I didn't even start this off to take a side (though I guess I have by now) - I was just pointing out a fallacy in GP's thinking.
All right: how much of the quoted sum do you think the (for-profit) patent troll companies book as revenue? I think the order of magnitude is right. (Remember that traditional comapnies can also play the game and book some of the settlements etc as revenue - i.e. elective litigation.)
Give me your guess, if you think that the article quotes the systemic cost and not the part that is booked as revenue.
What I'm saying in it doesn't matter what the patent troll companies book as revenue. That's just the wealth transfer.
Wealth transfer is not necessarily value creation. This is obvious, because if we all pay everyone else on the planet $100 a day we don't magically have an econmy worth $1.3 × 10^24.
Wealth transfer often destroys value. Wealth unjustly taken away from value creators becomes a disincentive to produce.
You have to look at wealth creation. Are the patents involved in litigation honest to god inventions that made the world a better place? Wealth was created. Eg, the first retrovirus medication.
Are the patents involved non inventions that were of no use, but are broad enough that patent trolls can, without merit, start seeking rent on products from companies they no part in creating? No wealth was created. Eg Lodsys.
In general, different segments of HN disagree over which patents fall into which categories, but the vast majority agree, myself included, that software patents basically all fall in bucket #2.
This is my last reply to you, as I'm pretty sure by now that you're just trolling, and HN doesn't need to be polluted with this thread.
They weren't forced by a nebulous system but by a for-profit company. Hackernews needs to be consistent - that for-profit company saw value there, and created that value. (In the ycombinator sense.) Do you really not see the difference between a broken window and a company getting people to pay it to install windows through legal pressure?
I'm disagreeing with the definition of "value" used around here - for normal companies, not patent trolls - and to show my disapproval with this notion I insist that the word value be applied here as well.
I'm not aware that the ycombinator sense of value is profit (or maybe income?). Not saying it isn't, I'm just unaware of that.
And when I said system, I meant the law forcing the companies to pay, not the troll using the law as a tool to create profit.
We could enter murky territory on whether other forced forms of income (taxes or fines, for example) provide value, they are forced but on the other hands they are supposedly used to common benefit, instead of private profit.
Consistent? There are thousands of commentators here trying to gratify each others' intellectual curiosity. We aren't required to agree on everything, and if we did, hardly any of us would have anything useful to say. For me, value is relative to the status quo ante. The difference between trade and extortion is in what would have happened if you weren't present and making the offer. Is everyone slightly worse off, or better?
Patent trolls who serve no purpose other than to litigate don't create value. And if we take one in particular Lodsys. They had the potential to destroy a lot of value when they sued small app developers many of whom simply didn't have the resources to defend themselves.
Exactly. And yet by the business ethics that are rampant here, they do create value (see my cousin comment). These aren't "the system". These are specific for-profit enterprises.
If an enterprise shrinks the size of the economy by $1b but in the process gets people to pay it $100m, then by getting people to make that payment it has "created 100m of value." Nevermind the effect on the rest of the system.
There is no inconsistency here, you're again falling for the broken window fallacy. Busy work does not create value; eliminating it does.
The simplest way to demonstrate it is to look at the industrial revolution. Vast amounts of people were put out of work because automation made the economy more efficient. $1bn industries, as you say, were permanently shrunk to $100m industries, left right and center.
All those workers displaced eventually found employment elsewhere, and it turned out to be one of the largest economic booms in history.
Would you rather we still weave our sheets by hand employing 100 times as many workers as the modern textile industry, each one costing $1000?
Because that's exactly the consequence of your line of argument.
We're talking about the revenues the company creates for itself. (See my other comment.) I think the order of magnitude is right for the amount for-profit troll companies and troll legal divisions at bigger companies doing elective litigation book as resulting revenue. The systemic cost could be higher.
I know - and I don't either. But we need to be consistent in how we talk about companies that have a revenue stream they create at a systemic cost to everyone: this is (from the companies') perspective, "building value."
By that argument the KLF were building value when they made a million quid with the express intention of setting it all on fire. And they possibly were, in artistic terms.
However, if we are talking about people who are just shifting money around without creating anything other than unnecessary work, then they are a cost to the wider economy, they are not increasing it's value.
To be fair the cost of burning 1 million dollars is only the cost to print and transport the money.
Assuming it only costs 10c to print a $20 bill then the cost to society of the act was a meagre $5000. I imagine the entertainment value provided would been worth more than $5000. Thus the act could have been a net gain for society.
The other $995,000 would have been redistributed through-out the money supply in the form of deflation.
I totally agree with the common belief that patents are the wrong way for protecting most startups... But, an interesting thought about patent trolling, I believe, is that if patents are useless then why can the trolls make $29B/year on trolling? I'm confused!
Patents are intended to incentivize people to reveal their secrets in exchange for a temporary monopoly on the secrets. They are not meant as vehicles purely for making profit, but that is how they are being abused - by people who buy up patents and then sue anyone who infringes, or by people who patent as broadly as possible and then sue anyone who infringes. Useful for making money, not useful for the intended purpose of contributing work for the greater good of all people.
The patent system is too broken. Anyone who writes software should hate patents. Anything you write will infringe on some patent out there. If all you want is money then writing software isn't the best way to go about getting it.
A better system would be one where patents do not give protection to ideas, but do give minor tax incentives to the people who own and use a related patent in their business. Then their ideas are shared, but not using the patents gives them nothing, and they cannot block others from using the all too often obvious ideas.
It should be noted that patents are particularly broken for software, since in that field it appears to be quite easy to convince someone at the patent office that a trivial discovery is non-trivial. Also most of it is math and shouldn't be patented anyway.
> The patent system is too broken. Anyone who writes software should hate patents. Anything you write will infringe on some patent out there. If all you want is money then writing software isn't the best way to go about getting it.
I write software (open source on GitHub) and don't hate patents. I hate bad patents, the kind you can infringe upon just by writing software, but lots of patents aren't bad patents. E.g. IBM has a number of patents on compiler optimizations. Am I going to stumble upon Steensgard's pointer analysis by accident? No, the only reason I know about it is that IBM let him publish a paper based on the research they paid him to do at Watson.
>Am I going to stumble upon Steensgard's pointer analysis by accident?
Yes! Yes, you could stumble on Steensgard's algorithm. Like convergent evolution in nature, it's easy for requirements to shape implementation, and for multiple implementations to naturally overlap. There are so many software patents out there- it is a minefield.
Additionally, engineers at large companies are discouraged from doing their own patent research, because of the risk of losing a "sorry, we created this organically in good faith" defense in litigation.
Publication of patents does not offset the chilling effect and legal overhead on our industry.
Part of the rationale for the patent system is that it is supposed to encourage people to disclose trade secrets that they would not otherwise disclose. However, if you can tell how a thing works just by looking at it, then according to that rationale there is no point in allowing such an invention to be patented (at least not on that basis). Unfortunately, that does not seem to prevent many completely obvious things from being patented (e.g. one click shopping).
Before capitalism, "trade rights" were a property right. You could own the right to be a sell bread in a particular town, for example (and the right to exclude others from doing so). Those owning such rights made lots of money, but that doesn't mean they were a good idea.
Good point, but the common belief is that patents are worthless and therefore it's interesting that at least some (the trolls) make a hefty profit on using patents in their business model. I.e. patents can't be worthless? That was my point and some thought I should be downvoted for that but it's still my point...
If I have a patent on X, that means I can charge you money to make X.
Suppose X is sandwiches. If I'm allowed to charge anyone who makes sandwiches, yes, my patent is worth lots of money. It's not "worthless" in that sense. It's worthless in the societal sense: allowing my monopoly provides no value to society.
Nobody thinks you can't make money from software patents. Some people think software patents do not provide value to society by encouraging innovation, which is the stated legal intention of intellectual property law.
You're using two different meanings of "worthless." Patents are "worthless for the benefit of society" (I would go further and say that they are actively harmful) in that they provide disincentives to innovate and create new and interesting products. However, they are not "worthless for obtaining money" because our government allows them to be an excuse to forcibly transfer money.
A neo-liberalist wouldn't necesseraly make the two a difference. Right now I personally see patent trolling as a tax (collected by some really murky individuals) on innovation, a neo-liberalist would perhaps see it as the market promoting patented innovations over non-patented innovations or innovations without "good" protection - thereby making the individual with a "good" protection an advantage. I think even a neo-liberalist could see that as positive. I'm however not a neo-liberalist (fuck, I'm a Swede we're pretty much communists anyway?) so I can only see this as a tax on innovation, but the point I was trying to make and still stick by is that if patents are so "worthless"/"weak" then why can someone make a buck out of them, aren't patents then more misunderstood than "worthless"/"weak"?
>A neo-liberalist wouldn't necesseraly make the two a difference
A (neo-)liberalist would not approve the difference, as long as money is made, but the patent system is government regulation of trade, so he would not approve of the patent system itself if he took his conviction to the logical end.
Patents have value to the holders of the patents, but that does not mean their existence creates value to society as a whole. If they do not, then there is an open question as to whether society should continue offering to enforce them.
When people call patents valueless, they're probably talking with respect to society as a whole.
First, just yesterday, I was at an event where a patent lawyer declared (I kid you not):
"You should be careful how much you innovate on top of existing products, because you might end up falling under someone else's patent."
Seriously. I couldn't believe my ears. Incentivising innovation fail.
The other soundbite came from an entrepreneur at a TechHub meeting in London, about the Hargreaves Report on IP, last year. He said:
"I wish I hadn't come tonight. The more I learn about IP, the less I want to start a business."
I think that pretty much sums up how well the patent system incentivises innovation.