Patent law overhaul: Bad for start-ups?

WASHINGTON--Silicon Valley start-ups and independent technologists will suffer if Congress's proposed overhaul of the U.S. patent system succeeds, the brains behind the Segway and Apple's QuickTime video argued Thursday.

The list of companies favoring the proposed Patent Reform Act of 2007, which passed the U.S. House of Representatives in a 220 to 175 vote earlier this month, seemingly includes all of today's major tech-sector players--including Microsoft, Apple, Cisco, Google, eBay, Intel, Hewlett-Packard, Amazon.com and Oracle. But opponents of the bill say a tech-oriented side of the story is getting drowned out by those powerful lobbying forces as politicians press ahead with the most significant patent system changes in decades.

Among the inventors who showed up to deliver that message at a press conference here just steps from the U.S. Capitol building were Dean Kamen, best known for conceiving the Segway, and Steve Perlman, the chief developer of Apple's QuickTime video technology in the 1980s and inventor of WebTV, one of the first TV set-top boxes offering Internet access.

They--along with other members of the Innovation Alliance, a coalition of academic institutions and patent-dependent firms from the manufacturing, biotechnology and nanotechnology world--also planned to pay visits to politicians' offices later that day.

Kamen and Perlman claimed the proposed legislation will devalue patents and discourage investment, by making it easier to challenge patents and more difficult for patent holders to receive the damage awards they believe they deserve in infringement suits. Kamen, for one, said the bill would be bad for anyone like him who holds many patents but does not actually build his own products, leaving that instead to deeper-pocketed companies through licensing arrangements.

"I had learned from all the experts that a troll, which is a bad thing, is somebody who's abusing the patent system, and someone who abuses the patent system is somebody who never actually makes their own products," said Kamen, who runs a company called DEKA Research & Development. "I would sit there thinking, 'Hmm, that sounds awful, that describes me.'"

Joking aside, Kamen said he recognizes that patent system abusers exist, but he suggested the bills in Congress are not the way to go about addressing that issue.

To be sure, the bill that passed the House and a similar version pending in the Senate propose a number of significant changes.

In an attempt to weed out questionable patents, each would set up an out-of-court process within the U.S. Patent and Trademark Office for challenging recently issued patents.

One of the most contentious components of each bill would also change the way courts award damages to patent holders that win infringement suits, generally basing them on the value of the patented component, not the entire market value of the product. The bills' tech-industry supporters say that's necessary because their products often contain hundreds or even thousands of patented components, creating the potential for inflated settlements or damage awards unless Congress makes those changes.

Kamen and Perlman said they recognize that the U.S. patent system isn't perfect, but they suggested the best course of action is to start by beefing up the number of patent examiners in an attempt to deal with a backlog of more than 600,000 pending applications.

Perlman was particularly animated about the bills' movement, arguing that there has been an utter failure by its sponsors to seek out the perspective of Silicon Valley start-ups. He said Capitol Hill staffers told him they had sought input from eBay, whom they considered representative of the Silicon Valley set, but he scoffed at the idea that anyone would equate the online auction giant with a start-up. (Even he alone owns more than the 25 patents eBay has to its name, he said.)

Larger technology companies backing the patent proposals would be wise to consider the negative impact he and others believe those changes will have on the ability of Silicon Valley start-ups to obtain and enforce their patents, Perlman warned. Smaller venture capital firms have voiced similar concerns to Congress--albeit before a small-business committee with no control over the direction of patent law.

'Part of an ecosystem'
"A lot of the companies that are for the bill depend on the start-up companies that feed them," Perlman said. "We are part of an ecosystem. "They have market power, we don't. If we don't have patents, we cease to exist."

Perlman, who now runs a venture called Rearden Companies that bills itself as an "incubator of art and technologies," knows something about having his inventions scooped up by bigger firms. After all, Microsoft bought his WebTV venture back in 1997.

Although Perlman admitted he was "late to the party" and only found out about the patent reform proposal after it passed the House two weeks ago, others present at the press conference claimed the bill's sponsors have been ignoring the interests of engineers and inventors more generally. (Kamen, for his part, has testified at patent law-related hearings in recent years.)

Keith Grzelak, chairman of the intellectual property committee for IEEE-USA, which represents American electronics and electrical engineers, said his organization has long been aware of the movement toward patent system changes. "We were champing at the bit to have a say," he said. "We were not asked to participate in any of these discussions."

Claims that independent inventors and other stakeholders have been left out of the process aren't accurate, said Shanna Winters, chief counsel to Rep. Howard Berman (D-Calif.), the primary sponsor of the House patent bill.

"From the beginning, Mr. Berman reached out to independent inventors to try to get their perspectives and in fact made a number of changes to the bill based on what the independent inventors asked for," she said, adding that an inventor was asked to testify at a hearing about the bill earlier this year but was unable to attend.

Passage of patent law changes this year is hardly a sure thing, although the bills have moved further along than in any previous sessions of Congress. Berman has already acknowledged that the House version isn't perfect and has pledged to continue negotiating further changes. The prospects for the Senate version, which would have to be reconciled with the House bill even if passed, are even less clear.

[frankly0]

lobbying by megacorps wins again

Does it occur to anyone that the reason few independent inventors weighed in on the patent "reform" is that they have little money to form and fund lobbying organizations?

Who does have such money? Why the Microsofts of the world, of course, who are very eager to be able to steal other people's ideas with complete impunity.

And of course Microsoft is always joined by their bestest buddies in the world on this matter, the Open Source parasites, who have never met a good idea they don't think they're not fully entitled to steal.

And how priceless was the comment that an independent inventor was invited to talk, but couldn't come? I mean, in all of America, there was just one independent inventor who might have weighed in on the issue?

Christ are we screwed, with "Democrats" like Howard Berman sticking up for the ordinary citizen.

[sismoc]

Patent reform should start with reducing bogus patents

A patent should be awarded only to those inventions that are New, novel and non-obvious.

In other words, a patent should be almost impossible to get. Small incremental changes to existing technology should NOT be patentable.

Software, living organisms and a myriad of other things should NOT be patentable.

This would greatly increase the value of patents.

[ColdMast]

Honey Crisp Apple

it not like they invented the source apples.

[rapier1]

I don't think you are thinking this through

What is my motivation to make an important improvement if
there is no way that I can recoup my investment? If there is no
way that I can bring the product to market before MegaCorp
steals it from me why should I even bother?

Do you have any idea the chilling effect this would have on
innovation? Do you have any idea how much that would
concentrate power in the hands of the largest companies? The
age of the independent inventor would effectively be over.

[frankly0]

With Democrats like Berman...

who needs Republicans?

[fazalmajid]

They don't speak for all startups

I am an entrepreneur, with 2 patents to my name and one pending. I disagree entirely with Kamen and Perlman.

Patents in themselves are worthless without enforcement, and few startups have the financial resources to sustain expensive litigation. Currently, patents are used more by large corporations to stifle competition by bludgeoning startups into submission than the other way around.

Let's face it, in a legal arena, the decks are stacked in favor of the wealthier and more politically influential party, and that is usually not the startup. No amount of procedural mechanism is going to overcome that advantage, quite the opposite in fact. The argument that patents help the individual inventor against the big company is just a pretty fiction used to "sell" patent legislation to Congress.

The only people who benefit from the current situation are patent attorneys, and to a lesser extent the entrenched interests of the status quo.

[frankly0]

good patents don't want for money to back them

Look, if you have a patent that covers a new, important, emerging technology, you will not find it hard to get money to defend your turf.

Patents are good for startups only if they are technology innovators in important markets. Of course, that's what most people think the purpose of a startup in the technology sector is to begin with; not many investors should really want to back a startup that's a me-too or me-three.

[ColdMast]

society in favor of the wealthier

who every said life's fair, mostly it is a struggle just to exist.

power corrupts.

Just like Microsoft and their 200 or so non-existent infringed patents that Linux supposedly uses.

Don't large corporations just buyout startups because it is cheaper than their lawyer fees?

[stug44]

We don't really know

We don't really know how patent reform would affect start-ups. And start-ups are not a monolithic entity. Biotech start-ups are different from those in software, etc. etc. I have spoken with investors, and they suggest that the most important use for patents is to give the new company freedom to operate. Well, if patents are weakened, doesn't *that* in itself offer more space to operate? We have to ask--what are we trying to reward? Some guy who had an idea, or the guy who took that idea and actually employed people, and added wealth to society? The *independent inventors* who are currently rewarded by the system are not always the entrepreneurs who actually bring the product to market, a product that is often quite different from the original idea embodied in the patent. It is a fiction for the independent inventor lobby to be out there creating the fiction that the current bill would make patents valueless, and all ideas capable of pirating. And the "foreign" aspect is clear demagoguery. That said, it is also disingenuous for the large systems vendors to be out there suggesting that "trolls" are wreaking havoc. I believe that sensible patent reform could actually tighten a system that has gotten out of control. I hope that Congress can withstand these appeals to emotion, without too much intelligence behind them.

[manaboulsi]

Freedom to Operate does not equate Freedom to STEEL

AND patents do not necessarely give you the freedomm to operate or even build your product.

Sensible reform is fine, but what we have here is not sensible, nor it is reform It is simply seeking an easy way out to solve the decaying morals of this country by making what's illegal legal,

Sort of like the generic amnesty to illegal aliens, usuing social security funds for other purposes and leaving Seniors out ion the cold and so on.

If foreign systems were any better, why aren't they more inventive, richer, more competitive then we are?

Mohamad A. Naboulsi

[michaelo1966]

Oh no!!

Without the burdensome, useless, and dumb patent system we wouldn't have the Segway or WebTV! That's awful. What would the world be like? Definitely worth it to allow patent trolls like EOLAS to screw-up Flash and all other plug-in's so we can keep non-obvious, socially useful, groundbreaking inventions like WebTV.

[Heebee Jeebies]

Patent Reform Should Start With...

Not being able to patent genes in the human body. No one created these, certainly not a biochemistry, medical or other research facility. I own my genes they are mine and I don't think its right for any company to be able to own something like that.

Robert

[fazalmajid]

Eolas patent

Actually, preventing Flash and other useless browser plug-ins (i.e. advertising and popup vectors) is a feature, to be put to the credit of the patent mess. See, there is always a silver lining.

[manaboulsi]

Stop the rip off

The small inventor and the american public will be the only ones to loose in this. Here are legitimate questions that require answers:

1: Why is the law effectiveness include patents that were filed a while back? Why doesn't the law kicks into effect on patents filed after it is in effect?

2: Why doesn't the law forces companies that infringe to sit down and negotiate and equitable licensing agreement instead of forcing the independent inventor to go to court and get scraps from literally thieves and criminal

3: Why is a 14 year old that copies a CD or download a song can get hefty fines but a group of adults running multi billion dollars corporation can steel with impunity.

4: Why doesn't the patent office offer incentive to bring in more examiners?

The individual inventor can not be fairly represented by a single person or even an organization.

The interest of this economy which is built by small business including the small inventor, should trump all other global interests. If other countries are doing so great, why aren't they more innovative, more rich, more advanced then we are.

Our innovative dynamo is the envy of the world and for us to relinguish the incentive that pushes inventors to take risks and move forward.

Mouhamad A. Naboulsi
Applied Computers Technologiers Inc.
www.actplace.net

[ChipVenters]

Well put

The large tech companies are dominating the debate because..guess what...they have the money to. And they want these patent laws changed...because they know they are liable. In this case, their actions are speaking louder than their words.

[asdf]

If you didn't allow software patents, there wouldn't BE problems

It's funny to watch two sides of this debate, tech and bio, neither of whom give a rat's tail about the consumer, going at each other.

I can solve this problem in one sentence, and here it is-

Forbid the patenting of software and so called business methods.

In one fell swoop, you've cleared the backlog of patents and stopped MS from being both a target of trolls and an uber-troll to their own competition, LINUX and even small open source projects like BlueJ :
http://www.bluej.org/mrt/?p=21

The reason tech has a dog in this fight is because companies like MS want to use software patents to exclude others from market participation. Gates is well aware that this will be the effect of patents, and so Ballmer has threatened Linux with IP lawsuits and gates has famously said (in 1990):

"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."


But has since seen the light:
http://www.nytimes.com/2005/07/31/business/yourmoney/31digi.html

There is no rational reasons that business methods and software should be patentable.

The purpose of patents is to promote progress of the useful arts and sciences. Up until 1999 or so, sw patents were no widespread, and business and innovation were going through the stratosphere.

That, my friends, is called an existence proof and is the strongest form of argument possible- we know SW innovation will take place without patents because it DID happen. No theorizing and hand wringing or what ifs are needed. We know.

If bio had a brain, they would spend time attacking BM and SW patent's legitimacy- an easy task and one that is convincing to legislators the world over. With those gone, MS would have to go back to competing through providing value (ha) and the flood of junk patents would become a manageable trickle.

[rapier1]

Do you understand

Do you know what patents actually protect? They do not and
*never have* protected the product. They have always protected
the *idea*, the conceptual foundation that manifests itself as a
product. Why should someone put huge amount of effort into
software development if they can never have any sort of
assurance that they'll be able to at least have a chance to recoup
their investment. Its not like software development is necessarily
cheap or easy.

A copyright isn't effective protection because it only covers the
exact implementation of an idea rather than the idea as a whole.
Unless you argue that copyright protection will now cover a
broad range of derivations.

There is a problem in that there is a dearth of qualified patent
reviewers and serious push to retrain and streamline the process
would do a lot to weed out the useless applications. However,
eliminating entire classes of protection isn't going to help
anyone out.

Full disclosure: I have a software/method application pending.
Honestly, I don't think I'd have put the work into it if I didn't
think I'd be able to get the value associated with control over the
IP.