Patent Trolls are NOT the Biggest Barrier to Innovation

A recently published survey by The Atlantic asked a panel of 50 Silicon Valley insiders a variety of questions ranging from what is the most exciting tech start-up at the moment to which tech company is most overvalued. One question in particular was quite intriguing: What is the biggest barrier to innovation in the United States? You might be surprised by the answer.

According to this poll the biggest barriers to innovation in the United States are, in order:

  • Government regulation/bureaucracy 20%
  • Immigration policies 16%
  • Education 14%
  • Talent shortage 10%
  • Lack of diversity among tech executives 10%
  • The need for patent reform 8%
  • Lack of investment 6%

This survey shows what those in the industry have long known — patent trolls and the need for patent reform are NOT the biggest problems facing the high tech industry in the United States. In fact, 92% of respondents feel that there are other things that are more concerning and a bigger barrier to innovation. But how can this be? The public has been consistently fed the line that patents stifle innovation. How can something that stifles innovation not be the biggest concern, particularly when so many of the tech giants from Silicon Valley have for years blamed the patent system for all their woes? The simple answer is that patents do NOT stifle innovation, but rather patents foster innovation. Those who are intimately familiar with the industry know patents promote innovation regardless of the lies promoted to advance patent reform, vilify innovators and lay the blame for everything at the feet of patent trolls. See also Promoting Innovation: The Economics of Incentives.

A lack of imagination, a lack of sophistication and a system that rewards incremental innovation over paradigm shifting innovation are the problems for innovation in the U.S. “Working on problems that don’t really matter. New York magazine recently reported that there are no fewer than a dozen venture-funded start-ups trying to make doing your laundry easier,” said Jennifer Pahlka, founder and executive director, Code for America. “That’s the problem the ‘innovators’ in our country feel is most important to solve?”

There is a reason why smart investors are backing start-ups that focus on making laundry easier and other rather inconsequential things. The more revolutionary your innovation and the more widely adopted it becomes the more likely the patents you have obtained won’t stand up. Indeed, it is a tragic irony that in the United States your patent is more likely to be defeated as being patent ineligible or obvious the more revolutionary the innovation it covers. If everyone is using your invention, if it becomes ubiquitous, rather than celebrate the type of paradigm shifting innovation that we claim to want we insult and vilify the innovator for having the audacity to have sought patent protection. See Use of Ubiquity to Determine Patent Eligibility

On the other end of the spectrum, patents that only offer minor incremental increases are celebrated as proof that companies are highly innovative. In fact, you are better off having a crappy patent and seeking only very modest royalty payments than having a revolutionary innovation and a strong patent. Silicon Valley tech giants will pay at least nuisance value to make the crappy patent case go away, but will fight decades if necessary not to have to pay when they infringe a valid patent on an important technology advancement.

The reality for those seeking early stage funding, whether in the form of Angel investment of money from Venture Capitalists, if you cannot obtain patent protection you make getting that investment much harder if not completely impossible. That means you cannot afford to engage in the research and development, or absorb the risks associated with paradigm shifting innovation. Innovating for the future requires real expenditure of capital, it is that simple. Those who pretend that innovation just happens or that it doesn’t cost money are just living in a fantasy world.

Those who say that patents are not necessary for software are either hopelessly ignorant, or they are delusional. They myth that useful and usable software be can be programmed by any second year engineering student is a lie (sorry Justice Kennedy). Perhaps an App for your iPhone that doesn’t do anything particular special or creative can be put together relatively quickly, but even debugging things and ensuring interoperability of simple software takes time, which means it costs money. Something more complicated and useful, such as a new operating system will require hundreds of team members to dedicate 1 to 2 years worth of time. Even then we all get weekly warnings about the need for critical updates and security patches. For something that is terribly simple it takes the best and brightest minds at the most innovative companies in the world extraordinary amounts of time to really come up with something that is no better than beta software that constantly needs tweaking. If it is so easy why does software need to be constantly updated in order to ensure it works, is compatible and secure?

The truth is there is nothing easy, trivial or inherently obvious about creating a piece of software that actually works. Anyone who says otherwise is simply not being honest, or they have convinced themselves by listening to propaganda that is aimed to mislead. Sadly, as these hopelessly lost souls continue to update smartphones, tablets, computers and video game units they somehow manage to believe writing the software is easy, if not trivial. Yet they complain about the updates that negatively impact battery life or change working environments of the worse. If the patent critics would actually rub brains cells together and critically analyze what is happening even the most intellectually dishonest among them would have to come to the conclusion that they are talking out of both sides of their mouth.

Meaningful, useful, dependable software, whether for personal use or enterprise software, cannot be written in a weekend by a second year engineering student despite what the Supreme Court may think. Creating software requires a large team of individuals to spend many months, if not many years. To pretend that doesn’t cost money is almost as ridiculous as those who claim taking a drug to market and navigating the FDA process isn’t that expensive. See The High Cost of Making Pharmaceuticals. Who are these people? More importantly, why would anyone belief such lies?

Perhaps the most insightful comment came from Babak Parviz, who is a Vice President at Amazon. He explained to The Atlantic that the problem is short-sighted focus on quarterly profits. He explained that the biggest problem in his mind is that need “to show quarterly profit, every quarter, by the CEOs of major companies.” Such short term thinking leads to risk aversion, which is the enemy of innovation, which by definition requires bold initiative to try and do something new. To me, however, the short-sighted view of CEOs is due to the fact that the average life expectancy of a CEO at a Silicon Valley company isn’t very long. That has lead them to see patent infringement lawsuits as a problem, causing them to develop an untrue narrative about patent litigation out of control, which has influenced the Courts and Congress despite the fact that there is no patent litigation explosion. See Silicon Valley’s Anti-Patent Propaganda: Success at What Cost?

But facts don’t matter in the debate. When the independent Government Accountability Office says that 80% of patent litigation cases are brought by manufacturing companies against other manufacturing companies the narrative still doesn’t change. The interjection of facts should matter, but it won’t moving forward. There is already talk around Washington, DC that House and Senate Republicans, in anticipation of taking control of Congress, are working to streamline another round of patent reform that can quickly and easily pass in the House and in the Senate.

If we want to make the patent system better I am all for reform, but if we are just going to do the usual, which is vilify innovators then count me out.

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12 comments so far.

  • [Avatar for tifoso]
    tifoso
    October 26, 2014 03:37 pm

    Joren –

    You make an error of fact common to many in the anti-patent community. A patent does not create a market monopoly. It gives, for a limited time, exclusive use of a particular solution to a problem within a segment of a market. If an inventor claims solution A to a problem, that does not prevent other inventors from coming up with solutions B, C, D, and so on. Just because an inventor claims a specific type of mousetrap does not mean that no one else can claim another specific type of mousetrap.

    You cite software as an area of complaint. Of all the disciplines, software should be the clearest example of there being tens of thousands of ways to solve problems. Can you identify some patent that prevents you and every other programmer from solving some problem where there is no other solution to the problem? If so, that does not speak well for the creativity of that computer community.

  • [Avatar for Benny]
    Benny
    October 26, 2014 12:15 pm

    Joren,
    Individual market players will misbehave to increase their profits at the expense of optimizing the consumers’ choices because that is how a free market operates. I work for a consumer appliance manufacturer, my goal is to keep other manufacturers’ products off the shelf space in the store so as to increase my profits. The fact that other manufacturers could offer a cheaper, higher quality, or more capable product than mine is in your interest as a consumer, but not in mine as a breadwinner, and since I invested in the initial research an development I get tot call the shots. The system can’t work equally well for both of us. Governments should not interfere.

    Open source software often generates indirect profit – for example via linking to platforms which “buy” information in exchange for providing services (i.e, Googles’ business models) or is directed for use with dedicated hardware. In other cases (as in Linux) it is created by not-for-profit individuals or organizations – nothing wrong with that, on the contrary it is to be applauded, but it won’t put butter on your bread.

    As for open source conquering proprietary software – I think the bosses at Microsoft should take a long hard look at Kodak and make sure they are not treading the same path.

  • [Avatar for Joren De Wachter]
    Joren De Wachter
    October 26, 2014 11:54 am

    Benny,

    If I understand you correctly, then you say that because market players will misbehave (get monopolies), government should support that by increasing their possibility to do so?

    The open source argument is about the economics: open source firmly (and empirically) disproves the theoretical dogma that the cost of software development (which is real) requires IP-like monopolistic rights in order to “protect” or “promote” innovation. Open source is conquering market share from proprietary software every day (I see no movement in the other way), using a prohibition to apply IP-based economics (while using IP law to do so).

    And Gene’s article is very weak because he ignores this – yet, it’s an essential fact to be taken into consideration in the argument.

  • [Avatar for Anon]
    Anon
    October 26, 2014 10:01 am

    Benny,

    A rare occurrence that I agree with your post 100%.

    Well, almost.

    I think “distort the market” is an emotional misnomer, as the market is defined by how the government sets regulations for the market and – at least in the US, our market from Day One has been defined as including patents.

    I think the lack of appreciation of patents and history can only breed ignorance and misunderstanding of US law, its economy, and patents in general.

  • [Avatar for Benny]
    Benny
    October 26, 2014 02:59 am

    Joren,
    Yes, patents create a monopoly that distorts the market, but there is a huge incentive for manufacturers to monopolize market share, whether by patent protection or trade secret, so that isn’t going to change in a hurry. As for open source software – open source and patent protected are not mutually exclusive – if you read the end user license agreements for open source software you will discover that in some cases you have obtained a license in return for 0$, and certain restrictions and obligations still apply.

  • [Avatar for Joren De Wachter]
    Joren De Wachter
    October 25, 2014 11:13 am

    The underlying sexism in the derogatory approach to laundry is interesting.

    Automating laundry is one of the core causes of the social revolution that has lead to women’s equal rights (which, in turn, has had a profound effect on other groups suffering from structural discrimination, based on e.g. perceived race or skin colour, sexual orientation, etc).

    The key point to be made is that it is not up to lawyers, patent attorneys or government officials (patent officers or other) to determine “useful” inventions. We have much more efficient ways for that, one of which is the market.

    There is a good argument to be made that the monopoly of patents strongly distorts (and prevents) market efficiency, especially because the monopoly can be carried along the value chain, and allows for aggregation of monopoly, particularly for distributors and marketers (who, it must be pointed out, don’t innovate that much in terms of technology) – and the pharmaceutical industry is a perfect case in point, with less than 8% of the inventions coming from those who hold the patents.

    As to software, as usual, the absence of considering open source, and its market and innovative success, points to very selective reading of the facts.

    Without data, this is all just an opinion. And not a very well argued one.

    Which is a pity, the debate deserves better.

  • [Avatar for tifoso]
    tifoso
    October 25, 2014 10:54 am

    Justice Kennedy is right and wrong about software being something a second year grad student can produce. The fact that it can be written by a second year grad student does not mean that it actually is written by a second year grad student (and what if it is? Is there some part of 101 that says nothing written by a second year grad student is patent eligible?). As those who have labored in the computer industry know and Gene points out, most non-trivial software takes a team of programmers years to write. Many years ago I worked on an airline reservation system, one of the three most difficult systems to write and get running properly. To make it more difficult, we had to do 100 reservations per second where there were 6 I/O hits and 85,000 instructions after the transactions were passed from the front-end processor. No, Justice Kennedy. This was not something a second year grad student could do.

    Further, is there some statute that says that something a blacksmith or auto mechanic or bricklayer or farmer can invent is patent ineligible? What is so wrong about being a second-year grad student that her work is to be ignored?

  • [Avatar for Anon2]
    Anon2
    October 24, 2014 01:49 pm

    Fish Sticks

    Respectfully, “lack of capital” is not technically a barrier, anymore than “lack of interest” in my Rap Song about patents, is a barrier to my becoming a Rap star.

    Perhaps unreasonable taxation or complicated rules, regulation or bureaucracy surrounding and interfering with the free flow of capital… is a barrier.

    I’ll even concede lack of capital “due to” interference with the free flow of capital… can reduce innovation, but the root of the problem, the actual barrier is interference by government.

  • [Avatar for Fish Sticks]
    Fish Sticks
    October 24, 2014 01:32 pm

    lack of capital dedicated to funding the development and commercialization of new ideas — especially those by talented individuals and small businesses

  • [Avatar for Anon2]
    Anon2
    October 24, 2014 10:05 am

    I find it odd that:

    Education 14% and
    Lack of Talent 10%

    were responses to a question as to the biggest “barriers” to innovation.

    I would understand if the question were worded: What are your biggest “challenges” for your company and its employees? But “barriers” to innovation as such I highly doubt.

    Educated, talented, inventive people are what makes innovation possible. Their scarcity is a fact of the natural context of what innovation is, not a barrier to its existence.

    Sheer presence or number of people who lack education or lack talent are not “barriers” to innovation anymore than lumps of coal or granite are a barrier to diamond jewelry production. Educated, talented and INVENTIVE people are rare like diamonds.

    The question should be considered in the context of the natural fact that inventive people are rare, and like diamond jewelry production, “barriers” can only ever be unnatural, external interference over and above the natural supply of the “rare gems”.

  • [Avatar for Anon]
    Anon
    October 23, 2014 02:17 pm

    …and as innovation expert Clayton Christensen will tell you, truly large scale advances (disruptive innovation) will start out showing a loss.See The Innovator’s Dilemma.

  • [Avatar for Fish Sticks]
    Fish Sticks
    October 23, 2014 01:48 pm

    “short-sighted focus on quarterly profits. He explained that the biggest problem in his mind is that need “to show quarterly profit, every quarter, by the CEOs of major companies.” Such short term thinking leads to risk aversion, which is the enemy of innovation, which by definition requires bold initiative to try and do something new.”

    Good point!