Informationization Helps Too
The Earl Grey and the Sunday NY Times were ready for a good read. First the Sunday Styles to see what Bill Cunningham discovered in street fashion this week (urban farmers market chic), a quick glance at the crossword puzzle to see if it's a pencil or pen kind of afternoon (probably pen), a look at Travel (Italy in the summer) and Books (no review of This Town yet). Then scan the front page. The bottom of the front page featured the word patent with a teaser about the article in the Business Section. Patents on Sunday, really?
The article, "Has Patent, Will Sue: An Alert to Corporate America" notes, "the number of patent-infringement lawsuits has soared, partly because of Erich Spangenberg. His firm has sued 1,638 companies in the last five years." It is a pretty good article that has lots of venture capitalists, entrepreneurs, and business people running for the Tums. Lots of independent inventors, private wealth managers and institutional investors are hunting for Mr. Spangenberg's phone number. (It is on his website.) A one page tutorial on the fine art of patent trolling.
First, the highlights in the article:
- The article is about Erich Spangenberg, owner of IPNav, a big bad patent troll who has sued 1,638 companies for patent infringement and how he does business.
- According to IPNav's website, as of today they have created $610,549,103 in patent monetization revenue.
- Mr Spangenberg makes $25M a year and likes black teeshirts and jeans, Steve Jobs style. He reports that his ostentatious display of wealth phase appears to be over. He's looking for a Monet.
- Mr. Spangenberg goes thug on you if you don't take him seriously when he calls to tell you you are infringing one if his patents. But if you put up proof you aren't infringing his patents he goes away.
- At the risk of getting everyone in the patent universe upset, he appears to actually do what other patent trolls say they are doing — helping little guys who invented stuff make money off their patents while making money for himself. He splits the take with the patent owners.
The article quotes the usual collection of patent troll factoids. The toll of the troll on innovation. The doubing of the number of patent lawsuits. Ok, enough with the Boston University Law School study and it's loosey goosey numbers on the value of lost innovation. Until the authors put up the data to let other folks in academia check their numbers, please skip the $39B in lost innovation silliness. Citing this study is especially smirk inducing in light of Boston University's patent infringement law suit against Apple asserting a 19 year old invention. Apparently their collegues at BU don't share their views and want their money. As for doubling of the number of patent lawsuits. Part of the growth is a byproduct of changes in patent law under the America Invents Act that force patent trolls to unbundle their suits. A detail missing from the article. The consistent patent troll hater vibe.
Then there is the Spangenberg patent monetization business model.
Patent pragmatism as well as patent prognostication call for some commentary on patent trollness on a perfectly fine summer Sunday morning. Patent monetization is a business model that is here to stay. The only way to change the patent monetization business model is to fix the patents. The patents, not the patent system need to be fixed. Until patents are more specific and less obtuse, the flow of patent-assets into firms like Mr. Spangarden's will continue unabated.Hate the game, don't hate the player. It maybe time for some rule changes.
A Perfect Storm
There is a perfect storm in the patentsphere that make the unfettered execution of patent monetization possible. There is a confluence of circumstances that makes patent-asset assertion a formidable business model. Here are just a few.
100,000 New Inventions a Week
Each week the USPTO grants about 5000+ utility patents. At an average of 20 claims per patent, that means there are 100,000 new inventions. This is an endless stream of potential assets for monetization. There are lots of guys, they are mostly guys afterall, that invented and patented interesting stuff and followed their patent attorney's advise to make sure that the language in the patent is broad enough to cover what might come up in the next 15 years. There is a pipeline of 700,000 patents at anytime and these patents are coming our way.
Inventors are not always the best folks to turn an invention into products that can be exchanged for money. That is why large operating companys usually have R&D and Product Management in separate departments. Different skill sets. Over time, the patents age quitely in a file cabinet somewhere and while new markets develop, the very ones that broad language was designed for. An auspicious occurance for patent trolls. While the patents age the inventors try to make businesses out of their inventions, raise money, hire people, spend money and in many cases go into debt. At some point the inventors and owners have to figure out what to do if you can't make money on a product. Try to get some of your investment back by monetizing the patent. Organizations like Mr. Spangenberg can have their pick of patents to assert and markets to target with partners anxious to see their invention bare fruit.
The Informationization of Invention
Information technology and software and business methods patents, are taking over invention. Informationizaton and information technology are dominant forces in economic, political, social and cultural development. This is coupled with the unprecedented growth in speed, quantity, and ubiquity of information production and distribution. Information technology is now the dominant commodity in new inventions replacing capital and labor.
The majority of patents granted each week sit in the electrical domain, where the majority of information technology patents reside. As of July 9th, USPTO has granted 76,840 electrical domain patents. This is 53.7% of all the patents granted. Use 20 claims per patent if you want to get a rough order of magnitude on how many actual inventions that represents. Each week the top inventions center on the same sets of technologies — Multiplex communications; Telecommunications; Electrical computers and digital processing systems: multicomputer data transferring or plural processor synchronization; Data processing: database and file management, data structures, or document processing; Computer graphics processing, operator interface processing, and selective visual display systems and business methods. Informationization is causing convergence of extremely diverse domains. Computatonal biology, nanotechnology, big data, and more.
Information Technology Isn't Chemistry
Unlike chemistry, the vocabulary of emerging information technology is ambiguous. Much of the policy analysis on patent assertion entities and their targets point out that information technology lacks the specific and widely understood scientific and technical language of chemisty leaving patents open to many different interpretations depending on the context in which they are read.
While the inventor can create his own lexicon, in information technology even the most basic IT terminology is unclear. Early in the internet age, mass storage was 6GB of data on an optical disk in a big jukebox that automated the loading of the platters so big insurance companies and the government could store images of their important documents. By 2000 mass storage was a terabyte of storage that cost $500,000. Today a 2 terabyte drive costs $165. Today mass storage is also a zetabyte out in the Utah Desert where NSA stores all of our phone calls, credit card transaction data and email. A patent granted in 1995 that describes how to find data stored on a mass storage device is still valid and can be read against much of the same technology now used for cloud computing, to store information for an online store or handle billions of text messages. And many of the patents granted in the mid-1990s are only now becoming feasible to implement now that the hardware that support it is more cost effective and in broader use.
Words like Phablet emerge, a device that is bigger than a phone and smaller than a tablet. (Phablet made its first appearance in the patentsphere in January 2013 in Patent Application 13/54041.) Not exactly a scientific description of a new form factor for an electronic device. A blog started as a weblog, a web-based journal that contains periodic posts usually in reverse chronological order. There are lots of web-based journals that have periodic posts usually in reverse chronological order — online banking, lists of your purchases on Amazon, updates to technology support sites. This broad description of how basic technology works gives patent assertion entities an expansive range of patents to explore in the hunt for assets that align with important technology in the marketplace. Information technology is a target rich environment. Overly broad patents with fuzzy boundaries designed for the future are a gift to patent assertion entities. And there is probably an 18-24 year pipeline of thousand and thousands of these patents floating around.
It is easy to invent information technology compared to what it takes to create a new drug or develop a new material. But even chemistry and pharma are benefiting from the development of better information technology. There are no open source organic chemistry sites that provide you with example code under an open source license, that provide you with a marketplace to sell your inventions in exchange for 30% of the sale, and help you promote your products via meet ups with like minded digital natives who have become accustomed to all software being free. Information technology defies consistent definition and unlike chemical and mechanical inventions, it does not require expensive labs or material transfers.
No One Reads Patents
Most inventor-entrepreneurs are not in the habit of reading patents especially the digital natives building information products. Their lawyers discourage reading patents for fear of being called out for inequitable conduct. The concern? That one of these inventors, developers, investors, is going to stumble across a patent then forget they ever saw it, something easy to do, and then have the patent show up in some patent infringement action five or ten years from now. So what you have is an environment where the people best able to figure out what is novel and useful and what is not don't read patents. The people who know where to fin the best prior art don't read patents. And the folks best able to invalidate bad patents don't read patents. And one thing you can be sure of is that Mr. Spangenberg reads patents — a lot.
Which brings us back to the article. The only way to change the trajectory of patent monetization and the patent trolls business models is to make the patents better. Stop trying o fix the patent systems and fix the patents. Unless there is a move to overturn the part of the Constitution of the United States that provides protection for intellectual property, the next move is to fix the patents to make them more specific, more focused, and to require the level of disclosure we are trading for the granting of exclusive rights to the invention for 20 years. The patents are the fuel for patent trolls. As long as the patents are fuzzy, and obtuse, Mr. Spangenberg and others in the patent monetization business will have the money to buy a lot of Monets for the foreseeable future.