The Unfortunate Rise of Patents in the Startup World
immad.me
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I think at the end of the day, there has to be some protection against unfair competition, even if its not the existing patent regime. On the recent story about SpaceX, someone mentioned that SpaceX keeps trade secrets instead of patents because the Chinese would copy the technology via the patents. That's a form of IP and the concern of copying is the same concern patents address. Even if Elon Musk dislikes patents, he also dislikes Chinese companies ripping them off.
As VC moves into more areas, like life sciences, medical technology, energy, etc, you will see more patents. It's unfortunate if it leads to meritless patent litigation, but the VC's aren't interested in people ripping off their portfolio companies either, so I doubt you'll get strong push back from them on the subject of reducing the amount of patenting within the industry.
That said, the amount of litigation has clearly gotten out of hand. Patent litigation shouldn't be more common than say shareholder litigation or antitrust litigation, etc.
Basically, I'm asking, "what does a successful wireless licensing path look like?".
My experience with trying to find the right decision-maker at large companies has been daunting. I mean, I play soccer with about 10 engineers & managers from a large military radio company (rhymes with Paris) and not one of them could even point me to the right division to talk to, much less the correct decision-maker. With companies where I don't know anyone, I don't even know where to start.
So, our startup is aiming to hit niche markets, like amateur radio, just to get a product out there and start some buzz. How did you do it?
Would you define "unfair competition"?
One of the nice things about torts is that they are very flexible. Common law judges have a lot of flexibility to look at actual controversies and tweek the rules to get the "right" results. Judges don't have any of this flexibility under the existing patent regime. The Patent Act says that basically anything is patentable, so judges have to follow the intent of Congress. Some important backstops against patentability, e.g. the exclusion of algorithms and laws of nature, are judicially-created, and moving patent law to a tort framework would give courts more leeway to create these sorts of exceptions in response to practical concerns.
Well, how is that unfair? Or are you saying it isn't? If it isn't unfair, then why bring up unfair competition?
Circling back, it's not "unfair" that product companies have natural advantages in the market. Arguably, it's not desirable for product companies to be able to further leverage their advantage by being able to copy designs and technologies from other companies. That let's them compete "unfairly" by letting someone else take the expense and risk of doing research then undercutting them by getting the results of the research for free. I think it's a good thing to have companies like ARM that focus on creating designs, but without some sorts of protections, companies like Samsung that focus on manufacturing and end-user products would be able to steamroll over those companies by copying their designs.
>Ah, one of the questions that has come out of a number of lawsuits as of recently, that here on the west coast, in silicon valley, we didn't patent circuit designs or Computer Aided Design for that matter. And as a result, we never patented at Fairchild the ROM and the RAM. Intel never patented the microprocessor... and others did. East coast companies or TI in particular, took our work and patented it. How come we never recognized the importance of that... circuit development?
>Well, it was probably a different attitude about patents. One thing that happened in the semiconductor industry... semiconductor processes are a long series of steps and the patents had gotten pretty broadly spread because all of the people working on the technology had some of them. And the net result was in order for any of us to operate we had to be cross licensed so the participants tended to all cross, license one another. So, there was not a tremendous advantage to having more patents... with a couple of exceptions, there wasn't much net benefit from it.
>What we never anticipated, I guess, was a lot of other participants were going to enter the business later on. So, at Fairchild we tended to patent relatively few things, typically the ones that we thought we could police most easily and were the most difficult to get around, you know, the more fundamental things. But, I was responsible for a lot of those decisions. I remember one in particular that, in retrospect, is kind of funny. In the early days of the integrated circuit, Bob Norman, one of the people who were involved there, suggested the idea of semiconductor memory... the whole idea of how semiconductorflip- flops could be used as a memory structure, and I decided it was so economically ridiculous, it didn't make any sense to file a patent on it.
>You recognize that a few years later, semiconductor memory was the basis of...
>Of Intel.
http://silicongenesis.stanford.edu/transcripts/chronicles.ht...
That depends highly on your definition of 'normal'. In non-software startups, there's a combination of patent, trade-secret and (probably) copyright to balance. Part of the value you are creating is in the innovative step/technical advance, which may make sense to write down, defend and assign to the company. For some companies, having the patent is a critical piece not only to demonstrate an innovative step [1] but also for investors who are putting money into the company because of that innovative step (that they know it's part of the company and you can't simply make off with it). It's a tangible asset so yes, it can be sold.
[1] assuming that the patent system is doing it's job properly (which many would argue it's not)
Part 1: http://www.thisamericanlife.org/radio-archives/episode/441/w...
Part 2: http://www.thisamericanlife.org/radio-archives/episode/496/w...
I agree that hardware patents seem reasonable, as long as they are technical patents and not design patents, but shortening their length to 5 years sounds like a good idea.
As a programmer, I cannot think of one software patent that I've seen granted which did not appear obvious. I'm sure they are out there, and there are many innovations taking place in computer science, but the kind of programming involved in developing most software-based startups does not warrant protection.
Facebook didn't catch on due to amazing technology, it was amazing implementation. Likewise with Airbnb.
I think this is availability bias. Non-obvious patents don't receive wide publicity for the same reason that "Grandma walks home safely from shops for thousandth time" doesn't receive wide publicity.
Hardware patents still seem to work and reward innovation - things like FRAND prevent lockout whilst rewarding the innovator.
Other parts of the world, well really everywhere that isn't the USA, manage to get along fine without software patents but with hardware patents.
In fact a small hardware startup is exactly the kind of company that the patent system is designed to protect.
In the end, I guess only time will tell if our worries were founded.
To be able to work within the "system". That is, to stop someone from patenting prior art (our technology being only prior art if we didn't patent it) and use that against us. I've personally known of people who have done things like this (find a new usage for an existing very specific technology, patent it and notify the creators of the technology).
To give us the option to open source the technology and not have problems within the (broken) system: specifically intellectual property (Java with Sun Microsystems and Microsoft come to mind though that was resolved through Trademarks).
I was raised in the USA and, at the time we started the patent process, it "felt" like the thing we were supposed to do.
I've invested a lot in R&D and somehow felt that I needed to protect that investment. It took four years to figure out all the kinks in the technology.
What I find most interesting is that I believe most (not all) members of this side of the debate 1) don't know there is another side and/or 2) don't care about the needs of the other side. This author makes good points, but lacks proper context I believe.
Statements like '20 years was set in the days of horse and carts, does it make sense in the modern age?' are great for pandering to an already complicit audience. However, the point is that for some industries 20 years makes sense, and for some of them 20 years isn't long enough.
I'd be willing to bet Myriad Genetics or Monsanto thinks 20 years is not enough.
I finally got the product to market. It hit a nerve and went like gangbusters, selling several hundred thousand dollars in product in the very first quarter. Not a bad launch. Six months later a competitor comes out of the woodwork with a product that was 60% of mine at 50% of the list price. A friend of mine called me thinking that I had licensed the technology because the competing company had even copied my marketing language verbatim. What a shock.
You see, hardware R&D is very expensive. The "R" part can take months, even years. Depending on the field of application and the problem being solved costs can be staggering. One example of this are medical products. If you can bypass the "R" and go straight to "D" you can put out a product for a lot less money. that's exactly what happened to me. Not only did my competitors bypass "R" but they also benefited from the work and expense I went through to identify a market.
That's when you look back and want to kick yourself in the ass for not having taken the time to file for a patent. Lesson learned the hard way.
Many years and lots of mistakes later I emerged with far more wisdom about both engineering and business. One of my observations was that patents are nothing more than necessary weapons of war. Business is war. No question about it. And so, whether you like it or not, if your opponent is using guns you have to have guns as well. Not having patents exposes you to an indeterminate level of danger. As we have seen over the years, both legitimate patent holders and trolls can surface out of nowhere and almost shut you down. Having a granted patent you can point to gives you the ability to say "go away" with some authority.
Years ago I viewed the open culture of web startups with a degree of incredulity. Based on my experiences, I simply could not believe entrepreneurs would put it all on the table for anyone to see. That goes counter what you want to do in the hardware world. Keep it quiet and get it patented or you'll get screwed. That's the winning model.
While small software startups continue with the open philosophy, larger companies like Apple and others file patents at a furious rate. Interesting. Patents are expensive and very time consuming. Perhaps the disparity between small and large companies and what they can do with regards to filing software patents should be reason enough to abolish software patents. The little guys simply can't play the same game.
While I am decidedly anti-patent when it comes to software-only products I have trouble finding fault in the idea of patents for physical or hardware inventions. Don't get me wrong, I still want to see patents only be granted for real inventions. What constitutes a real invention? That's a whole new discussion. That said, the standard of proof should be harder and harder to meet as the years go by. Today it should be nearly impossible to get any kind of patent. Why? Because it is harder to actually invent anything new. Almost every patent I've reviewed (hundreds) are implementations or regurgitations of implementations obfuscated enough to make them look like an invention.
Patents don't keep competitors from stealing your work, they just give you access to a (expensive) right to sue them to get them to stop.
To negotiate a settlement? Ahhhh, now we're talking. It's the flipside of patent trolling.
Your observation is on point. A patent guarantees nothing. You have to have the financial means to enforce them, which is it's own can of worms.
Not on anything like the same scale.
I only rarely mention this on HN because it's like being a particularly obnoxious lightning rod in the tropics, but I have a patent pending at the moment. It's been a slow and expensive process.
So far I am about AUD $17k into the process. This has netted me a WIPO PCT filing, which I have now parlayed into an Australian filing and soon a USPTO filing.
What nobody tells you at the beginning is that it all takes much longer than you think it will. And costs a lot more, because you have to file in each country independently. If I am granted a US patent, that's the lynchpin, the key element that would make a portfolio of patents worth a damn. But then I will still need to stump thousands more dollars per country to file elsewhere.
A company like Apple doesn't have the problem of fretting over the cashflow implications. They are not carefully shepherding a single filing that cost-wise represents a meaningful fraction of their revenue and assets.
Instead, to many companies, patents are a pipeline. A factory. They have on-staff lawyers to pump a constant stream of applications into global offices. They have economies of scale and generous cashflows that I simply don't.
Because of the economics of the situation, patents favour wealthy incumbents, not upstart inventors. There's been a priority inversion.
So it's something to offer to investors/dissuade competitors... within a year. That mightn't be enough time of course.
OTOH, though there is a zero-sum aspect, seeing it as war takes all the fun out of it :/
EDIT a prov just secures a priority date - so you can defer national vs. PCT an extra 12 months. It's confidential, so doesn't constitute public disclosure in itself. But... you're saying PCT members (eg USA) don't recognize an Aus prov priority date? That's a shame. If so, I guess one could file an individual prov in each nation of particular interest (eg USA), cheaper than an actual application, and then go the PCT route. But complex/hassle for just an extra year.
(also IANAL TINLA - but useful to hear!)
> But... you're saying PCT members (eg USA) don't recognize an Aus prov priority date?
Not, as I understand it, unless you go through the PCT process instead of a national applicaiton.
It's the PCT application that grants the worldwide priority and flexibility. You can't do it afterwards, you have to do it first.
IANAL, TINLA.
Email me (see profile) if you want a referral to my lawyer. I like him.
If you just file in one country, once the patent is disclosed, it's disclosed everywhere. You lose your opportunity to file in other countries.
I chose the PCT process. It costs more up front, but it gives me significant flexibility in terms of timing -- up to 30 months from initial filing date to begin national applications. That means I can see how the US application goes. If it is accepted, I will then file elsewhere.
In particular, a provisional application in Australia would give me no priority over a similar filing in the USA. But the PCT process gives me a worldwide priority date.
If I'd gone for the national-only route, I'd have had to file in all the countries of interest up front. Overall it's a cheaper option, but I don't have the kind of cashflow needed to file in a dozen places simultaneously.
Before I forget: IANAL, TINLA.
(AUD $17k = USD $15.7k according to Google.)
My car cost $6,500 USD. What are you buying for the price of $15,700? Just protection against competitors using your idea?
For two patents, technically.
Well, even more technically: for two patent applications and a WIPO assessment that my technology is sufficiently novel and inventive to be patentable in most treaty countries.
> Just protection against competitors using your idea?
Yes and no. Certainly not protection of a business model, and not protection of a feature. It's a technology which underpins several potential business models, but while it is a better technology, it is not a necessary technology. A competitor -- and some exist already -- can bodge along without it, but they will inevitably have a PR disaster that my technology effectively prevents.
The real purpose of the patent is to increase attractiveness to investors and to encourage potential startup competitors to look at other markets. And if it all goes to total crap, I can still put the patent on my résumé. Or not, depending on what kind of company I'm applying to.
You'll forgive me if I don't discuss the subject matter of the patent. My competitors could easily burn up more of my cash by raising constant, spurious objections. Another part of the patent game.
I'm just trying to understand the incentives to play. Why care about other technology companies, unless they've patented what you're doing?
In general your article seems to be more about software patents and software startups but by omitting those words it comes across an over-generalising (e.g so what if 6% of AngelList companies mention patents? What am I meant to take from that?).
Sure, you do mention 'hardware' startups but you talk about them as though this is something new. The 20 year time period only looks like overkill when your experience is in shipping code on a daily basis. If hardware startups only had 5 years to run, the only innovation created would be large incumbents copying the tech 5yrs after launch (instead of, say, trying to buy the company).
I think software patents stifle innovation but I also see that there are benefits to patents as a whole.
Are wheels obvious? How about a wheel attached to two logs (a cart)? How about fire? woven grass to catch fish in a stream? Taking some seeds from a plant and planting them?
Those completely transformed our lives, yet, for a very long time, were anything but obvious. My point is not to bicker about fire and how a patent process might have treated it, per se, but to illustrate how hard it is to recognize what is obvious or not. If no one else is doing something, in the tech field, is it because it wasn't obvious, or because the tech wasn't quite there yet? I've talked with quite a few (US) patent examiners and they are smart people, and find it anything but trivial to rule on obviousness. I'll say more about that in relation to "one click" below.
The bigger issue, to my mind, is the ease of research and implementation. It doesn't cost years of research to devise 'one click'. After you have thought of it, you can hand it off to a mid-level programmer and it'll be added to your stack in a few days - and a junior programmer could've had a prototype going in 15 minutes. Contrast that to the people rightly lamenting about investing years of work into medical device, only to have it stolen from them by a bigger (or just different) company.
I haven't studied the history of one click, so I could be wrong about its details. If so, please focus on the broader ideas. The argument is simply that if no one else does something for several years when it was possible, then that idea is not 'obvious', except in hindsight.
With that said, I'm not crazy about extending 20 years of protection to such a trivial implementation. But how do we do that without punishing people with years of research, or just a brilliant flash of insight? I'm sure we can come up with a straw man patent (and perhaps one click is that straw man, though I don't think so), but the difficulty is in ruling on non-strawman patents.
So, to use your example: Fire shouldn't have been patentable, because it's a natural phenomenon. But if you're the first one to discover how to light a fire faster, using a bow, then definitely you should be able to patent that.
In this context, one-click is neither fire nor a new way to light it. It's more like a situation where everybody is already using fire to cook freshwater fish, but nobody wrote in a recognized publication that you can also use it to cook seawater fish; and now you come and patent that.
Low-contrast font color and unreadable texts?
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