Small inventors, beware. You’ve got to be crazy to be an entrepreneur. You’ve got to be even crazier to be an inventor. Patent reform could change things, but opportunities abound in the nascent intellectual property marketplace.
That was one of the consistent messages of the speakers at this week’s Intellectual Property Symposium at the Fairmont Hotel in San Jose. With no Microprocessor Forum to attend (it’s been canceled), chip experts and patent lawyers itching for a gathering went to the first-time conference (co-sponsored by TechInsights, EE Times and others) to hear about all sorts of intellectual property issues.
Here are some interesting highlights that address whether life will get better for the lone inventors trying to innovate. If this topic charges your batteries, consider this IP 101.
The nascent IP marketplace
Peter Detkin, vice chairman and founder of Intellectual Ventures, the “invention capital” business headed by former Microsoft Chief Technology Officer Nathan Myhrvold, opened the conference with a talk about how IP markets are evolving.
At the outset, everything he said suggested the little guys are in trouble. Small inventors account for 60 percent of patents, but big companies reap about 90 percent of patent royalties. Patent reform is being dominated by big company interests, with big tech companies squaring off with big pharma companies. But Detkin didn’t think anything would get done this year on the competing bills.
It takes three years to get a patent issued, after you’ve spent all that time inventing something. Enforcing a patent is also tough and costly. Detkin noted that one Intel lawyer once told him that, upon being approached by an outsider with a patent claim, he should never schedule a meeting with the claimant for at least eight months. The big company strategy is wait out the individual inventor or lawyer and drive up the pain of trying to get the big company to pay a license fee.
Detkin isn’t associated with big companies trying to squash patents anymore. His company wants to create a fluid market for IP of all kinds for a variety of industries. Intellectual Ventures will invest money in an inventor – before the inventor creates something. That’s called “invention capital,” rather than venture capital, Detkin said. (see here for my interview with Myhrvold on this mission). Intellectual Ventures says it hopes to enable new businesses through its inventions; its plan isn’t to use its patent portfolio to sue everybody in town. As yet, it hasn’t sued anyone.
There are other companies trying to establish different IP business models. Thinkfire, IPvalue and IPotential are helping companies commercialize IP through licensing and advisory businesses. Ocean Tomo has also started a business where companies and inventors can auction off their patents every few months or so. Acacia Research and Mosaid are in the “portfolio assertion” business on behalf of individuals. And investment companies such as Rembrandt IP and Altitude Capital are investment companies that are financing later-stage development or litigation.
Others remarked during the conference that big companies such as Eli Lilly (through its Innocentive program), IBM, and Hewlett-Packard (our coverage) are working hard to invite collaboration with all sorts of inventors through “crowdsourcing” where they share research topics and get outsiders to contribute ideas.
With all of these developments, Detkin believes that a nascent market in IP investments and IP trading is blooming. Even as we write about how tough it is to start a full-fledged semiconductor company these days, it is still possible to make a good business out of the creation of IP and packaging it for the right company to commercialize it. Consulting to all of these IP marketplace start-ups, at the very least, has become a way for small guys to find work.
Clogged court system
Rich Belgard, a Saratoga, Calif., chip expert, looks at more than 300 patents a month and writes about them in the Microprocessor Report. He attended the whole conference and said, “The data presented led me to conclude it’s a little harder to get a patent than it used to be. But I didn’t feel the little guy is being hurt or helped either way. Everybody still has the same chance but there is a strong fear of what Congress may do that can harm the little guy.”
Belgard said that a number of recent U.S. Supreme Court rulings suggest the high court wants it to make it easier to invalidate patents for obviousness and to reduce the amount of injunctive relief for those who win patent cases.
“Everybody is calling for common sense in patents,” Belgard said.
What isn’t common sense? E-data gets a patent on a retail kiosk that can produce music recorded on cassette tapes. It asserts the patent against 75,000 e-commerce sites, gets licenses with 139 of them, and files 43 patent lawsuits. In a strange way, some courts like the federal court in the Eastern District of Texas are trying to grease the patent system by hearing lots of patent cases. In 2006 and 2007, there were 217 suits filed against Fortune 100 companies in the Texas court, compared to just 78 in California and only 11 in Florida. The Texas court is getting so clogged now that a rival court in Wisconsin are now taking a lot of patent cases. The number of patent suits filed a year was nearly 3,000 in 2006, compared to less than 1,000 in 1970, according to Michael Meurer, a professor at the Boston University School of Law and author of the book, “Patent Failure.”
Hollywood IP battle
The fireworks flew on the IP and Hollywood panel about the entertainment industry’s efforts to fight piracy and restrict user freedom through digital rights management. Fred von Lohmann, a senior IP attorney at the Electronic Frontier Foundation squared off against Dean Garfield, chief strategy officer of the Motion Picture Association of America, on what constitutes fair use of IP for consumers. Von Lohmann had no patience for DRM schemes that require consumer downloads of movies to expire after 30 days or to expire 24 hours after someone starts watching them.
Garfield contended that consumers don’t mind restrictions on how they can withdraw cash from an ATM machine. But von Lohmann said that the DRM rules in place now amount to telling consumers what they can do with their cash. Von Lohmann said that if the entertainment industry embraces emerging digital business models there will be an explosion of entertainment revenues in the coming decades. Garfield, meanwhile, hoped that new technologies such as the “managed copy” feature of next-generation DVD machines (whenever it comes out) will help settle fair-use rights for consumers.
Despite the saber-rattling, both agreed that Hulu.com, which offers major movie and TV releases for free along with ads, represents a positive development that both the studios and consumers can benefit from.
A patent troll doesn’t quite confess
Jim Turley, the former CEO of patent-licensing firm Patriot Scientific, provided the comic relief. At the outset of his speech, dubbed “Confessions of a Patent Troll,” he said, “I’ve always believed that power corrupts, and PowerPoint corrupts absolutely.” Turley is once again an analyst at Silicon Insider.
The problem of running an IP business, he says, is that “you have to hold your breath for three years.” That means it takes a long time from the point where you license IP to the point where you can even begin to receive royalties. That’s even when someone has chosen to use your technology willingly and you’re not in a legal fight with them. That’s after half the potential customers simply shut down and fail to get a product out.
“As the IP supplier, you are the last to get paid, from the point when the customer buys the product,” he said. “You should be able to survive as a business with a 50-percent mortality rate for your customers.”
Turley argued for common sense in applying for patents and the same in enforcing them. But he didn’t live up to the title of his talk. No doubt his former employer, litigious as it is, suggested it wasn’t a wise thing for him to tell insider tales on patent trolls.
3 Comments
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Ronald J Riley said:
Patent pirates love to talk about patent trolls. They paint a picture of being unexpectedly waylaid by a mythical and vicious troll. But the reality is much different.
Inventors generally pitch their inventions to anyone who is willing to listen. Patent pirates are often willing to listen, then after extracting as much information as possible they tell the inventor they are not interested. A year or later they introduce a product. They then stonewall the inventor hoping they will simply give up. Far too often this works. In any event they usually have years of notice before they are sued and they most certainly are innocents being victimized by evil trolls.
Patent pirates pillage an inventor’s patent properties and then abuse the process of law to rape the inventor. Believe me when I say there is nothing romantic or humorous about the way these lying, cheating and unethical companies. These companies commit larceny on the grandest of scales to the tune of billions of dollars every year. They even have their own trade association, the Coalition for Patent Fairness, otherwise known as the Piracy Coalition. Piracy Coalition members will lie to, cheat, and steal, leaving no stone unturned to cover their disreputable conduct including conducting massive public relations campaigns painting inventors as “tolls”.
It is virtually certain that any inventor who produces a valuable invention will get first hand experience of transnational corporations idea of “Patent Fairness”.
Inventors who need a patent enforcement entity are welcome to contact the Professional Inventors Alliance. Just as with other service providers there are big differences in how good a deal the inventor will get between different enforcement entities.
In my opinion Intellectual Ventures would be the buyer of last resort. They are well known for downright stingy offers.
There are many tradeoffs in picking a suitable enforcement entity. And once an inventor determines who might be best for them they need to convince the enforcement entity that they and their invention is worth the enforcement entity’s time and money.
It is very important that inventors have a good contract attorney with intellectual property experience review all contracts before signing.
Ronald J. Riley,
Speaking only on my own behalf.
Affiliations:
President - http://www.PIAUSA.org - RJR at PIAUSA.org
Executive Director - http://www.InventorEd.org - RJR at InvEd.org
Senior Fellow - http://www.patentPolicy.org
President - Alliance for American Innovation
Caretaker of Intellectual Property Creators on behalf of deceased founder Paul Heckel
Washington, DC
Direct (202) 318-1595 - 9 am to 9 pm EST -
steve wren said:
What is a patent troll?
According to some a patent troll is a firm who licenses patents they do not themselves commercialize. Yet many of the large firms who are most critical of the practice do it themselves. Out licensing is now an important profit center of most every firm. Often, as a result they end up licensing out patents covering technologies they themselves do not use as they are not consistent with their corporate plan. Rather hypocritical isnt it?
The sad truth is that entities some call “trolls” are often small companies or independent inventors who cant get the money to commercialize their inventions and end up on the curb watching others benefit from their creations. It’s enough to drive one mad. It’s certainly enough to kill the goose that lays the golden egg.
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Claire-J Beale said:
Where does your statistic “Small inventors account for 60 percent of patents, but big companies reap about 90 percent of patent royalties.” come from?
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