IBM Patent Lawyer Says The Patent System Works Fine Because... Hey Look Over There!

from the what's-that-got-to-do-with-patents? dept

Why would a company spend billions of dollars to build a microprocessor-manufacturing plant employing thousands of skilled workers in the U.S., if it could only protect its technology by obtaining patents in other countries?

Why would a venture capital firm fund a social-networking service provider if the company could not obtain patents on its innovative software backbone, preventing others from easily copying it?

But here’s the thing: Patent disputes like this are a natural characteristic of a vigorously competitive industry.



And they’re nothing new: Similar skirmishes have historically occurred in areas as diverse as sewing machines, winged flight, agriculture, and telegraph technology. Each marked the emergence of incredible technological advances, and each generated similar outcries about the patent system.

We are actually witnessing fewer patent suits per patent issued today than the historical average, according to economic historian Zorina Kahn. The rate of patent litigation was twice what it is today compared to some decades in the mid-19th century.

Economists also tell us that 75 percent of a company’s value is attributable to its intellectual property (IP) -- and that IP-intensive industries contribute $5 trillion per year to the U.S. economy. These industries account for about 35 percent of gross domestic product and 40 million jobs, including 28 percent of the jobs in the United States.

Six of the 10 companies globally with the highest software revenues are U.S. companies, including the top three. In other words: The success of the U.S. software industry correlates with its use of software patents to protect its innovations. If patent litigation caused by the U.S. patent system stifled innovation, U.S. software companies would not be the most successful in the world.

If people had understood how patents would be granted when most of today’s ideas were invented, and had taken out patents, the industry would be at a complete standstill today.

"OK," he said, "maybe you don't infringe these seven patents. But we have 10,000 U.S. patents. Do you really want us to go back to Armonk [IBM headquarters in New York] and find seven patents you do infringe? Or do you want to make this easy and just pay us $20 million?"

Ever since U.S. courts made it clear that copyright is unavailable to protect their ideas, developers have sought to protect inventions embodied in their software via patents. Denying patent protection for software will cause these developers to look for other ways to protect their IP investment — resulting in code that is less open, less accessible, and less interoperable.

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IBM's Chief Patent Counsel, Manny Schecter, has one of the most ridiculous defenses of the patent system you'll ever see over at Wired, entitled With All Due Respect: The Patent System's Not Broken . Having debated the patent system for years, I've noticed a pattern among patent system defenders who are big time patent lawyers. Their argument tends to amount to: see this wonderful thing? It exists because we have patents. Period. The fact that whatever it is they're pointing to probably has nothing to do with patents will never be acknowledged. Schecter's argument is a perfect example of this.I love idiotic rhetorical speculative questions like this that assume it's impossible to answer in any way other than the one the questioner wants... especially whentells a completely different story. It turns out that we have examples of countries with weak or no patent systems -- and they did invest tons in manufacturing plants, employing thousands of skilled workers. As covered in Eric Schiff's research decades ago, both the Netherlands and Switzerland had extremely weak or non-existent patent systems at the time they industrialized -- and both built up industries that involved huge capital expenditure, without the ability to protect the patents at home. Similarly, research by David Levine and Michele Boldrin highlighted how the Italian pharmaceutical industry developed to be quite impressive at a time when pharmaceuticals could not be patented in that country.The reason for this is not difficult to assess. It's that companies don't sell "patents," they sell products. And you can sell products whether or not they're patented. If you build something people want, you can figure out a way to sell it -- even if someone copies you. In fact, what plenty of other research has shown is that (again, contrary to what many lawyers believe) copying market leaders is often a hell of a lot more difficult than people believe. And, of course, even if you have a direct copy, it doesn't mean you can really compete. The first mover advantage is important, but so is knowing how to market and sell products, and copiers often don't do a good job on that front. So, yes, there are plenty of reasons companies would spend a lot of money without patents. And we know that already because the evidence says so.Uh, again, because they're not selling the patents, but the service. And plenty of smart VCs fund social networking companies without patents. Let's take a look at one of the most popular social networking sites out there today: Tumblr. The company has zero patents. Zero. And it raised money. From whom? From one of the most respected venture capitalists around: Fred Wilson, who has spoken out directly about how much harm patents do to innovation, and why it makes no sense to invest in a company because of their patents, as opposed to their actual product or service.So we're now two for two on completely ignorant "rhetorical" questions from Schecter, showing that the true answers to his questions disprove his point. And that's just in the first paragraph. Let's jump forward a bit.So because we've made this mistake before, it's okay to make it again and again? What kind of logic is that? Seriously.This is a. Why? Because the number of patents being granted todayexceeds the number granted in the past. The percentage of patents that are litigated over doesn't matter. We're talking about the impact of the lawsuits. The fact that the patent office grants a ridiculous number of patents today that never are used in litigation has no impact on that whatsoever. This is what's known as throwing out bullshit statistics when the actual data goes against you.Where to start? First off,economists? Second, having your value attributed to your "intellectual property" (loosely defined) isas saying that it's. This is a common and ridiculous mistake that many make -- assuming that because the things currently covered by IP laws are important, the laws themselves must be important. Ideas, content, innovation etc. all exist absent IP laws. This is something that patent lawyers seem to conveniently forget or ignore. Next, the $5 trillion number and the 40 million jobs claim -- well, that's equally bogus , as we've discussed before. It's based on the ridiculous and obviously faulty belief that these jobs and "contribution" to the economy are due to "IP laws" and not other economic activity such as. And those jobs? Yeah, anyone who claims that has lost all credibility, because, remember, it's actually mostly about, and that means that 2.5 million of those jobs are actually people working at grocery stores . Sorry, dude, you don't get to claim the checkout bagger as a reason why we need stronger patent laws. But that's exactly what he does.Well, let's start with the basic point that correlation does not equal causation. In fact, let's dig deeper and point out that in nearly every case, the patentsthe success. That is, these companies have used patents to restrict competition, not as a way to get big. Of course, Boldrin and Levine's research has shown that to be the case historically as well. Strong IP laws and enforcement tends toinnovation, rather than the other way around. I don't know which "list" Schecter is using here, but we'll go with the software top 100 -- and it confirms that theory. Top of the list? Microsoft. The same Microsoft whose founder once said:Not exactly the ringing endorsement Schecter believes it is. Yes, lots of big companies have patents, but that's because they need to have patents these days or they get sued by others who have patents. Schecter knows this because he lives this daily (sometimes in helping IBM sue other companies for innovating). Need we remind Schecter of the famous story of IBM showing up at Sun with a patent lawsuit, and after being told that Sun didn't infringe on any of the patents, telling Sun:That's not innovation. That's extortion. And Schecter is defending it.Uh... copyright has never been about protecting "ideas," only expression, so I'm not sure what he's getting at here. Furthermore, part of the big problem with software patents today is how they're broadly claiming way too much. If I understand his argument here, it's that if we fix that, and stop them from using monopolies too broadly, they'll just try to lock up their software. Except we already know that fails in the marketplace in the long term. Over the long run, customers demand more open, accessible and interoperable solutions. Why do you think IBM bet so strongly on Linux backed up with? Because it knew that there was money in providing services around open, accessible and interoperable systems. If a company is stupid enough to go in the other direction, it will fail in the marketplace. No problem there.In the end, none of the arguments he makes even come close to making sense. At best, he argues some sort of bizarre correlation to make his point, but most of the time he's just pointing elsewhere and pretending it has something to do with patents. We could just as easily argue that patents have caused population growth in the US. I mean, look, the population has grown... and we have patents! And it would be just as meaningless as every single argument he makes.

Filed Under: manny schecter, patent system, patent trolls, patents

Companies: ibm