I listened to This American Life’s new show on patents today; it’s a followup to the original, widely heralded show from two years ago. I think it was well reported, and worth a listen. Despite concerns about NPEs being worse now than two years ago, I thought the show was oddly more balanced than the last time (even though nearly half the show is just a replay of a portion of the original). The part of the show I want to focus on is a patent granted to Crawford based on a 1993 filing date, which claims a large part of the online backup business model/technology (depending on how you look at it).
In the original show, it was revealed that Intellectual Ventures (IV) purchased the patent in 2007, sold it to a shell company in Marshall, Texas, called Oasis in 2010, but retained a “back end” percentage of any settlements/litigation winnings. Oasis sued a bunch of online backup companies, settled with most, and then lost against the holdouts when a jury found that Crawford actually co-invented the patent but failed to include the other inventor on the patent application. In this part, we learn that IV’s back end percentage is 90%, and that Crawford got about 18% of IV’s take. In short, Oasis got 10% as an enforcement agent. I have a lot to say about this topic, but only a short amount of time now, due to deadlines on three different papers (who says professors take the summer off). I did want to note three takeaways:
1. The Intellectual Ventures part of the story is actually the least surprising/interesting part of the story. I think it’s a great piece of reporting; IV made a real gaffe by pointing to Crawford as its model inventor, and This American Life dug and found some answers. But the answer isn’t all that new if you’ve been following this area. At the time Oasis filed its suit, the conventional wisdom was that IV was mounting several lawsuits through shell companies. Maybe this was due to earlier IV statements that they preferred not to litigate, much like people never die at Disneyland.
It appears that the Oasis lawsuit featured in the show is one of those shell lawsuits, though I have no idea whether IV ceded control when it transferred the patent or retained control about who pursue. To this, I ask the same question I asked in my Wired op-ed: does it matter? Would we view this lawsuit or the patent differently if it were brought by IV? If IV had a 10% backend instead of 90%? If Crawford brought the suit? If Crawford’s company survived to bring suit? My answer is generally not, other than having concerns about misinformation and secrecy. Perhaps others feel differently.
2. Many software patents are too broad. This is nothing new, of course, but the show illustrates it nicely. I’ll discuss the Crawford patent below, but the first part of the show nicely illustrates this point with a segment on the podcasting patent. The show argues that the inventors never could make podcasting work, and resorted to audiocassette distribution; the argument is that the inventor merely invented the “idea” of podcasting.
This type of attack on the patent falls under a few different legal rules: written description (claiming more than the inventor actually invented), enablement (claiming more than the inventor actually taught), and functional claiming (claiming the function divorced from the way it was implemented). Further, in Life After Bilski we argue that an idea that is so broad that it is unmoored from any specific application might be an unpatentable abstract idea.
I don’t know where the podcasting patent stands, but my first read of it makes me think it’s pretty broad.
3. My favorite part of the show was the story about how Crawford obtained the patent. While the ending is not so great (invalidity due to non-joinder of inventor), the story itself is one that is rarely told in today’s patent bashing news cycle. It turns out that Crawford and friends came up with the idea for online backup with passwords back in 1991, as part of a failed business venture to solve a very real problem that consumers faced – an easy way to back up data offsite. The story describes how the friends swapped floppy disks, but remember that 1991 was before writeable CDs, and floppy drives were 1.44MB. The average 20MB hard drive (can you imagine? how did we live like that?) would take many floppy disks.
Thus, they came up with a solution. Was it obvious? I don’t know. The first When Patents Attack show implied as much, but the patent survived whatever challenges the litigants brought on that front. For all the talk about many other patents in the same area, it might just be that those patents were improvements on this pioneering patent. It wouldn’t be the first time, but I don’t really have any idea.
The point I want to make, though, is that this is patent law working exactly as it was supposed to. It was people getting together to solve a problem, coming up with a solution, and attempting to protect it. (Well, there was one hiccup, which is that the inventors didn’t get together and file, apparently – but it was invalidated for that reason. This isn’t the case most of the time.) Indeed, the show confirms a key point that IV has always maintained, that a significant amount of money was paid to the inventor. That money might stimulate further investment in the invention in the future.
But another thing happened that often happens; the inventors were too early. They came up with a solution that wasn’t commercially viable yet. The world of 2400 baud modems where users pay for bandwidth by the minute was simply not ready for the online solution, and the business failed to materialize. Indeed, my own firm tried something similar in 1997 working with a Sparcstation and a client who was a Sun engineer; it was still too slow to use in-house, let alone online. Technology needed to catch up.
This is one reason why we often see patent assertions much later in a patent’s life, especially in software. Many really great software solutions–both in patents and in research–implement ideas nobody ever thought of on equipment that’s just barely ready to handle it. It’s not until years later that the solutions seem obvious because the enabling technology makes it commercially feasible.
The question is, what do we do about this? In other areas of patent law, we tolerate long delays. We would prefer not to have them, of course. Indeed, one side benefit of the current assertion trend is that patentees are getting more savvy about commercializing earlier. For example, Crawford and friends could have approached folks with fast networks and computers – universities – with their solution back in the early 1990s. Maybe today they would have, and might have found some early adopters.
But even if patents are not exploited, other patent areas treat this as a feature of the system; most calls to reform the system to avoid this problem have been to commercialize earlier, not to kill off the patents (so long as the patent is not hidden for too long). Software patents seem to be different, though. The collective wisdom seems to be less tolerant of this delay for software. I think the reason for this stems from my second point, above. Because software patents can be so broad, the concern is that a single broad patent –even a valid one– can render an entire industry infringers. Furthermore, patents filed in the early 1990s expire seventeen years after grant, not 20 years after filing. This effectively extended their life, perhaps for too long.
I’ll end by saying that I share these concerns about software patents, but I’m not so sure that they are so different from the rest of the patent world. There have been plenty of broad overarching patents in a variety of industries over time. Some had poor outcomes that stunted industries, and some fueled industries. People disagree about the software industry, I think.
These were my primary takeaways. I wish I had a clever solution, but I don’t; the show is worth listening to, however, with an open mind.