Jim Moore’s blog: Innovation, Strategy, Public Policy

Reading list here….good for discovery.

You have ownership over your ideas. You can keep your ideas to yourself.  You can share them.

Society needs markets for creative ideas.  Innovators invest in solving problems and then provide those ideas, for a fee, to others who implement them. 

Ideas are particularly easy to steal.  Ideas are very difficult to
sell, because in order for a price to be negotiated, the idea must be
disclosed.  Once the idea is disclosed, a potental buyer is often in a
position to simply take the idea.

To make a market for innovation and creativity work requires some form of registration and protection of the property right.

For some forms of property, society sets up systems to help secure those rights through registration and protection.  It is in the interest of society to do this, to reduce disputes and to facilitate trade.

Land title and title insurance, automobile titles, investment securities laws, copyrights and patents all provide the function of securing a property right in order to reduce disputes and facilitate trade.

From Wikipedia:

Patents in general

A patent is a set of exclusive rights granted by a state to a patentee (the inventor or assignee) for a limited period of time.

To obtain a patent, inventors must file patent applications
in each and every country that they want protection in, such as Japan,
China, the US or India. Some regional offices exist, such as the European Patent Office,
which act as supranational bodies with the power to grant patents which
can then be brought into effect in the member states. A European
patent, for example, can be brought into effect in up to 36 countries
in or neighbouring the European Union. Although there are no worldwide patents, the Patent Cooperation Treaty provides a unified patent application filing procedure for most countries of the world.

Patent applications must disclose how to make and use the invention
in sufficient detail so that another person of ordinary skill in the
art can reproduce the invention without undue experimentation. If it is
not self evident, then a patent application must also disclose what
practical utility an invention has.

The history of the US patent system is that when a new
domain of innovation arises, such as drugs or biotechnology, the patent office
adapts.  This is all to the good. This is indeed the way the system
advances. 

Some make the argument that software patents are somehow less valid than other
forms of patents because they only became recognized in the late 1980s. But this is
because software itself only became recognized as an independent domain of
innovation at about that time.  The situation with software is no
different than the situation with internal combustion engines 100 year
ago.

Software, up until the 1980s, was seen as something that hardware companies
gave away in order to sell their machines.  I worked as a management consultant to Sun and AT&T on Unix SystemV.4.  At the time Bill Joy was Sun’s chief software architect, and even with his genius software was not yet really recognized as a standalone value.

The revolution in information
technology happened when operating systems became modular enough and open
enough for software to flourish as a distinct field of innovation.  While this began to happen in a big with with the IBM 360 mainframe, it did not really take off until the personal computer era. Software
engineers went from second class to first class citizens.  Schools of
engineering introduced degrees in software engineering.  Software patents
arose during this same time, as software innovation began to be recognized
independently from hardward. 

Software patents are vital to protect innovation that, in modern information
architectures, is layered above hardware.  Software patents are
particularly important, because most innovation in technology is now in the
software layer.  The reason that large companies like IBM focus on
weakening software patents is that they know that this is the future. 
Independent thinkers should be stepping up to defend patents for software,
unless they want to become technoserfs of the large corporations.

For those with a scholarly bent, here from WikiPedia is the history of software patents:

The first software patent ever granted is probably a patent for a
“computer having slow and quick access storage, when programmed to
solve a linear programming problem by an iterative algorithm, the
iterative algorithm being such that (…)” applied for in 1962 by British Petroleum Company ([2], see end of page 3). The patent relates to solving simultaneous linear equations.

The USPTO
has traditionally not considered software to be patentable because by
statute patents can only be granted to “processes, machines, articles
of manufacture, and compositions of matter”. In particular patents
cannot be granted to “scientific truths” or “mathematical expressions”
of them. This means that most of the fundamental techniques of software
engineering have never been patented.

The USPTO maintained this position, that software was in effect a
mathematical algorithm, and therefore not patentable into the 1980’s. The
position of the USPTO was challenged with a landmark 1981 Supreme Court case, Diamond
v. Diehr. The case involved a device that used computer software to ensure
the correct timing when heating, or curing, rubber. Although the software was
the integral part of the device, it also had other functions that related to
real world manipulation. The court then ruled that as a device to mold rubber,
it was a patentable object. The court essentially ruled that while algorithms
themselves could not be patented, devices that utilized them could. This ruling
wasn’t as straightforward as many would have liked, forcing many electronic
device makers into the courts to establish that their inventions were in fact
patentable. [3]

Due to different treatment of federal patent rights in different parts of
the country, in 1982
the U.S. Congress created a new court (the Federal Circuit)
to hear patent cases. The new circuit rejected rulings from some parts of the
country, and nationalized others. For example, the court made patents generally
easier to uphold by presuming patents were valid unless proven invalid and
weakening the defence of non-obviousness. This court
allowed issues, such as patentability of software, to be treated uniformly
throughout the US.
Due to a few landmark cases in this court, by the early 1990s the
patentability of software was well established, and in 1996 the USPTO issued Final Computer
Related Examination Guidelines. See Software patents under
United States patent law.

In Europe, the EPO and other national patent offices
have issued many granted patents for inventions involving software since the European Patent Convention (EPC) came
into force in the late 1970s. Article 52 of the EPC excludes “programs for
computers” from patentability (Art. 52(2)) to the extent that a patent
application relates to a computer program “as such” (Art. 52(3)).
This has been interpreted to mean that any invention which makes a non-obvious
“technical contribution” or solves a “technical problem” in
a non-obvious way is patentable even if a computer program is used in the
invention. See Software patents
under the European Patent Convention.

Patent protection for early-stage ideas is simple and easy for the individual inventor.  The reason it seems expensive is that big companies and big law firms want you to experience it that way.

Protection is afforded by having filed provisional patents–which are not expensive.  This protection can be solidified by filing a complete patent application for those ideas subsequently.

An inventor can wait for a year after the filing of the provisional application to file a complete application.  This means that good ideas can be invested in. Ideas that in retrospect seem less valuable can simply be dropped.

The advantage of this process, for an individual or small company, is that if they enter into a negotiation with IBM or Microsoft or Google or Yahoo their ideas are protected.

One of the dilemmas of selling big ideas is that in order to market the idea one must disclose it, and once one has disclosed it there is often little barrier to the prospective buyer deciding to simply steal the idea. 

One of the only reliable barriers to idea theft is that the individual or small business is engaged in the patenting process.

Even saying to a prospective buyer that one has filed provisionals can often radically change the nature of the discussion, for the benefit of the inventor.

Finally, there is no reason that an inventor can’t license an idea to many players, for a nominal percentage of the value created by the idea.  This will help create a market for the service or solution, while at the same time rewarding fairly the original inventor.

Within a few months of the introduction of the spreadsheet invented by Dan Bricklin, (Dan tells me) there were more than 20 clones.  Eventually the market was taken by Lotus 123, created by Mitch Kapor after working for the company that marketed Bricklin’s original.

In an absense of software patents, which had not been developed, Bricklin got not a penny for his ideas from these companies.

If you want to experience a world without software patents, go back and look at the history of the computer industry.  What you will find is quite ugly.

This is similar in my mind to people who want to make abortion illegal, but choose not to face what life was like when abortion was illegal.  Women were scarred, were rendered infertile, and bled to death.  Women were traumatized.

A global technology community without software patents would be a lawless, hobbsian world.  You would hold your ideas close.  You would close your code.

And you would probably end up working as an employee of a large company.

Just something to consider..

IBM public relations must be singing this morning. They have pulled off “the big lie” at least for now.   They have made it look like they are opening up the crown jewels, when what they are really doing is radically diminishing the rights of independent technologists.

Some leading lights of the blogosphere are doing IBM’s bidding, fanning support for its so-called “reform” efforts.  For example Jason Woodrow has a comprehensive post that is the worst of the lot I have seen this afternoon.  Jason calls his post, provocatively,  “We don’t need no stinking patents..”  With all due respect I believe he has been sucked in by corporate amerika.

IBM and other large businesses are trying to weaken the patent system because it stands in the way of their powerful business goals. 

IBM and others like them employ thousands engineers/serfs, and tens of thousands of sales consultants.  IBM and other large corporations continuously pirate and infringe on the ideas of the little guys like you and me.  They are second-movers, fast-followers and integrators of technology first.  Their money comes from integration–from professional services.  IBM and other large firms are not the leading sources of ideas in the Web 2.0 world.  Little guys are the lead source of ideas.

The question is “WHO don’t need no stinking patents?  Small companies and inviduals? Or big companies like IBM?

IBM don’t need no stinking patents, because they want to be able to pirate and infringe at will.  The depend on the ecosystem for innovation, and then they pack it up and sell it to clients.

IBM is out to destroy patent rights, so it can have “freedom of action” to sell whatever it wants.  Read (again) what the IBM CEO said in the New York Times yesterday.

…said Samuel J. Palmisano,
I.B.M.’s chief executive. “If you need a dozen lawyers involved every
time you want to do something, it’s going to be a huge barrier. >We need
to make sure that intellectual property is not used as a barrier to [IBM] growth in the future.”

Large companies don’t need patents. Large companies have other competitive
advantages: big money, big marketing, big management, big client lock-in, big control over standards.  In a world without patents, large companies prevail.

The US patent system is not broken, despite what IBM tells you

The patent system is designed to make a market for innovation.  Patents give direct rights to innovators, which in turn makes it feasible for innovators to sell or license their ideas. Selling and licensing ideas in turn enables innovators to continue to innovate.

This virtuous cycle of temporary property rights being granted to innovators has served America very well.  It was invented by the founding fathers of our country, and it has been effective for generations.

The US patent system is the best in the world, as evidenced by the state of innovation in the US economy

Taken as a whole, the US innovation ecosystem is the best in the world. The US is the most innovative nation
on the planet.  Our patent system is at the center of our innovation.  It enables investment in research and development by individuals, universities, and companies. 

Our innovation rate is far above the Europeans, and they have the most “reformed” system.  We have the most traditional patent system, and the best technical and economic results.

We also have the most open industry structures, the highest percentage of small businesses, the highest levels of venture activity.  All of this, I believe, is because we have the most well-developed market for innovation.  By contrast Europe is dominated by big companies that monopolize the output of local engineers and scientists by forcing them into empoyee status.

Patent litigation costs are tiny.

Intellectual property costs are NOT a problem for any company I know,
and I know lots of companies.  Patent management and litigation is a
TINY part of the budget of technology firms–and industry-wide is less
than one percent of revenues.

Why then do large companies like IBM say that the system is broken?

The market for innovation is working well for society as a whole, but
it is increasingly expensive for big companies like IBM.

There are more
engineers and scientists working today than ever before in history, and
most of them are independent, work for universities or small companies, or are working in
alternative matrices in China or India.  In most cases they do not live
in the United States.  In almost no cases do they work for IBM or similar firms.

IBM and other large companies no longer do much core innovation. They have morphed into professional services firms, and innovation is an “input” they buy or license. Innovation is a “supply component.”   Most new ideas in big companies come from buying smaller companies, licensing technologies, or–candidly–copying innovators.

The problem the big companies are facing is that innovators are gaining bargaining power and sophistication. Innovators are starting more companies.  Innovators are asking more for their intellectual property.  Innovators are commanding higher license fees.  And innovators who have been infringed are finding ways to fund lawsuits and force the large companies to the table. 

Not only are large companies more dependent on the community for innovation, they lag the community.  In a world of millions of independent developers, scientists and
engineers, around the world, IBM will be out-innovated unless it can freely integrate ideas from
anywhere anytime.

Big companies are running scared, and IBM is the most fearful of all.

Big corporate amerika is
up against a disruptive threat: free engineers and scientists. 
Talent has escaped “the matrix” and challenges the corporate
model.

As the companies become more threatened, a few of them, led by IBM, have decided that they want to destroy the market for innovation as it currently exists.

IBM coopts smart liberals who are niave about big business.

What better way than to coopt the “free culture” movement, and turn it into a “free for IBM culture” movement?  With a few thousand dollars given to the right non-profit, you can buy the support of the likes of Larry Lessig and EFF. Give a grant to NYU, and you get yourself associated with patent reform.  Release a few dozen patents to the open source movement, out of 32,000 you own and 45,000 you control, and you seem a hero.  Contribute a few highly-scrubbed patents to the “peer to patent” projec–out of 3000 you expect to file just this year–and you become a beacon of patent quality.

What better way than to define those little guys as
“trolls” and set about weakening the rights of the little guys.  IBM’s
“reform” is stealing individual rights, in the disguise of being “open.”

IBM’s sophisticated conspiracy is sucking in otherwise smart folks. 
Ultimately IBM’s motives and plans will be revealed, and its unwitting
allies are going to look like fools.

[Charlie Wood just sent me a note to
say that Jason Woodrow is "an incredibly smart and talented guy." I
agree.  So is Brad Feld, who cheers for the IBM move without providing critical analysis.

Any inflamitory language that may have slipped into this post is because I am passionate about this issue. 

Friends, you are following lemming-like the most disingenious corporate exploitation of open values!  Really and truly!

Charlie
suggests that patent reform is a David and Goliath situation.  I
agree.  We independent inventors and small companies are David.  IBM
and Microsoft, HP, etc. are Goliath. 

What
disappoints me is that some leading Davids are jumping up and down
cheering "Goliath gets it!" as if IBM has turned saintly on
innovation. 

Believe me, IBM does get it.  Just not the way you think.]