It's Time to Outlaw Software Patents
When you hear the word "patent," you probably picture classic inventions like the telephone, revolver, bicycle, or typewriter. These were revolutionary breakthroughs that deserved to be protected, and the United States Patent and Trademark Office (USPTO) did its proper job in recognizing the inventors.
Unfortunately, not all patents are created equal. Over the last two decades, the USPTO has granted scores of patents for emerging technologies, and particularly for software. Software patents are like the government: smart in theory, but problematic in practice. In the 1990s, an overeager USPTO rubber-stamped all kinds of patent requests in areas like online shopping, internet-based calling, and video streaming. The problem is that no one (and especially the USPTO) understood the technology or knew just how big the web would become over the next two decades. By approving thousands of software patents, the USPTO assumed that it was protecting inventors, when in reality, it was crippling American small businesses for decades to come.
Today, there's a patent for entering credit card information online. There's a patent for making calls over the internet. There's a patent for playing games online. Forgive me for being critical, but these patented concepts aren't exactly the cotton gin. These absurd patents have caused huge problems for large and small companies alike. For example, big players like Google and Apple spent more on patents than on research and development in 2011. That's a disaster. However, the real tragedies lie among the little guys. Pyramid-schemers and opportunistic lawyers have discovered an easy way to make money: buy up a few dozen software patents, then sue every programmer, website, and small business who has a feature, concept, or protocol that seems close to the language of the patent. It doesn't matter whether the patent actually describes what the small business is doing -- just that the patent sounds close enough to bring the dispute to court. These scammers focus on the new and the financially unstable, because they know small businesses can't fight back.
It gets worse. These get-rich schemers -- often called "patent trolls" -- have devised strategies to hide in the shadows and eliminate their risk. They create shell companies that don't exist, with names like Lumen View Technology (see this Google search for all the companies they are suing). They do the exact minimum amount to be legally considered a business (which usually involves having an office address that's actually unoccupied) and ensure that they have zero assets so they can't be countersued. As a result, the actual individuals who stand to profit do not have to reveal their names, and small businesses are stuck arguing with a patent lawyer who can legally refuse to answer questions. Patent trolls intentionally wait for small businesses to gain a certain level of financial traction -- usually striking after an angel investor or venture capital firm has chipped in a few hundred thousand dollars -- then threaten to drag the helpless entrepreneurs to court unless they settle for tens of thousands of dollars.
Most entrepreneurs choose to settle (a ~$50k fee instead of ~$1M in a protracted legal battle). Regrettably, settling with one patent troll signals other trolls: you'll have a new letter on your desk in a month asking for yet another settlement on a similarly frivolous patent. Over time, even the most promising startups have folded as troll after troll has collected for a patent that never should have been granted in the first place.
One week ago, New Zealand solved this problem by introducing legislation that effectively eliminates software patents altogether. It's a rare example of a government recognizing an issue and passing legislation bold enough to actually solve the problem. So why can't the United States do the same? President Obama has given the issue lip service -- even fairly strong lip service -- but hasn't bothered to prioritize the issue since. Several congresspeople have floated bills, from Rep. DeFazio (D-OR) (would shift legal fees to the troll if the court ruled against him) to Rep. Deutch (D-FL) (an anti-shell company bill) to Senator Coryn (R-TX) (organized a larger bill combining several of these elements) to Rep. Goodlatte (R-VA) (a general "discussion draft" for addressing shell companies and unfair patent-related legal costs).
The problem with all of these proposals is that they don't go far enough. The system is broken, and these bills would serve only to tape over a few of the more gaping holes. It's time for the government to admit that software patents were a bad idea in the first place, that patenting "making calls over the internet" is as silly and destructive as patenting the concept of a chair or doorway.
Great software is built by hardworking, talented engineers who combine a variety of basic principles to form the best possible product. These innovators shouldn't be worried that designing a better online shopping experience will only lead to lawsuits, lawyers, and bankruptcy.
Predictably, a few government officials have stood in the way of real progress by attempting to obscure the issue and cast doubt on the solution. In a November 2012 address, former USPTO director David Kappos argued that software patent protection "is every bit as well-deserved" as "the innovations that enabled man to fly ... that enabled man to light the dark with electricity." He went on to concede that "inconsistency in software patent issuance causes uncertainty in the marketplace and can cause threats of litigation that in turn can stifle innovation and deter new market entrants" but concluded that "the U.S. patent system is great because it struggles with complex challenges" and has "not not chosen the easy way out."
Kappos's remarks are marvelously crafted and properly wordsmithed. They're also utter baloney. He fails to see just how much American innovation is ruined by trolls, and just how much we lose by sticking to a "200 year" precedent. He describes a surgery-related software patent, hoping to appeal to our emotions. But what about the emotions of the thousands of hardworking entrepreneurs, Mr. Kappos, who are forced out of their businesses by trolls after years of honest work and creative execution?
Thankfully, momentum is swelling, at least outside the government. Mark Cuban, billionaire entrepreneur and owner of the Dallas Mavericks, has been outspoken in his utter disdain for patent trolls. DoubleClick founder and FindTheBest CEO Kevin O'Connor (disclosure: I work for FindTheBest) has committed $1M of his personal funds to fight Lumen View Technologies in court (suing FindTheBest for a patent on indicating preferences online). Countless petitions have popped up on sites like Change.org, as people ask the government to stop talking and start acting.
Let's put aside the focus-grouped, crowd-pleasing dialogue and enact a legitimate law. Let's reward entrepreneurs who build great products, not government officials stubbornly appealing to bad precedent. Let's put an end -- for good -- to patent-snatching, small business-destroying trolls and help U.S. innovators get back to creating the next great American company. Let's follow New Zealand's example and ban software patents once and for all. It's time.