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$4.5 B. Nortel Bid Shows the Disastrous State of Software Patents

56 points by bproper 15y ago

monochromatic 15y ago
This article is awfully thin. It doesn't give any argument whatsoever for why software patents are not a good thing. Here's a summary: 1. Google, Microsoft, Apple, RIM, and Sony are willing to pay a lot of money for a bundle of patents, including both software and hardware. 2. Therefore, software patents are evil and a tax on innovation, rabble rabble rabble. It's not much of a syllogism.
- Produce 15y ago
  I think that the argument for why software patents are dangerous is the $4.5 billion figure. If companies are shitting their pants to this extent then clearly the patents have a huge impact on business from their perspective.
  - padrack 15y ago
    Exactly. The price is well above expert estimates. While these tech giants can afford that extra cost, the same tension is playing out for smaller startups that cannot.
  - larrik 15y ago
    But if these patents were say, automotive in nature, and a coalition of automotive companies bought them for 4.5 billion, would we immediately jump to the conclusion that automotive patents are bad? I wouldn't (necessarily). I have to agree with the parent comment.
    - Produce 15y ago
      >if these patents were say, automotive in nature, and a coalition of automotive companies bought them for 4.5 billion, would we immediately jump to the conclusion that automotive patents are bad? Without going too deep into a philosophical discussion, I think that the competitive nature of our society is hindering progress more than anything else. When people learn to build social structures based on cooperation (I consider a small group of people cooperating to compete against everyone else to be too small in scope), we will see progress increase by orders of magnitude. Just look at the advantage the limited type of cooperation we have now has given us over animals which do not cooperate at all. Now scale that up to the next level (open source is a live example of this, in fact). In concrete terms, imagine if, just as individuals in a company cooperate, companies cooperated with each other. Everyone would be better off. At it's root, this is the difference between seeing life as a non-zero-sum game as opposed to a zero-sum one.
      - monochromatic 15y ago
        Exactly. Look at all the productivity increases that the USSR saw. No bread lines there. Nope.
        Produce 15y ago
        Again, you are missing the point. Imagine if the USSR and the US cooperated and spent all that money they used to make their dicks look bigger on, for example, flying to mars.
      - cube13 15y ago
        >In concrete terms, imagine if, just as individuals in a company cooperate, companies cooperated with each other. Everyone would be better off. At it's root, this is the difference between seeing life as a non-zero-sum game as opposed to a zero-sum one. So... it's exactly what MS, Apple, RIM, etc. did. They cooperated, combined their resources, and outbid Google for the pool. There's no indication that these patents aren't going to be used. Since RIM is in the group, it seems that the hardware patents are definitely going to be used, and who knows what Apple and MS want from the pot. I still don't see how this is an argument specifically against software patents.
        Produce 15y ago
        Imagine if MS, Apple, RIM AND Google all cooperated and said "this is silly, let's get rid of all our nukes (patents) and live in peace". Collectively, they would be $4.5 billion better off and could use it to build something instead of stocking up on weapons.
- inkaudio 15y ago
  The argument is simple, not thin. Instead of spending billions on new R&D, new innovation, these companies have to spend money on the shenanigans of the current software patent system.
  - monochromatic 15y ago
    The money spent on these patents creates a market for innovation by monetizing patents. If Google et al. thought these patents were invalid, obvious extensions of the prior art, would they be willing to spend this much money?
    - jbooth 15y ago
      No, it creates a market for filing patents by monetizing patents. Innovation means coming up with an idea, implementing it, and bringing it to market in a way that's cost-sustainable. Filing a patent just requires a lawyer. The evidence that things are broken is that a bunch of otherwise productive companies just paid a boatload of money for a grab-bag of IP, primarily to immunize themselves from lawsuits from companies with less productive revenue sources.
      - monochromatic 15y ago
        There are plenty of instances where someone comes up with a good idea, and the only way he is able to monetize it is through patent protection.
        sorbus 15y ago
        If the only way you can make money off of a good idea is by suing other people who are using it, then it's not a good idea.
        monochromatic 15y ago
        My point is that patents give inventors a way to cash out early without having to go to litigation. It's this property right that they can sell to someone else who wants the use of the idea. Maybe the buyer wants to make money off lawsuits, maybe he wants to produce the product. Doesn't matter. The patent lets the inventor sell his idea to someone who can make better (more economically efficient) use of it.
GHFigs 15y ago
I don't understand. For one thing, Google wasn't "the early front runner", they were the stalking horse bid--essentially the minimum. There seems to be this retroactive meme going around to the effect that Google was expected to win with that bid or that they somehow deserved to. It's an auction, folks. It's not clear to me that that was their final bid, either. Maybe it was, but I can't imagine Google letting something important to them climb at auction from from $0.9 billion to $4.5 billion without staking another bid. The second thing I don't understand is the connection between the price paid by a consortium of major tech companies[1] for a collection of patents from a formerly major tech company--only a few of which are even software at all--to Fred Wilson ranting about Lodsys. Who is the troll here? Nortel? What is the significance of the dollar figure? How does it "echo the sentiment" of Wilson? [1]:BetaBeat says "...a coalition of Microsoft, Apple, RIM, and Sony...", while the actual press release[2] states: "Apple, EMC, Ericsson, Microsoft, Research In Motion and Sony." [2]:http://www.marketwatch.com/story/nortel-announces-the-winning-bidder-of-its-patent-portfolio-for-a-purchase-price-of-us45-billion-2011-06-30?reflink=MW_news_stmp http://www.marketwatch.com/story/nortel-announces-the-winnin...
- SoftwareMaven 15y ago
  The complaining was around companies needing to spend $4.5B in pre-emptive legal defense. The $4.5B being pre-emptive is extrapolated by me (and I'm assuming the author) from Google stating their $900M was. Nowhere in the article did it even imply any of the players in this transaction were trolls.
  - GHFigs 15y ago
    What was the point of saying that the size of the winning bid "echoes the sentiment" of a rant about Lodsys?
    - SoftwareMaven 15y ago
      The whole article was about "Software patents are bad". The Nortel auction was just one example of why patents are bad. Fred Wilson's comments were to back up that theme. Lodsys is just another example. Read it in that light, and things tie together much more smoothly. Whether it is good writing (e.g. effectively conveying a point) is questionable, since it obviously has cause confusion.
Caligula 15y ago
I worked briefly at Nortel. It makes me sad reading these articles. Nortel was a great company that still could have been successful today were it not for terrible corrupt high level management.
yalogin 15y ago
Isn't it better that a coalition won instead of Google? Now at least these companies will not sue each other. Its much better that way. Google should have joined the group rather than going itself. Also Nortel was a really huge company and a really good one at their peak. So its not surprising it amassed that many patents or that they fetch that much value.
- sorbus 15y ago
  Google expressed an interest in using the patents defensively, and implied that it would share them with the open source community. If the coalition intends to use the patents offensively, which is very plausible considering the companies involved, then it is not better that it won.
  - brudgers 15y ago
    Nations express an interest in obtaining nuclear weapons for peaceful purposes. One side effect of obtaining them is that it limits their neighbor's options when the tanks roll into their back yard. Google is no more benign than any other company.
    - fleitz 15y ago
      No kidding, I heard in the spirit of innovation, open source, and allowing consumers to get a better ad display and search experience that Google will soon release it's search algorithms and ad sense code for others to improve on. /snark.
    - cromwellian 15y ago
      Really? Then why did Google buy On2's video codec patents and then give them away?
    - kjksf 15y ago
      Actually, based on past history, it is. As far as I know, Google hasn't sued anyone for violating their patents. Apple, RIM, Nokia, Microsoft sued plenty of companies in clear attempts to further their already strong position in the market. Facts contradict your opinions.
og1 15y ago
Probably coincidental, but the math lines up where Google could retroactively buy into the group at the price of it's 900M bid. After that the 4.5 Billion would be split evenly between the five companies. Edit: Looks the BetaBeat article excluded EMC and Ericsson, so the split wouldn't work so nicely.
petegrif 15y ago
Lame poorly written piece without clear argument or even any remotely convincing substantiation for its disconnected assertions.
- bproper 15y ago
  The software patent system in this country is broken. Google said so in its initial blog about the Nortel portfolio. Many VCs have been expressing the same thing in recent weeks. These two separate actions represent the very early and very late stage of the technology game. The fundamental problem, however, remains the same.
sehugg 15y ago
This Wikipedia article is an interesting read: http://en.wikipedia.org/wiki/Motion_Picture_Patents_Company http://en.wikipedia.org/wiki/Motion_Picture_Patents_Company It describes a strong-armed patent consortium formed around the turn of the century which controlled filmmaking technology. Indie filmmakers reacted by establishing new operations in a little place called Hollywood.
kjksf 15y ago
It seems like there is a simple tweak that would make everything better: DOJ should force the "consortium" to allow Google to join at the same price. It seems each company will pay $750 million. Google should be allowed to pay $750 million for the patents as well. That way Nortel gets more money and Microsoft, Apple and RIM won't be able to torpedo Android with lawsuits (as opposed to doing a better job).

56 points by bproper 15y ago

This article is awfully thin. It doesn't give any argument whatsoever for why software patents are not a good thing. Here's a summary: 1. Google, Microsoft, Apple, RIM, and Sony are willing to pay a lot of money for a bundle of patents, including both software and hardware. 2. Therefore, software patents are evil and a tax on innovation, rabble rabble rabble. It's not much of a syllogism.

Produce 15y ago
I think that the argument for why software patents are dangerous is the $4.5 billion figure. If companies are shitting their pants to this extent then clearly the patents have a huge impact on business from their perspective.
- padrack 15y ago
  Exactly. The price is well above expert estimates. While these tech giants can afford that extra cost, the same tension is playing out for smaller startups that cannot.
- larrik 15y ago
  But if these patents were say, automotive in nature, and a coalition of automotive companies bought them for 4.5 billion, would we immediately jump to the conclusion that automotive patents are bad? I wouldn't (necessarily). I have to agree with the parent comment.
  - Produce 15y ago
    >if these patents were say, automotive in nature, and a coalition of automotive companies bought them for 4.5 billion, would we immediately jump to the conclusion that automotive patents are bad? Without going too deep into a philosophical discussion, I think that the competitive nature of our society is hindering progress more than anything else. When people learn to build social structures based on cooperation (I consider a small group of people cooperating to compete against everyone else to be too small in scope), we will see progress increase by orders of magnitude. Just look at the advantage the limited type of cooperation we have now has given us over animals which do not cooperate at all. Now scale that up to the next level (open source is a live example of this, in fact). In concrete terms, imagine if, just as individuals in a company cooperate, companies cooperated with each other. Everyone would be better off. At it's root, this is the difference between seeing life as a non-zero-sum game as opposed to a zero-sum one.
    - monochromatic 15y ago
      Exactly. Look at all the productivity increases that the USSR saw. No bread lines there. Nope.
      - Produce 15y ago
        Again, you are missing the point. Imagine if the USSR and the US cooperated and spent all that money they used to make their dicks look bigger on, for example, flying to mars.
    - cube13 15y ago
      >In concrete terms, imagine if, just as individuals in a company cooperate, companies cooperated with each other. Everyone would be better off. At it's root, this is the difference between seeing life as a non-zero-sum game as opposed to a zero-sum one. So... it's exactly what MS, Apple, RIM, etc. did. They cooperated, combined their resources, and outbid Google for the pool. There's no indication that these patents aren't going to be used. Since RIM is in the group, it seems that the hardware patents are definitely going to be used, and who knows what Apple and MS want from the pot. I still don't see how this is an argument specifically against software patents.
      - Produce 15y ago
        Imagine if MS, Apple, RIM AND Google all cooperated and said "this is silly, let's get rid of all our nukes (patents) and live in peace". Collectively, they would be $4.5 billion better off and could use it to build something instead of stocking up on weapons.
inkaudio 15y ago
The argument is simple, not thin. Instead of spending billions on new R&D, new innovation, these companies have to spend money on the shenanigans of the current software patent system.
- monochromatic 15y ago
  The money spent on these patents creates a market for innovation by monetizing patents. If Google et al. thought these patents were invalid, obvious extensions of the prior art, would they be willing to spend this much money?
  - jbooth 15y ago
    No, it creates a market for filing patents by monetizing patents. Innovation means coming up with an idea, implementing it, and bringing it to market in a way that's cost-sustainable. Filing a patent just requires a lawyer. The evidence that things are broken is that a bunch of otherwise productive companies just paid a boatload of money for a grab-bag of IP, primarily to immunize themselves from lawsuits from companies with less productive revenue sources.
    - monochromatic 15y ago
      There are plenty of instances where someone comes up with a good idea, and the only way he is able to monetize it is through patent protection.
      - sorbus 15y ago
        If the only way you can make money off of a good idea is by suing other people who are using it, then it's not a good idea.
        monochromatic 15y ago
        My point is that patents give inventors a way to cash out early without having to go to litigation. It's this property right that they can sell to someone else who wants the use of the idea. Maybe the buyer wants to make money off lawsuits, maybe he wants to produce the product. Doesn't matter. The patent lets the inventor sell his idea to someone who can make better (more economically efficient) use of it.

GHFigs 15y ago

I don't understand. For one thing, Google wasn't "the early front runner", they were the stalking horse bid--essentially the minimum. There seems to be this retroactive meme going around to the effect that Google was expected to win with that bid or that they somehow deserved to. It's an auction, folks. It's not clear to me that that was their final bid, either. Maybe it was, but I can't imagine Google letting something important to them climb at auction from from $0.9 billion to $4.5 billion without staking another bid. The second thing I don't understand is the connection between the price paid by a consortium of major tech companies[1] for a collection of patents from a formerly major tech company--only a few of which are even software at all--to Fred Wilson ranting about Lodsys. Who is the troll here? Nortel? What is the significance of the dollar figure? How does it "echo the sentiment" of Wilson? [1]:BetaBeat says "...a coalition of Microsoft, Apple, RIM, and Sony...", while the actual press release[2] states: "Apple, EMC, Ericsson, Microsoft, Research In Motion and Sony." [2]:http://www.marketwatch.com/story/nortel-announces-the-winning-bidder-of-its-patent-portfolio-for-a-purchase-price-of-us45-billion-2011-06-30?reflink=MW_news_stmp http://www.marketwatch.com/story/nortel-announces-the-winnin...

SoftwareMaven 15y ago
The complaining was around companies needing to spend $4.5B in pre-emptive legal defense. The $4.5B being pre-emptive is extrapolated by me (and I'm assuming the author) from Google stating their $900M was. Nowhere in the article did it even imply any of the players in this transaction were trolls.
- GHFigs 15y ago
  What was the point of saying that the size of the winning bid "echoes the sentiment" of a rant about Lodsys?
  - SoftwareMaven 15y ago
    The whole article was about "Software patents are bad". The Nortel auction was just one example of why patents are bad. Fred Wilson's comments were to back up that theme. Lodsys is just another example. Read it in that light, and things tie together much more smoothly. Whether it is good writing (e.g. effectively conveying a point) is questionable, since it obviously has cause confusion.

Caligula 15y ago

I worked briefly at Nortel. It makes me sad reading these articles. Nortel was a great company that still could have been successful today were it not for terrible corrupt high level management.

yalogin 15y ago

Isn't it better that a coalition won instead of Google? Now at least these companies will not sue each other. Its much better that way. Google should have joined the group rather than going itself. Also Nortel was a really huge company and a really good one at their peak. So its not surprising it amassed that many patents or that they fetch that much value.

sorbus 15y ago
Google expressed an interest in using the patents defensively, and implied that it would share them with the open source community. If the coalition intends to use the patents offensively, which is very plausible considering the companies involved, then it is not better that it won.
- brudgers 15y ago
  Nations express an interest in obtaining nuclear weapons for peaceful purposes. One side effect of obtaining them is that it limits their neighbor's options when the tanks roll into their back yard. Google is no more benign than any other company.
  - fleitz 15y ago
    No kidding, I heard in the spirit of innovation, open source, and allowing consumers to get a better ad display and search experience that Google will soon release it's search algorithms and ad sense code for others to improve on. /snark.
  - cromwellian 15y ago
    Really? Then why did Google buy On2's video codec patents and then give them away?
  - kjksf 15y ago
    Actually, based on past history, it is. As far as I know, Google hasn't sued anyone for violating their patents. Apple, RIM, Nokia, Microsoft sued plenty of companies in clear attempts to further their already strong position in the market. Facts contradict your opinions.

og1 15y ago

Probably coincidental, but the math lines up where Google could retroactively buy into the group at the price of it's 900M bid. After that the 4.5 Billion would be split evenly between the five companies. Edit: Looks the BetaBeat article excluded EMC and Ericsson, so the split wouldn't work so nicely.

petegrif 15y ago

Lame poorly written piece without clear argument or even any remotely convincing substantiation for its disconnected assertions.

bproper 15y ago
The software patent system in this country is broken. Google said so in its initial blog about the Nortel portfolio. Many VCs have been expressing the same thing in recent weeks. These two separate actions represent the very early and very late stage of the technology game. The fundamental problem, however, remains the same.

sehugg 15y ago

This Wikipedia article is an interesting read: http://en.wikipedia.org/wiki/Motion_Picture_Patents_Company http://en.wikipedia.org/wiki/Motion_Picture_Patents_Company It describes a strong-armed patent consortium formed around the turn of the century which controlled filmmaking technology. Indie filmmakers reacted by establishing new operations in a little place called Hollywood.

kjksf 15y ago

It seems like there is a simple tweak that would make everything better: DOJ should force the "consortium" to allow Google to join at the same price. It seems each company will pay $750 million. Google should be allowed to pay $750 million for the patents as well. That way Nortel gets more money and Microsoft, Apple and RIM won't be able to torpedo Android with lawsuits (as opposed to doing a better job).