Comment by rayiner | Hacker News Reader

Comment by rayiner | Hacker News Reader

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The value created by IV and RPX in this situation is of the same character as the value created by any transactionary middle-man: they create liquidity. They enable "genuine innovators" to quickly cash out their invention in a single transaction instead of either litigating themselves, or waiting to sell the patents piecemeal to someone who will "actually use them." In this case, Kodak isn't going to continue as an ongoing entity. It's better for Kodak, the original inventors, to sell the patent to an aggregator than to drag out the bankruptcy selling the patent portfolio piecemeal to companies that will "actually use it." In turn, IV and RPX aren't doing anything Kodak, the original inventors, couldn't already do. They are just taking advantage of Kodak's need for expediency, hoping to make a profit on the discount Kodak is willing to take in order to complete the transaction quickly.

Also, the use of the phrase "genuine innovator" is more than a bit editorial. Who is to say that they aren't just opportunists seeking to take advantage of the fact that Kodak can no longer practically enforce its rights? Kodak isn't a software company--the probability that IV and RPX will just be going after "innocent" third parties that just happened to stumble on the same invention is lower than it would be in say the software patent context.

Liquidity in the patent market isn't the issue. Building tangible things and pushing forward the pace of innovation is. Kodak would still innovate without the ability to liquidate their patent library during bankruptcy. Is the reduced risk to investors really worth having technology hoarded by non-practicing entities?

That's like saying we should assign real estate to the public domain on bankruptcy, because people will still develop land even if the can't liquidate that real estate in bankruptcy.

That's a poor example. Patents are almost always way more broad (and far-reaching) than real estate holdings.

Intellectual property is not the same thing as physical property. They serve entirely different purposes.

The point is that "Kodak would still innovate without the ability to liquidate patents in bankruptcy" isn't any more or less true when it comes to patents than when it comes to any other kind of property, because the mecahnism is the same, even if the purposes underlying the two kinds of property are different.

Patents expire. The ownership of your house does not. We already have different rules for governing each.

Their patents are ideas, though--I can't imagine something with much more liquidity. Better to have simply found some way of assigning the patents to the public domain or somesuch.

How can you do much better for improving business than releasing the things to everyone to try and build a business on, instead of having to license or fight in court?

First, you can't just ignore the fact that the quick sale of the patents helps Kodak's pay off its creditors, etc. Facilitating that transaction has a certain value. Second, you can't just look at the situation post-facto. Kodak spent billions on research over the years, partly in reliance on the fact that it would book the resulting patents as assets. Simply assigning them to the public domain upon Kodak's dissolution doesn't protect that reliance.

We can have an argument about whether treating ideas as property creates value, but that's a separate argument. Once you decide to treat ideas as property, then as with any other kind of property there is a value created by entities that facilitate transactions of that property.

Those problems are the creditors' problems, and it matters not a hoot in hell how many billions Kodak spent previously--look where they are now. Better to make the world a better place than try and help some creditors recoup a percent of their investment.

EDIT: It doesn't matter to anyone who isn't on the Kodak board or a creditor that those patents aren't being wrung out for every penny they're worth. Let's not pretend that to everyone else in the market free access to those ideas wouldn't be somehow a preferable state of affairs.

None of your points are relevant to the issue at hand, which is that if you are going to treat patents as property, then entities that don't actually use that property directly, but exist to facilitate transactions regarding that property, have a place in the market.

There is a whole debate about whether you should treat patents as property, but I'm not really interested in getting into that debate in this thread.

If you aren't interested in the patents/ideas-as-property debate, my objections/observations here carry without complain. You haven't explained how, exactly, my points are incorrect--do you disagree that everyone would be better off if these patents unencumbered were available?

Entertain the assumption that patents as property is the right way to go. In that case, no, it is not better if the patents are simply freed up for the world to use in the case of bankruptcy. Companies count on being able to sell their patent portfolio if things go south, just like with any other asset. If the rules were such that the property right disappears as soon as the inventor stops being able to produce products based on the patents, then the patents become much more ephemeral property rights, and the incentive to invest in patents is reduced, because businesses don't like to deal with fragile rights.

I'll use a concrete example. I used to work for a startup where the only thing we really did was develop technology. We protected our technology with patents. We had no interest in getting mired in competing with big companies in producing actual products, because that wasn't a game we could win--whoever had the best supply chain/cheapest Chinese labor would win that battle. In the case of that company, if dissolution of the business meant losing the patents to the public domain instead of being able to sell them off, then we would have been very hestitant to invest in the technology in the first place. It would have meant that if we couldn't go forward as a successful business, we couldn't just sell off our assets and cut our losses. Rather, we would have done years of research with nothing to show for it. From a business point of view, there is a lot of value in being able to treat a patent like any other piece of property, which you can buy, sell, leverage in bankruptcy, etc.

You can't just consider the case where good patents get put into the public domain. You have to balance that against all the cases where people don't invest in technology because they consider the resulting patents too fragile. And I know on HN people develop technology just for the thrill of it (in their free time no less), but in most of the engineering field technology development is extremely capital intensive, and reducing the value of patents by making them ephemeral would discourage R&D investment.

Yes, but in assigning the patents to public domain, Kodak would have received on the order of $0.

(What rayiner said).

What's wrong with that? They failed to monetize their innovation now the rest of the market should have a chance.

It's their duty to shareholders and investors to return as much money as they can. No one would claim that they should give their factories and office furniture to the "Public Domain". They are going to liquidate that stuff.

Why would patents be different?

Factories and chairs have intrinsic value, and perform their duties as well as can be expected irrespective of the user if operated properly.

An idea or patent is utterly worthless without execution; a chair in the hands of a dullard or genius functions the same way.

This seems to be an arbitrary limitation you are applying. Most specialized machinery requires highly-skilled workers. They are effectively useless without the right person operating (executing) the machinery.

Regardless, my original point still stands: it is their duty to return as much money as they can to shareholders/investors. Someone is willing to buy their patent portfolio, therefore they are selling it.

Why are you trying to assign morals to something as simple as an exchange of assets in a market?

(This isn't arguing for or against the idea of patenting these technologies...that's a different can of worms. But as it stands, they A) have patents and B) are capable of selling said patents.)

  An idea or patent is utterly worthless without execution

No it's not. In this case it's worth $525m. Clearly other people assign value to them, even if you don't.

Worthless to society, not worthless to lawyers who will sue people doing useful work.

In a world where ideas weren't patentable, they'd be worthless. For better or worse, the current US system says that ideas don't have to be executed in order for patents to be granted. Patents are valuable only because the current system says they are.

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