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Intellectual Ventures' Patent Protection Racket 152

David Gerard writes "Nathan Myhrvold's Intellectual Ventures doesn't sue people over patents, because that would be patent trolling! No, instead they just threaten to sell the patent to a known litigious patent troll. So that's all right then. Timothy Lee details how using patents to crush profitable innovation works in practice, and concludes: 'In thinking about how to reform the patent system, a good yardstick would be to look for policy changes that would tend to put Myhrvold and his firm out of business.'"
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Intellectual Ventures' Patent Protection Racket

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  • Shorter lifetime? (Score:5, Interesting)

    by BigJClark ( 1226554 ) on Tuesday September 08, 2009 @06:26PM (#29358491)

    Why not shorten the standard lifetime of patents from 20 years(I think its 20, anyways), to say, for example 5?

    In this way, the owner of the patent will have motivation not to sit on it, maximize profit and then move on to the next innovation.
    Seems like this wouldn't be a bad idea, although, I will be the first to admit, I only understand the very basics of the patent problem.

  • by DaveInAustin ( 549058 ) on Tuesday September 08, 2009 @06:29PM (#29358539) Homepage
    In this gushing article [] Malcom Gladwell [] implies that this sort of patent trollism is some great innovation on it's own.
    Bill Gates, whose company, Microsoft, is one of the major investors in Intellectual Ventures, says, âoeI can give you fifty examples of ideas theyâ(TM)ve had where, if you take just one of them, youâ(TM)d have a startup company right there.â
  • Re:Shorter lifetime? (Score:5, Interesting)

    by Lehk228 ( 705449 ) on Tuesday September 08, 2009 @06:31PM (#29358563) Journal
    make it the lesser of three, 20 years. or 5 years from the first licensed product containing the patent being available for sale, or 7 years from the first infringing product being available for sale.
  • Fractional pools (Score:5, Interesting)

    by IamTheRealMike ( 537420 ) on Tuesday September 08, 2009 @06:35PM (#29358613)

    Consider the following replacement patent system, let's call it the fractional pool system.

    Let's say ACME Inc invents a new wonder drug at an approximate cost of $1 million. Let's also state that I is the "innovation incentive", a quasi-fixed constant specified by the government - sort of like the central banks base rate. I is expressed as a multiplier. For simplicity let's say I is 1.2

    Multiply the cost of development by I to arrive at $1.2 million. ACME Inc applies for a patent on their wonder drug, and it is deemed novel thus granted. A new pool is created with a value of $1.2 million. Anybody who wishes to license this patent (and anybody can - there is no exclusivity in the fractional pools system) must enter the pool by paying enough into it to split it evenly.

    For example, if MegaCorp wishes to compete with ACME Inc, they'd need to pay $600,000 into the pool, which is transferred to ACME Incs bank account. Now both companies are down $600k each. ZCorp sees that the wonder drug is popular and wants to enter the market too, so ZCorp pays $400k into the pool, which is split evenly between ACME Inc and MegaCorp. Thus all three participants in the pool are now down $400k.

    This continues until the cost of entering the pool reaches some minimal floor at which point the pool is cancelled and the invention becomes public property. There is no particular time limit on this. It happens whenever it happens. You can see that ACME Inc will eventually make back their $1 million plus an additional profit of nearly (but not quite) $200k.

    This scheme has some big advantages:

    • Pro - there is no exclusivity. Thus companies cannot blackmail other companies or cause widespread economic disruption by suspending the distribution of a popular product. Nor can a company sit on an invention for decades without using it.
    • Pro - the size of the pool is determined by the audited cost of development. Thus you cannot make millions off something trivial or obvious.
    • Pro - there is no arbitrary time limit on an invention, which will never be right for every industry.

    Of course there are some disadvantages too:

    • Con - It can be difficult to judge exactly how much a particular invention cost - where do you draw the line between costs specific to that invention and general shared costs?
    • Con - The "innovation incentive" is a fixed constant under political control. I used 1.2x in my example but perhaps a more realistic value is a lot higher, like 20x. Thus governments of the day can adjust it up or down - up likely means more inventions but higher costs to the eventual consumer, lower means cheaper toys but less R&D. Whilst the value could be adjusted per industry or even per invention, it will never be quite right for everything.
    • Con - The second entrant to the pool has the advantage of not needing to do the R&D yet can immediately benefit from the invention. First mover advantage might not be enough to offset this. Perhaps could be solved by throttling the entry rate to the pool.

    Despite these problems I think fractional pools are a more robust and flexible way to promote R&D than the existing patent system, which not only has arbitrary fixed constants but also gaping loopholes of the type we witness in this article. Discuss.

  • Re:Shorter lifetime? (Score:5, Interesting)

    by Ragingguppy ( 464321 ) on Tuesday September 08, 2009 @06:36PM (#29358621)

    For any of you who know patent lawyers that think that software patents and patents on business processes are a good idea show them this patent. Here is the link. []

  • by girlintraining ( 1395911 ) on Tuesday September 08, 2009 @06:39PM (#29358663)

    The problem isn't that businesses litigate over patent disputes. The problem isn't even so-called "patent trolls". It's the legal framework that creates it; The deeper judicial and legal principles. Patents were meant to cover an applied technological advancement; Not a theoretical one, or to intangibles like a process. But the patent system has been expanded to cover these, and it was done in a haphazard fashion by people who didn't fully understand the implications of doing so.

    The net result is that the patent system is being used to protect intangibles -- markets, processes, and "intellectual property". This was never the intend of the patent system. Even worse, the time limit of 7 to 14 years was needed due to slow business processes of the pre-computer era when it would take years to develop something and bring it to market. Now, development to market time can be weeks or months. While this was originally designed so that the inventor (an individual) could profit from his invention while safely making available details of how it worked to the public (thus advancing the state of the art), it nowadays functions as an impetiment to invention because of the long life of the patent and the nearly endless variations that are possible to keep basic inventions protected in perpetuity.

    What's needed is a radical rethink of business process and economics, and the removal of the extreme reliance upon the legal system to protect it.

  • Shorter Lifetime? (Score:1, Interesting)

    by Anonymous Coward on Tuesday September 08, 2009 @06:40PM (#29358677)

    Why not just shorten the patent trolls lifetime?

    Holding back progress for all of human civilization. That's gotta be worth the death penalty.

    If that isnt. What is?

  • by Anonymous Coward on Tuesday September 08, 2009 @06:45PM (#29358755)

    I can give you fifty examples of ideas they've had where, if you take just one of them, you'd have a startup company right there.

    By which Gates means, "a start-up company that pays monopoly rent to myself and other IV shareholders". If software patents had existed back in the day, there'd be no Microsoft. IIRC, Bill Gates has admitted as much... the guy's a moron.

  • Myhrvold, sigh (Score:5, Interesting)

    by TheModelEskimo ( 968202 ) on Tuesday September 08, 2009 @06:50PM (#29358825)
    Myhrvold's enterprise stunk to high heaven since the day it was conceived. Especially the part about paying scientists to come over to an exciting "tell us what's on your mind" conference and start brainstorming together, which was obviously done so that Myhrvold could collect, patent, and monetize those ideas.

    Reminds me of reading Dick Feynman's book about the U.S. government doing the same thing, asking scientists to come up with all sorts of uses for atomic energy that they could patent. Except, that's the government, and presumably they're accountable to someone. At least they ended up giving Feynman a dollar per patent so he could go buy some cookies. I've worked with companies who abuse scientists in similar ways, and to be honest I think our system trains scientists to be scientifically smart and realistically dumb - if you could explain to these guys that they don't have to sell out in order to make money, maybe we'd have MUCH better products and services today.
  • Re:Shorter lifetime? (Score:3, Interesting)

    by labnet ( 457441 ) on Tuesday September 08, 2009 @07:01PM (#29358957)

    Why not shorten the standard lifetime of patents from 20 years(I think its 20, anyways), to say, for example 5?

    Because for most technology, it takes at least 5 years to ramp up, and you often havn't recovered your engineering by then. (I'm talking about real physical products here, not the stupid stuff you often see discussed here like business methods and software patents which should not be allowed) As a development engineer, I can say that the 'invention' part is only a small part of the pain. The real pain is ironing out the bugs, testing, building relationships with customers and distribution networks, supporting the product and improving the product. Part of the answer is to say the invention must be in 'active good faith use'. The courts need to determine good faith on a case by case basis. Those who sit on patents loose them, those actively developing and marketing their patented IP get to do so for at least 15 years.

  • Re:Shorter lifetime? (Score:2, Interesting)

    by Anonymous Coward on Tuesday September 08, 2009 @07:14PM (#29359127)

    Isn't it too curious that widespread use started AFTER the patent expired? (1958+20=1978, widespread use in the 80s) It seems to me that after the patent expired, when everyone could start experimenting with lasers, then several uses nor foreseen by Bell Labs where found out for lasers.

  • by causality ( 777677 ) on Tuesday September 08, 2009 @07:26PM (#29359269)

    The problem isn't that businesses litigate over patent disputes. The problem isn't even so-called "patent trolls".

    For dealing with the patent trolls, I have an idea. Why not make patents work like trademarks, in the sense that you must actively defend them or else you will lose them?

    Not just patents, but the whole intellectual property idea in general is not really working anymore because it no longer provides a good balance between incentive to produce and the benefit to society of having these things eventually become public domain. It needs reform very badly. Restoring copyright to its original duration of twelve years, limiting patents to ten years, and requiring that patents be actively defended would go a long way towards fixing it. It would also help if "fair use" were more clearly spelled out in copyright law, so that meeting its criteria would prevent someone from being able to bring a lawsuit (as in, it could be immediately dismissed if they tried). This would be an improvement on its current status as a legal defense only after a suit is brought. Perhaps we could also use a law which states that any abuse of the copyright or patent systems by any corporation will result in the IP in question immediately becoming public domain**.

    I am not a lawyer and therefore I admit that I may be ignorant concerning the full implications of my suggestions. I'd really appreciate feedback telling me either why you think these ideas would work or why you believe they would do more harm than good.

    ** It's off-topic I know, but I always felt like forcing the entirety of the Windows source code to be public domain would have been the best punishment for Microsoft after they were convicted of abusing their monopoly. What better punishment for an abusive monopolist than to give anyone and everyone the ability to directly compete with them on their own turf? It's certainly a neater solution than meaningless fines or any of the proposals to split them up into multiple companies.

  • by JaredOfEuropa ( 526365 ) on Tuesday September 08, 2009 @07:39PM (#29359409) Journal

    Acquiring a fortune isn't the same thing as actually accomplishing something. Frequently, it's a matter of being at the right place at the right time. Come to think of it, I know of no fortune that would be possible without that essential bit of luck.

    True... but when the moment is there, you have to seize it. Bill Gates and MS did that, a couple of times. And I know of a few good but failed ideas that might have been great had they been launched 5 years earlier or later. I knew a guy, not rich but a regular Joe, who had a knack to always position himself to allow him to reap praise for projects already on the track to success, and get out of failing projects in time. He got plenty of promotions without really accomplishing something, but his success did require that special knack.

    Of course, sometimes just being there is enough. Joining a startup that grows into a success despite your best efforts, and suddenly that crappy stock you got in lieu of a decent salary is worth 8 figures...

  • by Anonymous Coward on Tuesday September 08, 2009 @08:00PM (#29359587)

    In âoeAgainst Intellectual Property,â author Brian Martin does a good job of demolishing the whole idea that ideas even should be owned, much as Tom Paine, in âoeCommon Sense,â once demolished the idea that heredity was a good way to choose leaders:

%DCL-MEM-BAD, bad memory VMS-F-PDGERS, pudding between the ears