Thursday, August 16, 2007

China Becoming Patent Giant

According to WIPO, the UN's intellectual property agency, China has become the third largest filer for patents behind the US and Japan, as the BBC reported. China has for some years become the manufacturer of first resort for many companies around the world. But that's a low profit type of business. The country is moving up market, so to speak:
China knows it cannot bet its future economic success on low wages alone. Other countries are already cheaper.
I can remember a few years ago speaking to an executive of a global consumer electronics company who was working in China. He said that people had no idea how quickly the country had advanced and exactly what was going on there, that to see it for yourself was a stunning experience. It still makes me wonder how many businesses and countries still write off China as a source of cheap labor and manufacturing, where there is little interest in intellectual property and where the chief capability of interest is copying what has already been done by another. How long will it be before the west faces China as a powerful competitor on all levels? Look how long it took to recognize - not just intellectually, but emotionally - Japan and then South Korea. We may all be in for a rude awakening.

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Monday, June 11, 2007

Cato Institute Scholar Misses Patent Point

In Saturday's New York Times, Cato Institute adjunct scholar Timothy B. Lee went on at length in an argument that software patents are stifling technical innovation. There were only two problems: he had a poor grasp on business history and his logic was faulty.

I hadn't noticed the piece until I saw mention of it in PATNEWS, a patent news and opinion email service. But I went back and read through last Saturday's piece. Let's start with the characterization of Microsoft as a "growing company challenging entrenched incumbents like I.B.M. and Novell." Technically that was true - and it also owned the desktop computer as it does now. Yes, Windows was in an early state, and I suspect that the company's only having six patents might be true, but that's because so much of what it had done wasn't at all revolutionary. DOS was an operating system much the same as any other - just small enough to run on a PC's then limited resources. Early versions of Windows hadn't done anything not previously covered by Apple and by Xerox before. But as Microsoft went on a heavy patenting binge, so did its innovation. That's because patents are an incentive to innovation.

Yes, you can find yourself locked out of doing something in a particular way, which is why you invent a new and possibly better mousetrap. Then you patent it and enjoy a limited benefit from that patent. Since companies have gone on a patent spree since gaining protection for fundamental algorithms and designs became possible in the 80s, software has leaped ahead faster than anyone ever would have expected: online services, graphical interfaces, new ways to model and plan businesses, home entertainment systems. So where is the lack of innovation?

Mr. Lee's main argument seems to be in the Verizon v. Vonage case:
Vonage developed one of the first Internet telephone services and has attracted more than two million customers. But last year, Verizon — one of Vonage’s biggest competitors — sued for patent infringement and won a verdict in its favor in March.
Does that mean the idea of software patents is bad, or that the decision is bad and, perhaps, the patent should never have been granted as there were Internet telephony service years before Vonage. Some go back to the mid-1990s - a good four or five years before the creation of Min-X.com, Vonage's predecessor. And Verizon's patents, whether you think they are valid or not, certainly came before that company's genesis as well.

So what exactly was the innovation that Vonage brought to the table? As it is, the company has already said that it thinks it's found other ways of providing its services to avoid conflict with the Verizon patents. If anything, the Verizon patent case has pushed it to do something at least slightly different and new. So much for Vonage serving as the poster child for the need to eliminate software patents.

Mr. Lee then argues the following:
In fact, companies, especially those that are focused on innovation, don’t: software is already protected by copyright law, and there’s no reason any industry needs both types of protection.
This is more nonsense. Copyright is protection of the specific expression of an idea or concept. Patents are protection for an underlying concept or idea itself. Under copyright law, I can write about the same subject, even with the same twist, as someone else, and if I'm using different wording, it's unlikely that the two articles will be seen as conflicting. But that's about exact expression. So say that I write a new algorithm - or unique and clearly defined approach to solving a specific problem - in one programming language like C++. I'm no lawyer, but I suspect nothing in copyright is going to keep someone else from expressing the exact same algorithm in a different programming language, like Java. So much for equating the two protections, because now I have no lock on the unique method I've developed to solve a problem. And anyone who has dealt with an issue of copyright infringement would laugh at Mr. Lee's statement, "The rules of copyright are simpler and protection is available to everyone at very low cost." Obviously he's never filed a suit in federal court. Then he bemoans the high costs of patents - and, yes, it's very expensive to file and maintain a patent.

But isn't that an issue of the market? Is this the Cato Institute looking into business protectionism? Of course companies must file patents to stay competitive. They also have to be innovative, do market research, develop new products, establish themselves, all of which are so much more expensive than obtaining patents that the comparison is almost laughable.

Patents are part of business strategy - and that's why Microsoft went into them so heavily. It's not that Bill Gates used to be enlightened and now is trying to protect his turf. It's more that his understanding of business has grown. Perhaps Mr. Lee should chat with Microsoft's chairman and see if there's something he could learn as well.

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Tuesday, June 05, 2007

Step Away From That AK-47 - Or Pay the License Fee

Apparently (and thanks to Slashdot.org for the tip), Russia wants licensing fees for producing AK-47s. Mind you, the rifle has been around for some six decades pretty much as it is now. They must be taking a page from the US corporate patent strategy notebook.

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Thursday, April 26, 2007

Investors Back Patent Trolling

Forbes had a great story on how some patent trollers - small companies that take out broad patents with no intent of actually making anything, only of suing large companies that do - are now getting funded by hedge funds, private equity firms, and other deep-pocketed investors. AS if life wasn't tough enough before. Last year the U.S. Supreme Court limited the ease with which a small company that was obviously looking to make money the new fashioned way, by suing, could threaten a large company with an injunction. That was in the Altitude/eBay case, in which the small company has received a $25 million infringement verdict because eBay's "Buy It Now" feature supposedly infringes on that company's patent. Yet I can remember all the fuss when Amazon got a patent for its one-button shopping feature.

The problem is that even if there is prior art, someone has to dig it out and continue to fight in court while lawyers prepare a Patent Office challenge - a process that, according to what I've heard from IP lawyers, can be extraordinarily long. Not surprising given the backlog in the system and the number of years it can take to get a patent issued. So in the past many companies have folded their tents, deciding that paying off what can, in some cases, seem like extortion is cheaper than a prolonged legal battle.

It seems like there needs to be some reform of the patent system, though it's not clear that anyone has a clear idea of how to do that effectively. The one sure thing is that it's going to take money - a lot of it - to get enough patent inspectors with deep enough experience and training to give a more critical look at many of the patents that seem more and more absurd in their breadth and lack of depth.

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