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Twitter’s Lack of Patents Seen as a Risk to Investors

19 points by RougeFemme 13y ago

ateeqs 13y ago
Patents aside, I feel Twitter does not have much in terms of innovation.
- nonchalance 13y ago
  Twitter may not have much in terms of technical innovation, but I believe that isn't Twitter's goal. Their true value lies in the news-making ability (you hear about many news events first reported on twitter and relatively few first reported on facebook or google+ or other social networks). And in that sense, they have much to offer.
  - johnchristopher 13y ago
    I think Twitter's value reside in connecting people but I am not really sure about that. Frankly, I think once Twitter (and FB) removed their RSS streams they could no longer be fit to spread news in a efficient way or claim to be anything news-related/efficient-to-spread-news. I have a hard time using Twitter for its news-making ability. The noise is way too much preponderant. Its ability to quickly spread news depends on how close someone watches its subscribed streams and I am only checking it twice a day or every other day. But I am still using Twitter as a micro-blogging platform and I am only following real people and NASA streams. + I have a tendency to un-subscribe from streams that send too much information that are not related to the reason why I first subscribe or that send information every 20 minutes about anything they are doing (eg: William Gibson or Dresden Codak, because I want to hear stuff about their work, not their personal life tidbits... But people close to them might be more interested in tidbits than in comments on their work so I may be the one misusing Twitter). But is everything news-worthy then ?
    - nonchalance 13y ago
      Actually, removing RSS streams is what makes twitter a business. They hold the keys to the data and can charge customers for access to the firehose. Your assumption is that the news consumption pattern ultimately dictates where the producers flock, which makes sense in the traditional journalistic business model. In a model where individual users contribute, the key factor is which platform gives users an easy way to speak (and I would argue that twitter has done a decent job at reducing the tweet friction)
      - johnchristopher 13y ago
        > Actually, removing RSS streams is what makes twitter a business. They hold the keys to the data and can charge customers for access to the firehose. Following on the analogy: to me they replaced a very good firehose (RSS) with a less efficient one. > Your assumption is that the news consumption pattern ultimately dictates where the producers flock [...] What ? No, my consumption pattern dictates where I (a user) go. And it turns out Twitter as a news media don't work for me (not twitter's fault though). > In a model where individual users contribute, the key factor is which platform gives users an easy way to speak (and I would argue that twitter has done a decent job at reducing the tweet friction) I don't see how removing the RSS feeds makes it less easy for a user to contribute. (shouldn't users who contribute be named producers in that context ?)
        ProblemFactory 13y ago
        RSS feeds make it easier be only a reader. If you use the Twitter user interface to read the stream, reply and post buttons are right there. If you use an RSS reader, going to twitter to post something on your own takes an extra step. Also, RSS feeds make it easier to filter out advertising posts, whereas with the official API Twitter can ban clients which introduce Adblock. This assumes that at least some of the RSS users migrate to the official UI, instead of abandoning the platform. But it might be a reasonable tradeoff.
        johnchristopher 13y ago
- rshm 13y ago
  Innovations that might cover their ad avenues all falls as a business processes. Patents on those i think are hard to get.
- joeblau 13y ago
  What about pull to refresh! But seriously, I know a few guys that worked there and helped build out Twitters distributed system platform and I think it's something they could have patented if they didn't open source it. Now that I think about it, they have a few cool technical products under the hood but the creators have all left Twitter gone their separate ways.
krakensden 13y ago
Since everyone is just going to do it anyway, I'll start: Boo, hiss Now we can talk about something else.
ChrisNorstrom 13y ago
Craigslist doesn't have any patents as far as I know and numerous companies from Microsoft (with Live.com expo) and Ebay (with Kijiji) as well as others (olx) have tried to de-thrown it and failed hilariously. Patents are not the only weapon businesses can use, there's always design, community, emotion, and the good ol fashion network effect.
- joeblau 13y ago
  Craigslist is making money though.
  - mkhpalm 13y ago
    tou·ché
- volaski 13y ago
  The reason Craigslist can't be beaten easily is because it makes less money, just like how Wikipedia can't be beaten easily because it's non-profit. Twitter as a for profit company can't afford to make less money.
alexqgb 13y ago
"If Twitter does deal with patent-infringement lawsuits, they don’t have too many patents to lean on to countersue. That does put Twitter at a disadvantage.” And there's the rub.
- nhebb 13y ago
  That's only the rub if the plaintiff is a producing entity. Some of the patent litigation has been from NPE's, and in others I can't imagine that there is often a tit-for-tat counter suit opportunity. My gut feel is that this article is taking a hot topic (the twitter IPO) and blowing one angle of it out of proportion.
ivanbrussik 13y ago
If Twitter were on Shark Tank right now, Mark and Robert and MR Wonderful would be out due to lack of patent.
- hayksaakian 13y ago
  With mark publicly opposing software patents, I'd disagree. However, your point stands, twitter doesn't make much sense in the traditional business POV.
- nhebb 13y ago
  To bolster @hayksaakian's point (plus I just like the name of the Chair position): "The current state of patents and patent litigation in this country is shameful," said Cuban, owner of the Dallas Mavericks. "Silly patent lawsuits force prices to go up while competition and innovation suffer. That's bad for consumers and bad for business. It's time to fix our broken system, and EFF can help. So that's why part of my donation funds a new title for EFF Staff Attorney Julie Samuels: 'The Mark Cuban Chair to Eliminate Stupid Patents'." https://www.eff.org/press/releases/eff-patent-project-gets-half-million-dollar-boost-mark-cuban-and-notch https://www.eff.org/press/releases/eff-patent-project-gets-h...
  - throwawaykf 13y ago
    I wouldn't put much weight behind Mark Cuban's words. He makes statements like the one you quoted and the next thing you know, he invests in a patent troll that's suing Google for hundreds of millions.
    - adventured 13y ago
      Not just his words. He put money into the EFF as well.
      - throwawaykf 13y ago
        He put 500K into EFF. And 2M+ in Vringo. Well, he's putting money and seems it's more where his mouth isn't.
thinkcomp 13y ago
Twitter's patent portfolio (not including patents not assigned to Twitter, Inc. that may be held by Twitter employee inventors): http://www.plainsite.org/flashlight/index.html?id=467846&table=patents http://www.plainsite.org/flashlight/index.html?id=467846&tab...
sheikhimran01 13y ago
I still don't understand why is twitter going for IPO? They have zero innovation, Vine is apps for wasted people, Twitter users are not growing... $10 Billion is a lot for twitter. Facebook story was different cuz it has user locked into its system. twitter should not be worth more than $3 billion
volaski 13y ago
People who are saying stuff like patent doesn't mean anything as long as you have good community and network effect don't know what is going on here. Facebook owns a patent for activity feed. Theoretically Facebook can sue Twitter once Twitter goes public. Although it's not likely going to happen and it will be settled somehow even if it does happen, it's still an important factor for investors.
- adventured 13y ago
  If that were true, Facebook would have been better off destroying Twitter a long time ago. Not waiting until they pick up another $1.5 billion in cash to fight with and buy more patents with. Facebook doesn't have to wait for Twitter to go public. There's no benefit to waiting. Facebook would gain a lot more from killing Twitter (which is why they'd have sued years ago), than even if they won a billion dollars in a settlement via IPO cash. A billion dollars is meaningless to Facebook. What matters is owning social.
  - volaski 13y ago
    What you say is all true. And what I say is true also. You're just talking from Facebook's point of view, and i'm talking from investors' point of view, which is what the article is talking about. As I also mentioned, it is unlikely that it will happen, but from an investor's point of view you cannot deny that it still is an existing risk. And I don't think it's nice to downvote someone else's comment just because you disagree
pearjuice 13y ago
A risk to investors? The only risk you have when "investing" (buying stocks) in Twitter is that you have to step out at its peek. All this IPO will be, is payout day.
throwawaykf 13y ago
The link to the study in TFA is broken, but here are some more relevant studies: 1. Study of startup patenting in various industries indicating entrepreneurs say patents help getting financing: http://www.law.berkeley.edu/9135.htm http://www.law.berkeley.edu/9135.htm (There was controversy around this study, where VCs with an anti patent stance, such as Brad Feld, publicly disagreed with the analysis. As TFA shows, they are probably in the minority.) 2. Study showing startups with patents more likely to get late stage financing and/or have a successful exit: http://papers.ssrn.com/sol3/papers.cfm?abstract_id=802806 http://papers.ssrn.com/sol3/papers.cfm?abstract_id=802806 3. Study (apparently -- it's paywalled unfortunately) showing startups with "stronger than typical" IP more likely to succeed: http://m.iam-magazine.com/blog/detail.aspx?g=ae1d78db-9c5e-41aa-a4f9-161c7de6c9fb http://m.iam-magazine.com/blog/detail.aspx?g=ae1d78db-9c5e-4... (Note that the study was done by MIT Sloan and IPVision, an IP consulting firm, so something to keep in mind.) Keep in mind that all studies must necessarily make some assumptions to make sense of their data, and some assumptions may be more valid than others. Also, different data sets and different methodologies give different results. For instance, the 2007 paper in [2] found much lower patenting rates in software than did the 2008 survey in [1]. Yet the patent possession/success correlation is hard to doubt. In addition to [2] and [3], there are other papers, such as by Rosemary Zeidonis, that also show a robust correlation between patenting and eventual success in high tech industries. Also, there's a working paper by a Pepperdine professor showing firms with patents four times more likely to succeed. I linked [2] particularly because it has a greater focus on the software industry. I do agree that Twitter's strength is in network effects, and so is less likely to be affected by issues affecting other startups. Just trying to show some numbers to explain why (some) investors see the lack of patents as worrying. However, the argument that the Innovators's Patent Agreement will attract the "best and brightest" is a false premise, handily disproved by Google and Facebook, just to pick two. It will attract a certain type of talent, maybe something Twitter is particularly looking for, but "best and brightest" is not necessarily it.
- michaelt 13y ago
  Yet the patent possession/success correlation is hard to doubt. How do you tell apart correlation and causality in studies like this? I mean, it seems to me patents are at their most useful when you have to make large upfront research investments, which is mandatory to get your foot in the door in some parts of the tech industry (IC fabrication) - but in other parts of the tech industry people would prefer to test the market with an MVP, and may be able to avoid a large upfront investment at all, so investors would tolerate higher risks of failure (iphone apps). So it's believable there could be confounding factors - how do studies control for them?
adventured 13y ago
Apple's substantial patent trove didn't help them fend off Samsung (which just printed a nearly $10b profit quarter), and Twitter's patent position also will have absolutely nothing to do with their long term success or failure. There's no core patent that is just going to shut down their business tomorrow. Reid Hoffman & Co. are the only ones I know of with such a potentially nuclear patent position, and they seemingly have zero interest in applying it offensively. There's a large patent lobby out there, and I generally assume this kind of article is mostly propaganda in favor of patents as some sort of huge competitive value. Facebook and Google as two simple examples, sure haven't been hurt by not being high on the list of patent issuers and patent suit launchers.

19 points by RougeFemme 13y ago

ateeqs 13y ago

Patents aside, I feel Twitter does not have much in terms of innovation.

nonchalance 13y ago
Twitter may not have much in terms of technical innovation, but I believe that isn't Twitter's goal. Their true value lies in the news-making ability (you hear about many news events first reported on twitter and relatively few first reported on facebook or google+ or other social networks). And in that sense, they have much to offer.
- johnchristopher 13y ago
  I think Twitter's value reside in connecting people but I am not really sure about that. Frankly, I think once Twitter (and FB) removed their RSS streams they could no longer be fit to spread news in a efficient way or claim to be anything news-related/efficient-to-spread-news. I have a hard time using Twitter for its news-making ability. The noise is way too much preponderant. Its ability to quickly spread news depends on how close someone watches its subscribed streams and I am only checking it twice a day or every other day. But I am still using Twitter as a micro-blogging platform and I am only following real people and NASA streams. + I have a tendency to un-subscribe from streams that send too much information that are not related to the reason why I first subscribe or that send information every 20 minutes about anything they are doing (eg: William Gibson or Dresden Codak, because I want to hear stuff about their work, not their personal life tidbits... But people close to them might be more interested in tidbits than in comments on their work so I may be the one misusing Twitter). But is everything news-worthy then ?
  - nonchalance 13y ago
    Actually, removing RSS streams is what makes twitter a business. They hold the keys to the data and can charge customers for access to the firehose. Your assumption is that the news consumption pattern ultimately dictates where the producers flock, which makes sense in the traditional journalistic business model. In a model where individual users contribute, the key factor is which platform gives users an easy way to speak (and I would argue that twitter has done a decent job at reducing the tweet friction)
    - johnchristopher 13y ago
      > Actually, removing RSS streams is what makes twitter a business. They hold the keys to the data and can charge customers for access to the firehose. Following on the analogy: to me they replaced a very good firehose (RSS) with a less efficient one. > Your assumption is that the news consumption pattern ultimately dictates where the producers flock [...] What ? No, my consumption pattern dictates where I (a user) go. And it turns out Twitter as a news media don't work for me (not twitter's fault though). > In a model where individual users contribute, the key factor is which platform gives users an easy way to speak (and I would argue that twitter has done a decent job at reducing the tweet friction) I don't see how removing the RSS feeds makes it less easy for a user to contribute. (shouldn't users who contribute be named producers in that context ?)
      - ProblemFactory 13y ago
        RSS feeds make it easier be only a reader. If you use the Twitter user interface to read the stream, reply and post buttons are right there. If you use an RSS reader, going to twitter to post something on your own takes an extra step. Also, RSS feeds make it easier to filter out advertising posts, whereas with the official API Twitter can ban clients which introduce Adblock. This assumes that at least some of the RSS users migrate to the official UI, instead of abandoning the platform. But it might be a reasonable tradeoff.
        johnchristopher 13y ago
rshm 13y ago
Innovations that might cover their ad avenues all falls as a business processes. Patents on those i think are hard to get.
joeblau 13y ago
What about pull to refresh! But seriously, I know a few guys that worked there and helped build out Twitters distributed system platform and I think it's something they could have patented if they didn't open source it. Now that I think about it, they have a few cool technical products under the hood but the creators have all left Twitter gone their separate ways.

krakensden 13y ago

Since everyone is just going to do it anyway, I'll start: Boo, hiss Now we can talk about something else.

ChrisNorstrom 13y ago

Craigslist doesn't have any patents as far as I know and numerous companies from Microsoft (with Live.com expo) and Ebay (with Kijiji) as well as others (olx) have tried to de-thrown it and failed hilariously. Patents are not the only weapon businesses can use, there's always design, community, emotion, and the good ol fashion network effect.

joeblau 13y ago
Craigslist is making money though.
- mkhpalm 13y ago
  tou·ché
volaski 13y ago
The reason Craigslist can't be beaten easily is because it makes less money, just like how Wikipedia can't be beaten easily because it's non-profit. Twitter as a for profit company can't afford to make less money.

alexqgb 13y ago

"If Twitter does deal with patent-infringement lawsuits, they don’t have too many patents to lean on to countersue. That does put Twitter at a disadvantage.” And there's the rub.

nhebb 13y ago
That's only the rub if the plaintiff is a producing entity. Some of the patent litigation has been from NPE's, and in others I can't imagine that there is often a tit-for-tat counter suit opportunity. My gut feel is that this article is taking a hot topic (the twitter IPO) and blowing one angle of it out of proportion.

ivanbrussik 13y ago

If Twitter were on Shark Tank right now, Mark and Robert and MR Wonderful would be out due to lack of patent.

hayksaakian 13y ago
With mark publicly opposing software patents, I'd disagree. However, your point stands, twitter doesn't make much sense in the traditional business POV.
nhebb 13y ago
To bolster @hayksaakian's point (plus I just like the name of the Chair position): "The current state of patents and patent litigation in this country is shameful," said Cuban, owner of the Dallas Mavericks. "Silly patent lawsuits force prices to go up while competition and innovation suffer. That's bad for consumers and bad for business. It's time to fix our broken system, and EFF can help. So that's why part of my donation funds a new title for EFF Staff Attorney Julie Samuels: 'The Mark Cuban Chair to Eliminate Stupid Patents'." https://www.eff.org/press/releases/eff-patent-project-gets-half-million-dollar-boost-mark-cuban-and-notch https://www.eff.org/press/releases/eff-patent-project-gets-h...
- throwawaykf 13y ago
  I wouldn't put much weight behind Mark Cuban's words. He makes statements like the one you quoted and the next thing you know, he invests in a patent troll that's suing Google for hundreds of millions.
  - adventured 13y ago
    Not just his words. He put money into the EFF as well.
    - throwawaykf 13y ago
      He put 500K into EFF. And 2M+ in Vringo. Well, he's putting money and seems it's more where his mouth isn't.

thinkcomp 13y ago

Twitter's patent portfolio (not including patents not assigned to Twitter, Inc. that may be held by Twitter employee inventors): http://www.plainsite.org/flashlight/index.html?id=467846&table=patents http://www.plainsite.org/flashlight/index.html?id=467846&tab...

sheikhimran01 13y ago

I still don't understand why is twitter going for IPO? They have zero innovation, Vine is apps for wasted people, Twitter users are not growing... $10 Billion is a lot for twitter. Facebook story was different cuz it has user locked into its system. twitter should not be worth more than $3 billion

volaski 13y ago

People who are saying stuff like patent doesn't mean anything as long as you have good community and network effect don't know what is going on here. Facebook owns a patent for activity feed. Theoretically Facebook can sue Twitter once Twitter goes public. Although it's not likely going to happen and it will be settled somehow even if it does happen, it's still an important factor for investors.

adventured 13y ago
If that were true, Facebook would have been better off destroying Twitter a long time ago. Not waiting until they pick up another $1.5 billion in cash to fight with and buy more patents with. Facebook doesn't have to wait for Twitter to go public. There's no benefit to waiting. Facebook would gain a lot more from killing Twitter (which is why they'd have sued years ago), than even if they won a billion dollars in a settlement via IPO cash. A billion dollars is meaningless to Facebook. What matters is owning social.
- volaski 13y ago
  What you say is all true. And what I say is true also. You're just talking from Facebook's point of view, and i'm talking from investors' point of view, which is what the article is talking about. As I also mentioned, it is unlikely that it will happen, but from an investor's point of view you cannot deny that it still is an existing risk. And I don't think it's nice to downvote someone else's comment just because you disagree

pearjuice 13y ago

A risk to investors? The only risk you have when "investing" (buying stocks) in Twitter is that you have to step out at its peek. All this IPO will be, is payout day.

throwawaykf 13y ago

The link to the study in TFA is broken, but here are some more relevant studies: 1. Study of startup patenting in various industries indicating entrepreneurs say patents help getting financing: http://www.law.berkeley.edu/9135.htm http://www.law.berkeley.edu/9135.htm (There was controversy around this study, where VCs with an anti patent stance, such as Brad Feld, publicly disagreed with the analysis. As TFA shows, they are probably in the minority.) 2. Study showing startups with patents more likely to get late stage financing and/or have a successful exit: http://papers.ssrn.com/sol3/papers.cfm?abstract_id=802806 http://papers.ssrn.com/sol3/papers.cfm?abstract_id=802806 3. Study (apparently -- it's paywalled unfortunately) showing startups with "stronger than typical" IP more likely to succeed: http://m.iam-magazine.com/blog/detail.aspx?g=ae1d78db-9c5e-41aa-a4f9-161c7de6c9fb http://m.iam-magazine.com/blog/detail.aspx?g=ae1d78db-9c5e-4... (Note that the study was done by MIT Sloan and IPVision, an IP consulting firm, so something to keep in mind.) Keep in mind that all studies must necessarily make some assumptions to make sense of their data, and some assumptions may be more valid than others. Also, different data sets and different methodologies give different results. For instance, the 2007 paper in [2] found much lower patenting rates in software than did the 2008 survey in [1]. Yet the patent possession/success correlation is hard to doubt. In addition to [2] and [3], there are other papers, such as by Rosemary Zeidonis, that also show a robust correlation between patenting and eventual success in high tech industries. Also, there's a working paper by a Pepperdine professor showing firms with patents four times more likely to succeed. I linked [2] particularly because it has a greater focus on the software industry. I do agree that Twitter's strength is in network effects, and so is less likely to be affected by issues affecting other startups. Just trying to show some numbers to explain why (some) investors see the lack of patents as worrying. However, the argument that the Innovators's Patent Agreement will attract the "best and brightest" is a false premise, handily disproved by Google and Facebook, just to pick two. It will attract a certain type of talent, maybe something Twitter is particularly looking for, but "best and brightest" is not necessarily it.

michaelt 13y ago
Yet the patent possession/success correlation is hard to doubt. How do you tell apart correlation and causality in studies like this? I mean, it seems to me patents are at their most useful when you have to make large upfront research investments, which is mandatory to get your foot in the door in some parts of the tech industry (IC fabrication) - but in other parts of the tech industry people would prefer to test the market with an MVP, and may be able to avoid a large upfront investment at all, so investors would tolerate higher risks of failure (iphone apps). So it's believable there could be confounding factors - how do studies control for them?

adventured 13y ago

Apple's substantial patent trove didn't help them fend off Samsung (which just printed a nearly $10b profit quarter), and Twitter's patent position also will have absolutely nothing to do with their long term success or failure. There's no core patent that is just going to shut down their business tomorrow. Reid Hoffman & Co. are the only ones I know of with such a potentially nuclear patent position, and they seemingly have zero interest in applying it offensively. There's a large patent lobby out there, and I generally assume this kind of article is mostly propaganda in favor of patents as some sort of huge competitive value. Facebook and Google as two simple examples, sure haven't been hurt by not being high on the list of patent issuers and patent suit launchers.