Hacker News Reader

Comment by cs702 | Hacker News Reader

I'm unhappy with Apple and Microsoft too, but the real enemy is a broken patent system that creates the perverse incentives that motivate companies to launch lawsuits like this one, to the detriment of society.

Regardless of who wins, we have already lost, because we have a patent system that discourages innovation and competition in software!

Maybe the prospect of patent Armageddon will finally force lawmakers to address the issue head on. I'm hopeful. As Winston Churchill supposedly said, "you can always count on Americans to do the right thing -- after they've tried everything else."

PS. I highly recommend Gary Reback's 2002 article, "Patently Absurd," which accurately depicts how patents are used by large corporations: http://www.forbes.com/asap/2002/0624/044_print.html

Edits: grammar and style; also, added PS and qualified quote with "supposedly," because it's unclear if Churchill ever actually said those words (thanks icebraining and drabiega for pointing that out).

View on HN

It's certainly true that the patent system is broken. But the fact you can get away with doing something due to broken laws doesn't make it ok to do it.

The operative word in cs705's comment is incentive. The patent system is broken in such a way that not only does it makes possible to get away with this behavior, it encourages and rewards it. That's very different than merely "making it possible".

And the operative word in pg's reply is "ok". That Apple, MS, et. al. are acting in their objective self interest (and to the detriment of all of ours!) is an important point. But it doesn't speak to the moral issue which is that such behavior needs to be condemned and not excused.

well, that's a tricky calculation. It's possible that Apple and MS have miscalculated the backlash on this, and they will be net losers. As for morality, although I disagree with it, there is a moral case for intellectual property rights. That this absurdity is an outcome of it suggests that there's something wrong with the foundational moral assumptions, but given that people are calling this a "nuclear" case - it's reasonable that many people did not forsee this coming.

4.5 billion dollars. If lawyers are even taking 1% of that - good gosh. So many other things in this world 45 million could be better spent on.

If the system incentivizes this behavior, can a publicly traded corporation even choose to ignore it? Would shareholders be able to claim breach of fiduciary duties if they did?

Note: I am certainly not arguing that this is a good thing for anyone by any means at all.

> Would shareholders be able to claim breach of fiduciary duties if they did?

By claim, I suppose you mean sue over? In that case the answer is no. There's this notion that companies legally have to be run so as to maximize shareholder value, and there's some case law in Delaware to support that notion. But what overlooked is the context of those decisions. Invariably the litigation has to do with change of control or measures designed to encourage/discourage same. Outside of those contexts, the business judgment rule reigns supreme. So long as there's no self dealing and the company doesn't lie in its public statements, it is almost impossible for a shareholder to win a derivative breach of fiduciary duty case.

> can a publicly traded corporation even choose to ignore it? Would shareholders be able to claim breach of fiduciary duties if they did?

Patents are a weapon, and if one huge corporation has no "weapons" to defend itself with, then others with "weapons" will attack it. That's why they all have to participate.

In this case, they all - Google included - rushed towards a particularly juicy weapons cache, and whoever got their hands on it was going to use it on the others.

This is fucking ridiculous and disgusting, of course. But it's not the fault of these corporations - they're forced to play, because if one doesn't, then others will just force a massive competitive disadvantage on it. The real problem is the US patent system, the US courts, and the culture of feverish bullshit litigation at every turn that pervades the US.

A cold war is not as bad as an open war. The cold war is caused by the existence of the weapons. The open war is caused by launching the first warhead.

> If the system incentivizes this behavior, can a publicly traded corporation even choose to ignore it? Would shareholders be able to claim breach of fiduciary duties if they did?

Corporate officers have wide latitude in determining what actions are in the best interest of the corporation.

In a case like this, the incentive to initiate Nuclear Armageddon for profit has to be balanced against the cost of making developers hate you and desecrating your reputation and standing in the community. It is by no means clear that starting a war in which all sides are susceptible to take heavy losses will be in the interest of shareholders.

Robbing homes is possible and rewarding.

Saying that doing something wrong is rewarding is not sufficient.

Robbing homes has the disincentive of being illegal. What disincentive does this behaviour have?

Retaliation against the real parties in interest by the victims, destruction of the business reputation of anyone associated with this behavior and the reluctance of anyone else to implicitly condone it by doing business with them, causing outrage in Congress or the courts thereby spurring them to respond by making changes to the law that destroy the market value of a multi-billion dollar patent investment, ...

Exactly.

The first step in this is speaking up and saying, "Hey, this is really obviously wrong".

Part of the reason that the law doesn't have to get every incentive and disincentive right is because there are other mechanisms available.

I'd like to say that I was going to avoid doing business with these parties, but I already wasn't doing business with these parties, at least not to the best of my knoweldge.

This is a possible disincentive, but it doesn't currently exist. Calling public outrage against patent abuse a disincentive is the same as calling changes to the current patent system a disincentive: they don't currently exist.

I'm not sure what you mean by "don't currently exist" -- there is a general consensus that some form of patent reform bill is going to pass in the not too distant future:

https://www.eff.org/issues/current-legislative-proposals-pat...

By launching the mother of all trolls to the disgust of the industry at large, they're adding fuel to the fire and making it more likely that stronger anti-troll legislation will pass. Certainly you can expect Google to dump several million dollars more into lobbying for it now. But if that legislation passes and decimates the weaponization capacity of the patent arsenal they just paid billions of dollars for, they've just wasted billions of dollars.

Similarly, the general consensus here seems to be that what they're doing is totally unacceptable. Here where we have the people who choose which platforms to develop for, whose choices collectively make or break those platforms. Yesterday if you had a choice between hiring an extra developer to develop a Windows Phone version of your app or using the money to improve or advertise the Android version, you were more likely than you are today to do the thing that benefits Microsoft. Similarly, if you're Samsung or Asustek or Huawei and Microsoft has just loosed the troll upon you, well, good luck trying to negotiate favorable terms for any of them to ship Microsoft technology in any of their products.

And on top of all of that, how can they not expect Google to respond? If you start a war you can expect the other side to return fire. Maybe not in kind (by setting loose their own patent trolling entity), or maybe they will, but one way or another it's not like Google is incapable of striking back. What happens when they throw a billion dollars into WINE and Samba? Or add support for Kerberos, LDAP and Group Policy to the Google API so that companies don't need Windows domain controllers anymore? Doing things like that probably wouldn't move the needle on Google's bottom line, but it would stab Microsoft in the face. Which is what happens when you make enemies.

> By launching the mother of all trolls to the disgust of the industry at large, they're adding fuel to the fire and making it more likely that stronger anti-troll legislation will pass.

As I understand it, this company was formed during the purchase of the Nortel patents, which happened a couple of years ago. Not just right now. The company which was formed from investment of Apple, Microsoft, etc, is not under their direct control anymore. They basically paid a bunch of money to grant themselves immunity from these patents while creating a hazard / barrier to others.

They intentionally put the patents in the hands of a troll. Moreover, since the trolls generally don't have the capital to buy the patents up front, the transfer deals generally involve the selling party getting a large cut of the shakedown money the troll collects from its victims, so it's quite likely that they haven't recovered what they paid for the patents.

The fact that the timing of this happening at the same time as patent reform is on the table wasn't predictable some years ago is just part of the point -- you can't always predict blowback. The risk is part of the cost.

> Saying that doing something wrong is rewarding is not sufficient.

Good thing "rewarding" was not used as a sufficient threshold for either cs705's comment or mine then.

If nothing else, wouldn't you be open to shareholder lawsuits if you didn't engage in an action which was obviously legal and obviously profitable?

Weird reasoning. So anything legal and profitable must be done? Even for shareholders I think this can't be true. And anyway it is easy to show that going evil is harmful in the long term, e.g. with developers.

I don't like this any more than the next guy, but it's not like apple and microsoft aren't also getting sued. At some point offense can be the best defense.

Edit: also, apple and microsoft also actually make things. This puts them in a different class than patent trolls like lodsys(sp?)

Isn't Lodsys a child of Intellectual Ventures, which Microsoft and Apple are/were investors in?

You're right. It's not just the broken patent system. It's also the present business culture (for lack of a better term), which makes getting away with it seem OK to a lot of otherwise decent people in corporate America.

This is the logical equivalent of, "don't hate the player, hate the game." And it holds about as much water. If any company in the world has the warchest to bow out of petty patent politics, it's Apple.

Yes! I am perfectly happy to hate the player and the game.

Apple and Microsoft were part of a consortium. Do we know that Apple was a ringleader here? Maybe they just are along for the ride to make sure that they weren't in the crosshairs? </devils-advocate>

We do know they are the ringleader as they own 58% of Rockstar.

This whole story brings on such a lugubrious feeling. I mean, I guess we can chalk it up to human nature, but, patent system aside:

How did we ever arrive at the place where we believe that everyone else must lose in order for someone to win? How did we get to a point where we believe that we have to take from someone else's plate when there's more than enough to go around? How did we lose the vision that bringing the highest performance, service, features and functionality is "The Right Way" to deliver and compete, instead of destroying ourselves? How did we become so misguided that, even with a broken patent system, we are not intelligent enough and civil enough to simply do "The Right Thing?"

None of this activity is in the spirit of the Hacker Ethos, regardless of the broken system. At what point did we lose our bearing?

I'm reminded of Joshua's observation from WarGames:

"A strange game. The only winning move is not to play."

Sigh...

we are not intelligent enough and civil enough to simply do "The Right Thing?"

With the majority of people, who are generally decent, the honor system is workable. Problems arise with a minority of people who are willing to exploit loopholes and engage in freeloading (e.g., patent trolls). This creates the tragedy of the commons [1]. With the existence of freeloaders, it is necessary to carefully craft public policy to discourage freeloading and rent seeking. Right now the US (and perhaps international) patent system does just the opposite.

[1] http://en.wikipedia.org/wiki/Tragedy_of_the_commons

This isn't just a human problem, it is one that exists throughout nature. Cheaters, free riders, parasites; just a few names for the same idea: beings that benefit at the cost of others. The problem is that natural selection favours these cheaters.

The best we can hope for is to mitigate the effects of cheating. Attempts to completely stamp out cheating (such as the patent system) are doomed to failure.

The patent system isn't a person or group. It's a weapon of mass rent-seeking built in part by these same companies so that they can reap huge profits without having to actually compete with their rivals. Responsibility for this situation is squarely on the shoulders of these companies and others who have lobbied the patent system into what it is today.

Also, and this is a minor quibble, despite it's frequent attribution to him, there is no evidence that Sir Winston actually ever said that.

Don't blame the patent system. While it is true that patent system should be reformed/eliminated, those companies chose to take advantage of it.

Just because you can steal something when nobody is looking doesn't mean it's justified to be stolen.

Companies are required to maximize their profits, and patents are a legal framework for creating profit.

I absolutely blame the patent system, and it's absurd of you to suggest otherwise.

How about blaming both. These positions don't seem exclusive.

> Companies are required to maximize their profits,

This meme needs to die.

http://www.washingtonpost.com/blogs/wonkblog/wp/2013/09/09/h...

"There are no statutes that put the shareholder at the top of the corporate priority list."

"Nor does the law require, as many believe, that executives and directors owe a special fiduciary duty to shareholders."

It needs to die.

Edit: And there are many, many other places you can find support for this.

There may not be statutes but there absolutely is case law. In fact, I'm sure there are indirect statutes. There's just no way that the purpose of a for profit company is not to maximize profits to the owners of that company. There may be reasonable debate about where best to deploy capital but those decisions should be justified.

A company can have more than one purpose and sometimes maximising profits gets in the way of the other purposes of the business, so just because a business is for profit, does not neccessarily mean that it will seek to maximise that profit or that the owners want it to as they may be just as interested in the other purposes that the business can be put to.

Money alone makes a poor measure of business as business is there to do stuff and money is just one of the processes involved.

What is the timeframe for maximizing profits? If I can liquidate the entire company and maximize profits for that quarter am I required to do so? If I can avoid instigating expensive legal battles and the associated bad PR to maximize profits in the next 10 years wouldn't I be just as required to do that?

I think I addressed this point in another thread once: http://news.ycombinator.com/item?id=6505161

The company's duty is to maximize the value of its shareholder's holdings in the company (i.e., stock). This can be done by maximizing profitability (see, e.g., Caterpillar, most publicly traded companies), but it can also be done through growth (i.e., Amazon, most startups) at the expense of maximized profitability.

It's easier to maximize profitability than it is to maximize growth. This is why more companies pursue the first path.

"Maximum profitability" still needs a timeframe to judge against. Maximum in the next quarter? Next year? Next decade? Maximizing in short term may harm or prohibit maximizing profits in long term, which would be just as bad (or worse) for shareholders.

Profit in the reporting context refers to the annual measure of net income, so maximum profitability generally refers to the profit generated in a single tax year.

Most corporations try to be profitable over a long term, and there is no requirement to be "maximally profitable" in a single year or over any time period. For every corporation there are judgements over the value of investing in product pipeline, sales, marketing etc. or the value of increasing short-term profits at the expense of long-term, the value of taking a risky action that may pay-off or may bring customer anger and lost sales etc.

The vast majority of single actions that a corporation takes are not mandated under some simplistic view of "maximising shareholder value".

Actually I think that article points out my take on the matter. For most corporations, its duty is to maximize shareholder value; the problem is that too many people have forgotten what that actually means.

Shareholders can and have replaced the Board of Directors of public companies, based on their lack of faith in the company's ability to maximize profits. The Board of Directors is in charge of hiring and firing for the senior executives. The Board of Directors and Senior Executives know this, and aren't stupid.

All that has to happen is that shareholders (which are often other corporations) need to act RESPONSIBLY, and you're right, this meme will die. I expect the sun to go red giant, first, though.

If you are seriously suggesting that Tim Cook would have been ousted had Apple not gone down this road, I think you and the rest of the world are just going to have to agree to disagree.

You misunderstand. Tim Cook wouldn't have gotten the job in the first place if the board had thought he would shy away from such a decision.

Unless pg is right, and this will actually hurt aap's share price. And pg is not always wrong.

I predict it isn't going to do anything to hurt share price.

Yeah, it would be crazy to think that a corporation like Apple would ever replace their CEO.

I'm reminded of the phrase, Those who do not read history are doomed to repeat it.

> Don't blame the patent system. While it is true that patent system should be reformed/eliminated ...

But thats the point. You can blame the companies all you want, another will always be there to step up and take advantage of it. I do blame the companies, but what does it matter? Are we likely going to see an Apple Boycott? I doubt it, and changing one companies business practices will have little impact on the industry as a whole.

But the patent system - that's a single target we can all align against, whose elimination would solve these issues immediately.

Every system has its exploits, will you blame those systems for their failures? Individuals are always to blame because individuals are the actors in the broken system. The blame must always lie with those doing wrong, or else we're just absolving ourselves of the hurt we cause each other.

It doesn't have to be one or the other, it can be both. A system that does it's best to prevent abuse, and individuals who do not seek out ways to abuse it, combined make a best case scenario.

I'm a pragmatist at heart is all. I look for the action that leads to the outcome I want, and I don't believe outcry against companies will ever have any impact on the patent system, outside of resultant legislative action.

> Every system has its exploits, will you blame those systems for their failures?

The system is responsible for maintaining the most beneficial incentives possible. In some cases, it is difficult or even impossible to remove those exploits, and in those cases I look to blame individuals to the maximum extent possible. But in this particular example, there is little to no apparent benefit to having (the current) patent system in place, and only perverse incentives. While it doesn't absolve the companies of their behavior, I don't see how it can be viewed as anything other than an inevitable outcome (given the system design). In that light, I may avoid Apple products for instance, but am generally uninterested in any complaint or action that isn't targeted at the root cause which for all intents and purposes can be fixed!

Sure I'm completely on board to fix the patent system but it does not follow that I should continue to support a company that I believe behaves unethically. Apple boycott, yeah I doubt it will happen but that's not the point. It's about informing my personal choices and helping to speak out to inform others. Boycott's unlikely to change anything but real change tends to come from lots of people speaking out and informing lots of other people.

> They chose to take advantage of it.

What would they do, just let Google acquire even more mobile-related patents? You think Google would never sue them? Let's not be naive, the only reason Google is a good citizen with patents today is because a retaliation would make a dent on them, and they know it.

The parent is right, the problem is the patent system, which gives a disproportional power to the holder and creates these power dynamics, "eat or be eaten". There's no space for ethics or fairness there.

That's not quite true. The newer generation of tech companies (Google, Facebook, Twitter) have taken to using patents very very defensively, at least so far.

Google has gone as far doing an "open patent non-assertion pledge" which is far beyond just not using patents: http://www.google.com/patents/opnpledge/

Twitter has an Innovator Patent agreement: https://blog.twitter.com/2012/introducing-innovators-patent-...

That's because the newer tech companies haven't had enough time to build a catalog of patents to rival older Microsoft, Apple, and so forth.

Do you really think Google won't do the same to younger tech companies a decade from now?

The problem here is rather that Google chose not to participate in the company buying the patents.

What do you do after that. Leave the companies that didn't pay alone ?

There used to be a time where companies would have been doing just that. But in mobile market, there is no competition anymore, there is a very rough war. 2 market leader (Nokia, Blackberry) have basically been pushed out of the market in less than 5 years. That's like incredible speed ( I work in financial software company, it takes decades of continuous bad strategy to doom a company ). Their error of judgement was all considered minor and the correction they have done should have been more than enough to limit the losses. In addition of that, only 2 players on the market manage to make money, a lot of money.

In that climate, anything that can give you even a few months edge can be the difference between competing and becoming irrelevant.

The smartphone market is brutal - too brutal for regular competition strategies.

Actually, he probably didn't: http://quoteinvestigator.com/2012/11/11/exhaust-alternatives...

I like the saying anyway, though, however said it.

Guns don't kill people. People with guns kill people.

Apple does not have to participate in this. They chose to cause they anti-competative to the bone.

If patent system was OK, with their power and money they could always find another weapon if what they really want is to attack a competitor. That said, I don't want to mean that the system is OK, obviously, this weapon surely looks too powerful.

While I agree that the US Patent System is broken for allowing this, Microsoft and Apple have to wear the moral blame for following this course of action.

Reply on news.ycombinator.com