There was an article awhile back by Paul Graham that talked about there not being a viable market for business ideas, that the real power in a business was the execution and not the idea itself. This was also mirrored in a podcast on Podtech.net where Furrier was talking with a VC that mentioned that they’ve heard all the ideas, that what was really important was the people running the business. If the people were good, then it was a business worth investing in. These ideas really line up with the american dream, if the small guy can come up with a better product they can take on the world and win. Historically patents were created to protect this small business from a large business stomping on them. The problem however was that patents were so powerful that they turned in a doomsday weapon that large companies would cross-license inorder to avoid a shooting lawyer war.
The recent change that is causing problems is that small firms are being created that own nothing more than patents. These firms live to sue other companies that could possibly be infringing. All of the problems with patents allow these firms to hold other companies ransom. It’s so expensive to fight a patent that it’s often just cheaper to licencse and since the company has no other assets you can’t cross-licensce. The firms are just leaches on the business field.
The big case in the news right now is the fight between RIM, maker of the blackberry, and NTP a firm created to collect revenue from licencsing patents. Historically the story is not so black and white. NTP was originally started from a small inventor that was working with email, but was never able to get a succesful product launched. Instead after the original inventor died the firm went on to sue mobile mail providers because it had recieved a very broad patent from the US patent office.
This flies in the face of how business is supposed to work. As I mentioned above the hard part in creating a succesful business was the execution of the day to day running, hiring employees, and managing sales. Patents were created to protect small businesses from being illegally squashed by established large businesses. However, there is no evidence that RIM did this. NTP is asking for hundreds of millions in licenscing fees for no work other than filing the patent. RIM put in all of the hard work and created a product, dubbed the crackberry because people have become so dependent on it, but NTP is trying to cash in on that popularity.
So, is there really a market for business ideas? It would appear that NTP is proving that there is. It has not executed a successful business, but is just charging for the use of the idea. I think we need to reexamine the way that patents are being used. There should be some clauses that damages can be awarded only if a real business has been damaged, threats against an idea of a business is not a real damage. Since NTP was never able to launch a product, there was never any damage inflicted and it should not recieve any award.
There should also be some risk in bringing a patent suit. It shouldn’t be cheaper to just settle because this hurts the next business to be held up and makes it harder to prove that the suit is frivolous. If a suit is deemed to be frivolous, the offender should have to cover the costs of the defense. This would make a firm like NTP think twice about suing businesses with a questionable patent.
There is also undue weight given to the granting of a patent by the USPTO. A patent grant should be tentative until it’s tested in court. It should be just as easy to overturn a patent once a lawsuit has been filed as it is to protect the patent. The patent office is addmittedly swamped and unable to do the real work in determining if a patent is valid. The undue hurdles that need to be overcome to overthrow a patent gives firms like NTP too much power.
Unless we can fix this system businesses and development will slow in the US because of the legal minefield that you need to work through just to launch a product.