Friday, September 23, 2011

The Troll

I've written before about the obsession with IP, and the feeling, especially among academic institutions that 90% of the value of a company is in the idea and related IP - having sweated bullets like most entrepreneurs in order to get an idea to market and scrape a few of them together to form a self-sustaining business, it’s a little frustrating to have someone tell you after the fact that it was all their brilliant idea.

Years ago I went to visit the patent office in Arlington, and walked into the examiners office with my little box containing laser, optical delivery system and power supply, turned it on and showed him how it worked (surprising that there weren’t metal detectors back then...). The examiner was so stunned, not so much at the invention, which I thought was pretty cool, but at the fact that it was the physical embodiment of what was described in my self-drafted patent application. He pulled out a few other patent wrappers to illustrate his point, on one there were 57 separate office actions, the front page was littered with rejections, but it kept coming back - this patent, he said, will eventually issue with severely limited claims but sadly the paper its written on is as close as it will come to any form of physical embodiment.

Now when I first started studying patents I distinctly remember one of the key requirements for something to be patentable was that it be reduced to practice but it seems this is no longer a priority in inventions which has become something more in the province of lawyers and accountants than engineers, scientists, and inventors. I know that this is largely how it has to be, but after doing a lot of business in China, there is a certain satisfaction in the Chinese attitude of who cares, let's just build it and sell it in China anyway, and not worry about the US patents. Innovation knows no borders, so hopefully as China continues to grow they will begin to value IP and level the playing field.

I actually think what is worse than the patent degradation of late, is the emergence of so many trolls - i.e., those who sit on a patent for years waiting for it to ripen so they can sue anyone and everyone who is using it. As with most things there are 2 sides to this story - CSIRO recently won a landmark patent lawsuit because they invented WiFi and others used it - to date they have won $200M in back royalties - the WiFi market just for chips was over $3B in 2008 - I would have preferred that a bunch of companies span out of CSIRO and they developed the products. Now it’s a lot harder to build a company than it is to have an idea, and for sure there is an economic model for patent licensing.

In the CSIRO case they tried to license, and in some cases did license, and then some of the companies stopped licensing. Personally, I don’t want to see more of this, I would much prefer to see entrepreneurs try to build companies. CSIRO at least is dedicated a portion of the win to starting a fund specifically for the purpose of spinning out high-risk high potential return ideas like WiFi.

The other side of course, is the Troll, who has no intention of developing anything but a bank balance, often a consortium of lawyers who buy up the IP of others and sit quietly on the until the stakes are highest to pounce on startups. To me these groups are as bad as litigation funds who band together to try and extract money from public companies by suing directors - sometimes it's legit, but most cases I have seen have been pure profiteering. These business practices do not create anything, rather they tear down what has been created or at least debilitate it like a parasitic organism we can't quite flush from the system.

There is of course yet another case - a little company in San Jose invented an optical interface which is exactly what is used in the Wii. Their patent predates anything Nintendo had by at least a year, and they honestly tried to commercialize it - in fact they created a wonderful interface for Media Center, which enables gestures to navigate the screen, zoom, pan, and twist all by hand movements. They sold a few thousand of these devices, and then Wii came out - they wrote a letter and sent copy of the patent, and were told to go pound sand. In this case, I would love to see these guys come out on top, assuming that the facts are all correct...