13 ms·

The Direct Costs from NPE (Patent Troll) Disputes

125 points by fpp 14y ago

its_so_on 14y ago
This is ycombinator's hackernews, the title should read "Patent trolls created $29B of value." I don't condone it but let's be consistent.
- Paul_S 14y ago
  Come now, you can't get away with a statement like that without explaining your argument.
  - ktizo 14y ago
    You are assuming that there is an argument behind it. That struts and frets his hour upon the stage. And then is heard no more: it is a tale. Told by an idiot, full of sound and fury, Signifying nothing.
    - ximeng 14y ago
      Off topic, but in that quote who is the idiot telling the tale?
      - pi18n 14y ago
        Either nobody in particular or Macbeth himself, I guess.
        ktizo 14y ago
        Is all of life itself. Might also be Shakespeare being cynical about his own craft. He could be very post-modern for someone living that long ago. [edit] also thinking about it, is a reference to god as well, as the tale is life, but the teller is the idiot.
        pi18n 14y ago
        Those are interesting interpretations, thank you for that.
  - its_so_on 14y ago
    all right, I'll explain it. One guy's cost is another guy's value (almost by definition - of course there are exceptions such as losing something to nature through accident instead of losing money to persons or companies [of any kind] by making an expenditure of any kind to them) - so the patent trolls "create" whatever value we add up to get to the number quoted. I am not saying anyone supports patents. I'm saying hackernews should be more consistent - or otherwise admit that "creating value" isn't an end in itself. It's the wrong question. Edit: I think the current title is fine. ("Patent trolls created $29B extra cost in the U.S. last year") I just want us to be clear that one guy's cost is another guy's "value". I would love to see more cooperative-optimistic-tit-for-tat solutions to the prisoner's dilemma, so that instead of just saying "creating value" we are more specific about the whole system. This is what (an unnamed restaurant review site) gets wrong and Google gets right, in my opinion. Google adds value whereas (unnamed) removes it. Of course in a naive sense (unnamed) is also "creating value". Just as these patent trolls are. We don't condone it, but let's be consistent.
    - taligent 14y ago
      This is the broken window fallacy. Patent trolls who serve no purpose other than to litigate don't create value. And if we take one in particular Lodsys. They had the potential to destroy a lot of value when they sued small app developers many of whom simply didn't have the resources to defend themselves.
      - its_so_on 14y ago
        Exactly. And yet by the business ethics that are rampant here, they do create value (see my cousin comment). These aren't "the system". These are specific for-profit enterprises. If an enterprise shrinks the size of the economy by $1b but in the process gets people to pay it $100m, then by getting people to make that payment it has "created 100m of value." Nevermind the effect on the rest of the system. Please be consistent here.
        reitzensteinm 14y ago
        There is no inconsistency here, you're again falling for the broken window fallacy. Busy work does not create value; eliminating it does. The simplest way to demonstrate it is to look at the industrial revolution. Vast amounts of people were put out of work because automation made the economy more efficient. $1bn industries, as you say, were permanently shrunk to $100m industries, left right and center. All those workers displaced eventually found employment elsewhere, and it turned out to be one of the largest economic booms in history. Would you rather we still weave our sheets by hand employing 100 times as many workers as the modern textile industry, each one costing $1000? Because that's exactly the consequence of your line of argument.
  - ximeng 14y ago
    Perhaps the idea that the cost of a service should equal the value provided, rather than the cost to produce the service.
    - its_so_on 14y ago
      when a company claims to have "created $50m of value" they mean that that's what they're producing is "worth" as valuated by their customers. For lean companies like those featured here, their cost doesn't enter the picture.
- mtgx 14y ago
  I don't think the majority of HN readers view patents in a positive way. http://news.ycombinator.com/item?id=2552740 http://news.ycombinator.com/item?id=2552740
  - its_so_on 14y ago
    I know - and I don't either. But we need to be consistent in how we talk about companies that have a revenue stream they create at a systemic cost to everyone: this is (from the companies') perspective, "building value."
    - ktizo 14y ago
      By that argument the KLF were building value when they made a million quid with the express intention of setting it all on fire. And they possibly were, in artistic terms. However, if we are talking about people who are just shifting money around without creating anything other than unnecessary work, then they are a cost to the wider economy, they are not increasing it's value.
      - Danieru 14y ago
        To be fair the cost of burning 1 million dollars is only the cost to print and transport the money. Assuming it only costs 10c to print a $20 bill then the cost to society of the act was a meagre $5000. I imagine the entertainment value provided would been worth more than $5000. Thus the act could have been a net gain for society. The other $995,000 would have been redistributed through-out the money supply in the form of deflation.
- saalweachter 14y ago
  Value is only created if patents are functioning as part of a system of disseminating ideas. Imagine two possible worlds. In the first world, when you -- as an engineer -- have a particularly difficult problem in front of you, you first go to a catalogue of solutions, look up the problem, and see if there is a solution already. If so, you pay a nominal fee to the solver, incorporate it into your design, and move on to unsolved problems. In the second world, you have the same particularly difficult problem, but there is no catalogue of solutions, so you buckle down and solve the problem yourself. Later, someone looks at your solution and declares that a portion of it is similar to something they wrote down in the big pile of disorganized ideas. You didn't know this, because looking in the big pile of disorganized ideas is a lot of work and rarely pays off, because most of the ideas are half-assed and don't really tell you anything you didn't already know. An exorbitant fee is then charged. There may be some industries living in the first world; I can imagine that in -- say -- chemical engineering, it is very easy to organize the ways to produce chemicals by the formula of the desired end product, and that the standard for describing how to produce a chemical leads to a pretty useful solution. The software industry, however, isn't.
swombat 14y ago
For me, the best summary of the fucked up nature of the patent system comes from two nice soundbites... First, just yesterday, I was at an event where a patent lawyer declared (I kid you not): "You should be careful how much you innovate on top of existing products, because you might end up falling under someone else's patent." Seriously. I couldn't believe my ears. Incentivising innovation fail. The other soundbite came from an entrepreneur at a TechHub meeting in London, about the Hargreaves Report on IP, last year. He said: "I wish I hadn't come tonight. The more I learn about IP, the less I want to start a business." I think that pretty much sums up how well the patent system incentivises innovation.
- grabeh 14y ago
  Out of interest, who was the lawyer? Much of the time lawyers are there to present a worst case scenario to push you into using their services. I wouldn't place much store in what they say (speaking as a lawyer myself). In terms of the entrepreneur discouraged from starting a business, I'd be interested to hear about what the business ideas were.
- kintamanimatt 14y ago
  This is one of the strengths Europe has right now: a somewhat less maligned patent system.
- rayiner 14y ago
  I don't think the first comment is particularly controversial, though the speaker was being diplomatic in his use of the term "innovate." It makes more sense if you replace it with "rip off." The fact of the matter is that a lot of people paint this idealized picture of the morally virtuous techie, where the only people who own patents are big bad patent trolls, and the only people who get sued are innocent innovators who independently arrive at an invention. That's not the actual story, or at least that's not the whole story. Like in every other field, there is a gaussian distribution of business ethics at various companies. Look at how many companies get nailed for using GPL-ed software without releasing source. You think those same companies don't also copy competitors' designs wholesale? When our company was doing business with an American telecoms supplier, a manager there mentioned that a Chinese telecoms supplier was ripping off their designs wholesale, down to the silk-screening on the PCBs. There is a difference between "let's innovate on top of this idea" and "oh this idea is good, let's just copy it." Now, NPE's in their current form are clearly just rent-seeking. However, I think there is a role for NPE's that create value by serving to create a market for patents. Not every innovator wants to get into the business of making products. ARM wants to design microprocessors, they don't want to design and manufacture iPads. Patents facilitate that division of labor, and NPE's can make the whole system more efficient by creating markets for patents.
mik4el 14y ago
I totally agree with the common belief that patents are the wrong way for protecting most startups... But, an interesting thought about patent trolling, I believe, is that if patents are useless then why can the trolls make $29B/year on trolling? I'm confused!
- Pkeod 14y ago
  Patents are intended to incentivize people to reveal their secrets in exchange for a temporary monopoly on the secrets. They are not meant as vehicles purely for making profit, but that is how they are being abused - by people who buy up patents and then sue anyone who infringes, or by people who patent as broadly as possible and then sue anyone who infringes. Useful for making money, not useful for the intended purpose of contributing work for the greater good of all people. The patent system is too broken. Anyone who writes software should hate patents. Anything you write will infringe on some patent out there. If all you want is money then writing software isn't the best way to go about getting it. A better system would be one where patents do not give protection to ideas, but do give minor tax incentives to the people who own and use a related patent in their business. Then their ideas are shared, but not using the patents gives them nothing, and they cannot block others from using the all too often obvious ideas.
  - pi18n 14y ago
    It should be noted that patents are particularly broken for software, since in that field it appears to be quite easy to convince someone at the patent office that a trivial discovery is non-trivial. Also most of it is math and shouldn't be patented anyway.
  - rayiner 14y ago
    > The patent system is too broken. Anyone who writes software should hate patents. Anything you write will infringe on some patent out there. If all you want is money then writing software isn't the best way to go about getting it. I write software (open source on GitHub) and don't hate patents. I hate bad patents, the kind you can infringe upon just by writing software, but lots of patents aren't bad patents. E.g. IBM has a number of patents on compiler optimizations. Am I going to stumble upon Steensgard's pointer analysis by accident? No, the only reason I know about it is that IBM let him publish a paper based on the research they paid him to do at Watson.
JimWestergren 14y ago
I am a non-US person. I was very close to set up and transfer my startup to a new C Corp in the US in order to get better payment APIs and make the startup more attractive to VCs. The patent trolls in the US is one of the biggest reasons why I choose not to move my startup to the US, at least not until I get funded. I guess many others also choose to stay away of the US for this reason. The total loss of business in the US must be great.
- arethuza 14y ago
  "at least not until I get funded" Having money in the bank means that can afford lawyers, but it also means that you are a more attractive target for litigation as you are then worth suing (if they are after cash). [NB The startup I co-founded years ago was involved in deeply unpleasant litigation soon after getting our first round of VC investment. Fortunately our lawyers made them go away.]
- kintamanimatt 14y ago
  I wonder if there's a legally creative way to keep the IP outside the US, but license it to a US company that acts as a reseller.
  - dlitz 14y ago
    I doubt it. Look at what happened to RIM.
    - kintamanimatt 14y ago
      Why, what happened to RIM?
devinmontgomery 14y ago
Alternate title: "Patent trolls give $29B boost to struggling legal profession"
- luriel 14y ago
  This should be a textbook example of the Broken Window Fallacy.
Produce 14y ago
You bunch of commie terrorists, stop trying to break the one mechanism fostering innovation that we have!
SagelyGuru 14y ago
As the ancients used to say, 'those that the gods want to destroy, they first make mad'. Accordingly, I see a lot of things going down the pan in an ever accelerating spiral. There are too many unscrupulous, unethical people about, out to make lots of money for zero real creativity, value, and effort. They are forever inventing new artifices towards this end, be it indulgences (sin forgiveness chits), fractional banking (credit out of thin air), software patents, CO2 indulgences, etc. and then getting fat on trading them. We are so far gone that many people can no longer even discriminate between real value and these things; sinking as we all are in this sea of BS.
- SkyMarshal 14y ago
  There's also a glut of lawyers in the US, enabled by cheap student loans, law schools' statistics inflation, etc., all scrambling to put food on the table. It's not surprising that some new legal strategies and domains that arise from this demographic trend may be good for lawyers in the short term, but not for the country in the long term.
wissler 14y ago
It costs far more than that. What's missing is the lost wealth due to things that weren't created but would have been, not only because people were afraid or unmotivated to create them but because of the money the trolls took.
its_so_on 14y ago
I just wanted to say thank you for the title change - this is far more clear and informative and makes my earlier comment moot. Actually it also made me click through to the paper, which also has this title. This is much better.

125 points by fpp 14y ago

This is ycombinator's hackernews, the title should read "Patent trolls created $29B of value." I don't condone it but let's be consistent.

Paul_S 14y ago
Come now, you can't get away with a statement like that without explaining your argument.
- ktizo 14y ago
  You are assuming that there is an argument behind it. That struts and frets his hour upon the stage. And then is heard no more: it is a tale. Told by an idiot, full of sound and fury, Signifying nothing.
  - ximeng 14y ago
    Off topic, but in that quote who is the idiot telling the tale?
    - pi18n 14y ago
      Either nobody in particular or Macbeth himself, I guess.
      - ktizo 14y ago
        Is all of life itself. Might also be Shakespeare being cynical about his own craft. He could be very post-modern for someone living that long ago. [edit] also thinking about it, is a reference to god as well, as the tale is life, but the teller is the idiot.
        pi18n 14y ago
        Those are interesting interpretations, thank you for that.
- its_so_on 14y ago
  all right, I'll explain it. One guy's cost is another guy's value (almost by definition - of course there are exceptions such as losing something to nature through accident instead of losing money to persons or companies [of any kind] by making an expenditure of any kind to them) - so the patent trolls "create" whatever value we add up to get to the number quoted. I am not saying anyone supports patents. I'm saying hackernews should be more consistent - or otherwise admit that "creating value" isn't an end in itself. It's the wrong question. Edit: I think the current title is fine. ("Patent trolls created $29B extra cost in the U.S. last year") I just want us to be clear that one guy's cost is another guy's "value". I would love to see more cooperative-optimistic-tit-for-tat solutions to the prisoner's dilemma, so that instead of just saying "creating value" we are more specific about the whole system. This is what (an unnamed restaurant review site) gets wrong and Google gets right, in my opinion. Google adds value whereas (unnamed) removes it. Of course in a naive sense (unnamed) is also "creating value". Just as these patent trolls are. We don't condone it, but let's be consistent.
  - taligent 14y ago
    This is the broken window fallacy. Patent trolls who serve no purpose other than to litigate don't create value. And if we take one in particular Lodsys. They had the potential to destroy a lot of value when they sued small app developers many of whom simply didn't have the resources to defend themselves.
    - its_so_on 14y ago
      Exactly. And yet by the business ethics that are rampant here, they do create value (see my cousin comment). These aren't "the system". These are specific for-profit enterprises. If an enterprise shrinks the size of the economy by $1b but in the process gets people to pay it $100m, then by getting people to make that payment it has "created 100m of value." Nevermind the effect on the rest of the system. Please be consistent here.
      - reitzensteinm 14y ago
        There is no inconsistency here, you're again falling for the broken window fallacy. Busy work does not create value; eliminating it does. The simplest way to demonstrate it is to look at the industrial revolution. Vast amounts of people were put out of work because automation made the economy more efficient. $1bn industries, as you say, were permanently shrunk to $100m industries, left right and center. All those workers displaced eventually found employment elsewhere, and it turned out to be one of the largest economic booms in history. Would you rather we still weave our sheets by hand employing 100 times as many workers as the modern textile industry, each one costing $1000? Because that's exactly the consequence of your line of argument.
- ximeng 14y ago
  Perhaps the idea that the cost of a service should equal the value provided, rather than the cost to produce the service.
  - its_so_on 14y ago
    when a company claims to have "created $50m of value" they mean that that's what they're producing is "worth" as valuated by their customers. For lean companies like those featured here, their cost doesn't enter the picture.
mtgx 14y ago
I don't think the majority of HN readers view patents in a positive way. http://news.ycombinator.com/item?id=2552740 http://news.ycombinator.com/item?id=2552740
- its_so_on 14y ago
  I know - and I don't either. But we need to be consistent in how we talk about companies that have a revenue stream they create at a systemic cost to everyone: this is (from the companies') perspective, "building value."
  - ktizo 14y ago
    By that argument the KLF were building value when they made a million quid with the express intention of setting it all on fire. And they possibly were, in artistic terms. However, if we are talking about people who are just shifting money around without creating anything other than unnecessary work, then they are a cost to the wider economy, they are not increasing it's value.
    - Danieru 14y ago
      To be fair the cost of burning 1 million dollars is only the cost to print and transport the money. Assuming it only costs 10c to print a $20 bill then the cost to society of the act was a meagre $5000. I imagine the entertainment value provided would been worth more than $5000. Thus the act could have been a net gain for society. The other $995,000 would have been redistributed through-out the money supply in the form of deflation.
saalweachter 14y ago
Value is only created if patents are functioning as part of a system of disseminating ideas. Imagine two possible worlds. In the first world, when you -- as an engineer -- have a particularly difficult problem in front of you, you first go to a catalogue of solutions, look up the problem, and see if there is a solution already. If so, you pay a nominal fee to the solver, incorporate it into your design, and move on to unsolved problems. In the second world, you have the same particularly difficult problem, but there is no catalogue of solutions, so you buckle down and solve the problem yourself. Later, someone looks at your solution and declares that a portion of it is similar to something they wrote down in the big pile of disorganized ideas. You didn't know this, because looking in the big pile of disorganized ideas is a lot of work and rarely pays off, because most of the ideas are half-assed and don't really tell you anything you didn't already know. An exorbitant fee is then charged. There may be some industries living in the first world; I can imagine that in -- say -- chemical engineering, it is very easy to organize the ways to produce chemicals by the formula of the desired end product, and that the standard for describing how to produce a chemical leads to a pretty useful solution. The software industry, however, isn't.

swombat 14y ago

For me, the best summary of the fucked up nature of the patent system comes from two nice soundbites... First, just yesterday, I was at an event where a patent lawyer declared (I kid you not): "You should be careful how much you innovate on top of existing products, because you might end up falling under someone else's patent." Seriously. I couldn't believe my ears. Incentivising innovation fail. The other soundbite came from an entrepreneur at a TechHub meeting in London, about the Hargreaves Report on IP, last year. He said: "I wish I hadn't come tonight. The more I learn about IP, the less I want to start a business." I think that pretty much sums up how well the patent system incentivises innovation.

grabeh 14y ago
Out of interest, who was the lawyer? Much of the time lawyers are there to present a worst case scenario to push you into using their services. I wouldn't place much store in what they say (speaking as a lawyer myself). In terms of the entrepreneur discouraged from starting a business, I'd be interested to hear about what the business ideas were.
kintamanimatt 14y ago
This is one of the strengths Europe has right now: a somewhat less maligned patent system.
rayiner 14y ago
I don't think the first comment is particularly controversial, though the speaker was being diplomatic in his use of the term "innovate." It makes more sense if you replace it with "rip off." The fact of the matter is that a lot of people paint this idealized picture of the morally virtuous techie, where the only people who own patents are big bad patent trolls, and the only people who get sued are innocent innovators who independently arrive at an invention. That's not the actual story, or at least that's not the whole story. Like in every other field, there is a gaussian distribution of business ethics at various companies. Look at how many companies get nailed for using GPL-ed software without releasing source. You think those same companies don't also copy competitors' designs wholesale? When our company was doing business with an American telecoms supplier, a manager there mentioned that a Chinese telecoms supplier was ripping off their designs wholesale, down to the silk-screening on the PCBs. There is a difference between "let's innovate on top of this idea" and "oh this idea is good, let's just copy it." Now, NPE's in their current form are clearly just rent-seeking. However, I think there is a role for NPE's that create value by serving to create a market for patents. Not every innovator wants to get into the business of making products. ARM wants to design microprocessors, they don't want to design and manufacture iPads. Patents facilitate that division of labor, and NPE's can make the whole system more efficient by creating markets for patents.

mik4el 14y ago

I totally agree with the common belief that patents are the wrong way for protecting most startups... But, an interesting thought about patent trolling, I believe, is that if patents are useless then why can the trolls make $29B/year on trolling? I'm confused!

Pkeod 14y ago
Patents are intended to incentivize people to reveal their secrets in exchange for a temporary monopoly on the secrets. They are not meant as vehicles purely for making profit, but that is how they are being abused - by people who buy up patents and then sue anyone who infringes, or by people who patent as broadly as possible and then sue anyone who infringes. Useful for making money, not useful for the intended purpose of contributing work for the greater good of all people. The patent system is too broken. Anyone who writes software should hate patents. Anything you write will infringe on some patent out there. If all you want is money then writing software isn't the best way to go about getting it. A better system would be one where patents do not give protection to ideas, but do give minor tax incentives to the people who own and use a related patent in their business. Then their ideas are shared, but not using the patents gives them nothing, and they cannot block others from using the all too often obvious ideas.
- pi18n 14y ago
  It should be noted that patents are particularly broken for software, since in that field it appears to be quite easy to convince someone at the patent office that a trivial discovery is non-trivial. Also most of it is math and shouldn't be patented anyway.
- rayiner 14y ago
  > The patent system is too broken. Anyone who writes software should hate patents. Anything you write will infringe on some patent out there. If all you want is money then writing software isn't the best way to go about getting it. I write software (open source on GitHub) and don't hate patents. I hate bad patents, the kind you can infringe upon just by writing software, but lots of patents aren't bad patents. E.g. IBM has a number of patents on compiler optimizations. Am I going to stumble upon Steensgard's pointer analysis by accident? No, the only reason I know about it is that IBM let him publish a paper based on the research they paid him to do at Watson.

JimWestergren 14y ago

I am a non-US person. I was very close to set up and transfer my startup to a new C Corp in the US in order to get better payment APIs and make the startup more attractive to VCs. The patent trolls in the US is one of the biggest reasons why I choose not to move my startup to the US, at least not until I get funded. I guess many others also choose to stay away of the US for this reason. The total loss of business in the US must be great.

arethuza 14y ago
"at least not until I get funded" Having money in the bank means that can afford lawyers, but it also means that you are a more attractive target for litigation as you are then worth suing (if they are after cash). [NB The startup I co-founded years ago was involved in deeply unpleasant litigation soon after getting our first round of VC investment. Fortunately our lawyers made them go away.]
kintamanimatt 14y ago
I wonder if there's a legally creative way to keep the IP outside the US, but license it to a US company that acts as a reseller.
- dlitz 14y ago
  I doubt it. Look at what happened to RIM.
  - kintamanimatt 14y ago
    Why, what happened to RIM?

devinmontgomery 14y ago

Alternate title: "Patent trolls give $29B boost to struggling legal profession"

luriel 14y ago
This should be a textbook example of the Broken Window Fallacy.

Produce 14y ago

You bunch of commie terrorists, stop trying to break the one mechanism fostering innovation that we have!

SagelyGuru 14y ago

As the ancients used to say, 'those that the gods want to destroy, they first make mad'. Accordingly, I see a lot of things going down the pan in an ever accelerating spiral. There are too many unscrupulous, unethical people about, out to make lots of money for zero real creativity, value, and effort. They are forever inventing new artifices towards this end, be it indulgences (sin forgiveness chits), fractional banking (credit out of thin air), software patents, CO2 indulgences, etc. and then getting fat on trading them. We are so far gone that many people can no longer even discriminate between real value and these things; sinking as we all are in this sea of BS.

SkyMarshal 14y ago
There's also a glut of lawyers in the US, enabled by cheap student loans, law schools' statistics inflation, etc., all scrambling to put food on the table. It's not surprising that some new legal strategies and domains that arise from this demographic trend may be good for lawyers in the short term, but not for the country in the long term.

wissler 14y ago

It costs far more than that. What's missing is the lost wealth due to things that weren't created but would have been, not only because people were afraid or unmotivated to create them but because of the money the trolls took.

its_so_on 14y ago

I just wanted to say thank you for the title change - this is far more clear and informative and makes my earlier comment moot. Actually it also made me click through to the paper, which also has this title. This is much better.