Tag: strategy

Patents – non-conventional warfare?

“But if patents are non-conventional warfare, even these measures of “quality” become largely irrelevant. A “quality” patent is one that manages to frighten targets enough that they pay up. Nothing more, nothing less.”

PATENTS AS NON-CONVENTIONAL WARFARE

In a previous essay (Patents — conventional warfare?), Timo Tokkonen considered patents to be type of warfare between companies. By and large, this is probably the best way to think about patents.  What Timo described is the “conventional warfare” aspect of patents: going to court, and getting a “real value” for the patent.  Maybe it’s possible to extend to analogy:

What if the “non-conventional warfare” part is equally important?

By that, I mean value gained without ever going to court — by settlements and agreements that are made quietly outside the court system. Do we have any way of knowing how important this “hidden” side of the war is?

To put in another way: What if the “real” value of a patent is in how much money it can rake in without ever going to court? One way of quantifying the question is to ask: “How much are companies paying for patent license costs where the underlying patent is spurious, but cannot be invalidated without taking excessive legal risks?”

An economist would say that the question is nonsense, because a contract is a contract, and if someone agrees to pay, then  nothing illegal has happened. Perfectly true, if the two sides are evenly matched. Not so true, if one of the parties has an unfair advantage. (Again a term that no economist accepts. But as we have discussed earlier, non-practicing entities do have an asymmetric advantage over companies that produce something. These contracts may be narrowly  legally acceptable, but there is no reason to accept them ethically).

This is not a very comforting idea, because it would make it even more difficult to estimate the value/risk of a patent. Academics are making efforts to predict the “quality” of individual patents by looking at external parameters such as number of prior art references, a huge number of claims, a large number of later patents referencing the patent,  and so on (see for example  Shresta 2009, Allison et al 2010). The sole definition of “quality” here is “what wins in court”.  These efforts are valuable, because if successful, they would make it at least slightly easier to estimate risk.

But if patents are non-conventional warfare, even these measures of “quality” become largely irrelevant. A “quality” patent is one that manages to frighten targets enough that they pay up. Nothing more, nothing less.

If one considers this non-conventional aspect, then some of the claims of the pro-NPE camp (for example McDonough 2006) become a little suspect. Those authors are looking at what happens in the courtrooms. But what if all the real action is happening outside the courtrooms?

Can this issue even be studied academically? Perhaps. Bessen and Meurer 2012 used surveys as well as public legal data to estimate the direct costs from NPE litigation. They came up with a ballpark minimum figure of 29 billlion USD in 2011. They estimated that about one third of this cost came from cases that never went to court (i.e. our “non-conventional warfare”). This is 10 billion USD, much of it from small and medium-sized companies.

Since there are indirect costs associated with legal assertions, Bessen and Meurer suggest that the real figures could be twice as large. To give some scale: the total R&D spending in 2011 was 247 billion USD. The non-conventional costs would then be in the ballpark of 5-10% of R&D spending. One has to remember, of course, that this is not money that is “robbed” as such; some of the cases may be completely valid. Nevertheless, this is real money.

We have been trying to look for credible first-hand material on the Internet about people or companies that would actually have been harassed by trolls. However, the material tends to be second-hand or generic.The EFF has collected material on cases that would seem to fall into this category, but it is still anecdotal.  Even the various anonymous anti-troll web sites tend to focus on litigated cases. The unlitigated cases exist in a shadowland.

Anyone who is under active targeting will almost certainly remain quiet under his lawyer’s recommendation. And if a settlement is reached, non-disclosure tends to be required. Thus, it is likely that we will never hear of these cases through normal routes.  Any information on anonymous web sites should be treated skeptically at best.

We think Project Troglodyte might actually provide a service in this direction. We already have a fundamentally unconventional view into these issues. We inhabit a kind of twilight zone: not quite hardcore IPR professionals (though hangaround members perhaps), not quite average “persons trained in the art”.

If a patent frightens and confuses us, it will certainly frighten and confuse an average person. A patent attorney can take away a lot of of the confusion by explaining what the patent (possibly) means. But the attorney cannot take away the fright part.

Unconventional warfare calls for unconventional methods perhaps?

Acknowledgements: This posting benefited heavily from arguments raised by Niko Porjo.

Patents – conventional warfare?

“After all a patent is only what it is claimed to be under its claims, nothing more, nothing less. And even those are eventually validated in courts, not in patent offices. So in real life, nobody knows what has been patented until it has been tried in a court. …. It is only about patent strategy and tactics. If you don’t have one, your competitor might have. It is war after all.”

WHY ARE PATENT APPLICATIONS SO COMPLEX AND HARD TO UNDERSTAND?

[Edit: See also Part 2: Patents — non-conventional warfare]

Writing a patent application is a skill honed to the extremes over the last two centuries. It is a mumbo-jumbo-techy-legal text that needs great expertise to understand what its actually being said. I have often heard from colleagues that they do not recognize nor understand. But what is that they don’t understand? The draft patent application they are asked to comment that is written based on their original idea. They don’t recognize the idea anymore nor find it in the written text. They can read the words but do not understand the sentences.

What is behind this all then?

Filing and receiving patents is also a game blown to the extremes. Individual patents have very little value as such. It is easier to understand the text if one tries to understand them through the system. It is like politics, lot of words but less concrete actions. Although there are agreements signed here and there now and then, they too are valuable only as long as everyone respects them.

Patents can have real value in several ways. An individual can show in his CV how many patents he holds and thus is inventive or where his interests lie. A company or an (academic) institution may have protected and published their new results as patents. Sometimes it is deliberately chosen not to patent and rather publish the results so nobody can claim those in the future. Quite often very important ideas related to manufacturing are not patented at all. It is better to keep a secret and not show competitors how things are done. If someone later receives a patent for the same idea, a company may be able to prove they’ve done it for years and keep using it.

But the ultimate question is if someone infringes your patent – what are you going to do about it? If you do nothing, your patent is just gathering dust. You must have the capability to protect your rights as well. Be ready to fight and have the resources and willingness to do so. In some cases it is not beneficial to attack the small fish but rather wait for the more lucrative cases to emerge and only then hit – being a shark. The old term of Shark has been turned into Troll when someone does not produce anything but just owns patents and actively seeks compensation for its rights. According to our laws and practices it is legal to do so and there are no clear boundaries when one could not protect his rights.

The real value of a patent is settled when it is sold or a court decides a company must pay another for infringements. Before the actual tried case, nobody can exactly say how valuable an individual patent is. Just like in military, one can only plan strategies and gather equipment, but the value of preparedness and tools are measured only in real use.

There is a heated cold war going on in several industries where companies are fighting for market position and revenues. Some technological areas rise in importance and 10-20 years later the original and subsequent patents become of value. In some areas standardization and games played there adds another aspect. Consider these as being equivalent of UN when compared to warfare. And patents are the needed tactical weaponry one might need one day – uncertain is only which and when. Enter patent portfolios that try to enumerate tactical advantage with numbers over quality. An individual patent is relevant only when backed up with other patents in the same and other areas. The patent costs are not so important as you have to have the army in any case to be taken seriously.

Only when you cannot afford to keep an army does the situation change. Well of course companies actively prune their patent portfolios by trying to understand and focus on the important, strategic ones. Old patents can be discarded or sold to someone else, perhaps to NPEs (sharks, trolls, non practicing entities). But overall I would claim most smaller companies do not understand the strategic role of the patents. They either over- or underspend resources, but when a company and an idea is growing, nobody knows what eventually will result. Patent strategy for a start-up may be a shot in the dark that may be prematurely required by the investors. Of course this is not a general rule, but I’ve seen this happen.

So there are reasons why the patent system is like it is, but why are the patent texts then so hard to understand? Can’t one just say what one means and has done?

Of course, but… For a patent to have some value and merit, it usually should not be too restrictive. For example if one protects a door opening mechanism with one hinge, another company may show why a two hinge mechanism is so much better and bypasses the original idea. To be generic enough but still have some merit and validity in other areas as well is one of the reasons why the descriptions are so hard to understand. A patent should have Generalizability.

There are processes and technicalities to be followed when filing patents – one may amend the original application given it has been covered in the original application. Thus from one perspective it is good to cover a lot in the first explanation as it can be used to alter the claims later. If something is not described in the original,  no later changes are possible, as a general rule. Another reason to describe the idea broadly is to have the patent text itself act as prior art for future development. Patents are far from the only form of prior art. Future technical development is a question mark for everyone, so it is better if your patent is not tied only to the current implementation. Sometimes a very narrow patent is the best thing to have, but it may be hard to think about all the circumstances that the future may hold. Patents can be amended and used to describe prior art covering more than the patent itself.

Those are some of the easy reasons and excuses for the mumbo-jumbo-techy-legal aspect. It is possible that the application is deliberately written to be hard to understand. If you don’t understand it, the chances are the competition does not know what you are after. Some have speculated that being vague enough is a tactical move to get a patent granted. The patent examiner gets overwhelmed and is buried in prior art so that it is actually unclear what the idea is – it is claimed and seems to be new and innovative thus patentable. Patent text can be used to distract not just the competition but also the examiners.

In some cases the text may be written as a strategic weapon, thinking ahead what type of litigation may be waiting ahead. “Yes, we have independently come to that conclusion, please see our original patent application preceding the date…” and the like. Patent applications can be used to show and prove a point or any point.

Then there must be all the other reasons as well that one just cannot think of that somebody else does. It is a system and it acts like a system with its rules and weaknesses built in. But it is the system we have right now.

After all a patent is only what it is claimed to be under its claims, nothing more, nothing less. And even those are eventually validated in courts, not in patent offices.

So in real life, nobody knows what has been patented until it has been tried in a court. Different countries and courts may decide differently. And of course some patent applications take those into account during writing and filing as well. It is only about patent strategy and tactics. If you don’t have one, your competitor might have. It is war after all.

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