Patenting by Entrepreneurs: The Berkeley Patent Survey (Part II of III)

Guest Post by Robert Merges and Pamela Samuelson, UC Berkeley School of Law; Ted Sichelman, University of San Diego School of Law

In our previous post, we discussed three major findings from the Berkeley Patent Survey—the most comprehensive survey to date in the United States, probably worldwide, on how patents are used by and affect entrepreneurs, startups, and early-stage high technology companies. As we noted in that post, the survey collected responses from over 1,300 companies less than ten years old (hereinafter, "startups") in the biotechnology, medical device, software, and hardware/IT sectors. In this post, we discuss three additional major findings. (For those interested in more information, a detailed discussion of the survey results is available here; a focused analysis on the drivers of startup patenting, here; and some background on the genesis of the survey, here.)

Our fourth major result is that our respondents—particularly software companies—find the high costs of patenting and enforcing their patents deter them from filing for patents on their innovations (see Fig. 1 below). Given the reported importance of patents to startups not only in the financing process, but also for strategic reasons—especially for increasing bargaining power—these cost barriers are worrisome.

Another of our survey questions revealed that the average out-of-pocket cost for a respondent firm to acquire its most recent patent was over $38,000. This figure is significantly higher than the averages for patent prosecution reported in the literature, which vary from a low of $10,000 to a high of $30,000.

Our respondents also offer a variety of other reasons for not patenting, including the ease of competitors designing around a potential patent and the belief that the innovation was not patentable (both of which are more salient for software companies) as well as the reluctance to disclose information in a patent and a preferred reliance on trade secrecy (which are more salient for biotechnology companies).

Figure 1. "For your last innovation you did not patent, which if any of the following influenced your company's decision?"

A fifth major finding is that although many respondents report licensing in patents from others, most of them did so to acquire technology, with fewer seeking licenses to avoid a lawsuit. So, while we find that 15% of technology companies licensed in at least one patent, there are industry differences.

Specifically, among biotechnology companies, while 37% had licensed in at least one patent, for their last license, 81% did so to acquire technology, and only 30% to (sometimes also) avoid a lawsuit. Among software firms, only 8% report taking at least one patent license, with 79% taking such a license to (at least in part) gain information or know-how. In each sector, less than 10% of companies taking licenses report licensing only to avoid a law suit.

When we restrict our focus to only venture-backed companies, inbound licensing is much more prevalent, with 37% of all companies licensing in a patent. However, there is once more wide variation from one industry to another. While 89% of venture-backed biotechnology companies licensed in at least one patent, only 12% of similarly-funded software companies had reported as much. Also, while only 3% of these biotech companies that had licensed at least one patent reported licensing in their last patent only to avoid a lawsuit, 22% of such software companies reported as much.

Last, we asked how much of a role patents play in the steps of the innovation process, from invention to R & D to the commercialization of products and processes. Somewhat surprisingly, the responses on the whole are rather tepid. For instance, biotechnology companies report that patents provide closer to a "moderate" than a "strong" incentive to engage in the innovation process. Among software companies, the results are even more striking, with them reporting that patents provide less than a "slight" incentive. These findings raise questions about the importance of patents to innovation for entrepreneurs and startups. Indeed, the results have spurred some vigorous debate in the blogosphere of late, and we devote our entire next post on Patently-O to discussing them in detail.

88 thoughts on “Patenting by Entrepreneurs: The Berkeley Patent Survey (Part II of III)

  1. “The purpose of a patent system is not to prop up business models; it is to “promote the progress of science and the useful arts.” I don’t see why a patent system should be concerned with the little entrepreneur that can’t hack it because competitors are offering competitive products.”

    Wilton, you need to think a step further. If the entrepreneur knows that with any hint of success Microsoft will reverse engineer and appropriate his innovation, what incentive does he/she have to spend resources developing it?

  2. Which is an entirely different rationale than the one given by Ned, who attempts to liken intellectual property to real property.

    The patent system attempts to liken intellectual property to real property. Ned didn’t make it up.

    The patent system creates the scarcity by a sui generis exclusive right, and that scarcity gives the invention some value. That value, in turn, “props up” the business activities that lead to patentable inventions, which in turn promotes the advancement of the useful arts.

    Why should we be concerned with the little guy who can’t compete in the market with his own invention? Because it’s his own invention, and the only reason his competitors know about it in the first place is because he thought it would be profitable to share it with the public.

    Inventions are typically expensive to originate and cheap to copy. Software inventions are among the cheapest to copy. Patents impose a cost on the copier, and create a reward for the inventor. They rearrange the economic incentives for people who deal in inventions, precisely to avoid the tragedy of the commons where everybody tramples the abundant invention until there’s nothing left.

    If you think it’s not working well in software, you’re welcome to that opinion. If you’re concerned about patent quality in software, you’re not alone. If you think patents create a certain measure of economic inefficiency, that’s a feature.

  3. Somebody upthread wrote (about Microsoft et al):

    “one major reason those companies got so big and impossible to compete against was that their competitors lacked the leverage provided by software patents.”

    That America should be the home of many, many world-class, world-beating software-based Global Titans strikes me as something that Americans would relish, not lament.

    Americans, why would you not wish to see a new generation of such world-beaters emerging again?

    But how to bring that about? Any suggestions?

  4. Yes, they can (sometimes) be duplicated easily enough, but not so easily created, and the patent system is about encouraging creation. The exclusivity is not an end in itself, but rather a means to an end.

    Which is an entirely different rationale than the one given by Ned, who attempts to liken intellectual property to real property. As I said, the rationale for property rights in scarce resources does not apply to the rationale for property rights in abundant resources.

    By the way, the rationale for encouraging creation is one I get and, to a large extent, agree with. It is only in software and business methods where I think the patent system gives the public a raw deal.

  5. Ideas and inventions. Basically, things that can be duplicated at little-to-no marginal cost.

    Yes, they can (sometimes) be duplicated easily enough, but not so easily created, and the patent system is about encouraging creation. The exclusivity is not an end in itself, but rather a means to an end.

  6. Ideas and inventions. Basically, things that can be duplicated at little-to-no marginal cost.

    Basically, Willton thanks inventions should not be patented.

    Even from a policy standpoint – that’s a loser.

  7. What “abundant resources” are you talking about?

    Ideas and inventions. Basically, things that can be duplicated at little-to-no marginal cost.

  8. all people may be able to use such resources without lessening another’s enjoyment of such resources.

    land is land – at least that’s what certain people told the American Indians as they forcefully “welcomed” those people to enjoy other land in a different area of the country.

  9. Your “other words” are distorting mine.

    Your words were pretty vague, and you haven’t clarified them very much.

    What “abundant resources” are you talking about?

  10. In other words, no investor could justify taking a property interest in something abundant, without a patent to make that thing scarce.

    Your “other words” are distorting mine. What I’m trying to point out is that property rights for scarce resources make sense because they encourage efficient use of those resources. But for resources that are abundant, there’s no efficiency problem because all people may be able to use such resources without lessening another’s enjoyment of such resources. Instead, property rights create costs where there need not be any.

  11. The same justification for property rights falls short when dealing with issues of abundance.

    In other words, no investor could justify taking a property interest in something abundant, without a patent to make that thing scarce.

  12. Willton, it is hard to imagine making a major investment in real property without a deed. Once you provide a system of ownership, all sorts of miracles happen.

    Compare any civilization with reliable property rights with the likes of Haiti, where there are virtually none.

    Property rights make sense when having to deal with issues of scarcity. The same justification for property rights falls short when dealing with issues of abundance.

  13. Willton, it is hard to imagine making a major investment in real property without a deed. Once you provide a system of ownership, all sorts of miracles happen.

    Compare any civilization with reliable property rights with the likes of Haiti, where there are virtually none.

    My God, Willton, your position against patents makes no sense whatsoever.

  14. software is not patentable in Canada.

    Not unless you put the software where a computer can read it, same as in the US.

    Are there other kinds of software?

  15. As IANAE mentioned, we could start by letting it keep all of the money it brings in through fees. We could also start by requiring Congress to give it back all the money Congress has skimmed off of the Office over the years (which amounts to something like $900 million, if I recall a speech by former Judge Michel correctly). And we could give the office greater fee setting power.

    How might it use that fee setting power? The most obvious is to simply raise fees. Another way might be add a tier or two to the existing large/small entity fee structure. Another might be to require a large fee upfront, then refund it if a patent actually issues. Applications that go abandoned would result in the Office keeping the fee. The upfront fee would probably only apply to large entities.

    I agree that the USPTO should be allowed to keep its money, but given how much Congress loves money, that strikes me as a tough road to hoe on Capitol Hill. So what do we do in the interim?

  16. Are methods of surgery considered “inventions”? If so, then Canada and Europe are in a bit of trouble.

    There is an explicit exception for diagnostic, therapeutic, and surgical methods.

    Well, you could make Canada your first test case, as software is not patentable in Canada.

    Really? That’s curious. A quick search at the CIPO website for patents owned by Google turns up 258 patents, and they certainly look like software patents to me. I’m not an expert on Canadian patent law, but it sounds like at the very least there’s a disconnect between theory and practice. Pardon the somewhat gross URL:

    link to brevets-patents.ic.gc.ca

  17. How do you propose the USPTO pay for the increased measures you illustrated above?

    As IANAE mentioned, we could start by letting it keep all of the money it brings in through fees. We could also start by requiring Congress to give it back all the money Congress has skimmed off of the Office over the years (which amounts to something like $900 million, if I recall a speech by former Judge Michel correctly). And we could give the office greater fee setting power.

    How might it use that fee setting power? The most obvious is to simply raise fees. Another way might be add a tier or two to the existing large/small entity fee structure. Another might be to require a large fee upfront, then refund it if a patent actually issues. Applications that go abandoned would result in the Office keeping the fee. The upfront fee would probably only apply to large entities.

  18. I don’t think software implemented inventions fall under any of those exceptions. It’s a pretty hard argument to make, in my opinion, that software patents offend morality or threaten life or the environment. Of course, even if a country violates TRIPS by banning software patents, good luck enforcing the treaty. As is so often the case in international law, enforcement is the real issue.

    Well, you could make Canada your first test case, as software is not patentable in Canada.

  19. Does this sound familiar? “patents shall be available for any inventions, whether products or processes, in all fields of technology, provided that they are new, involve an inventive step and are capable of industrial application.”

    I guess the good news is that as long as software is technically not an “invention” we’re in the clear.

    Are methods of surgery considered “inventions”? If so, then Canada and Europe are in a bit of trouble.

  20. Of course, even if a country violates TRIPS by banning software patents, good luck enforcing the treaty. As is so often the case in international law, enforcement is the real issue.

    Let’s not forget how many Americans rely on international treaties to claim patent rights in other countries, notably priority dates.

  21. I am not aware of any treaty that says software must be patentable.

    In my opinion TRIPS plainly requires it. Article 27:

    “Subject to the provisions of paragraphs 2 and 3, patents shall be available for any inventions, whether products or processes, in all fields of technology, provided that they are new, involve an inventive step and are capable of industrial application. Subject to paragraph 4 of Article 65, paragraph 8 of Article 70 and paragraph 3 of this Article, patents shall be available and patent rights enjoyable without discrimination as to the place of invention, the field of technology and whether products are imported or locally produced.”

    There are some exceptions: “Members may exclude from patentability inventions, the prevention within their territory of the commercial exploitation of which is necessary to protect ordre public or morality, including to protect human, animal or plant life or health or to avoid serious prejudice to the environment, provided that such exclusion is not made merely because the exploitation is prohibited by their law.”

    There are also some more explicit exceptions for diagnostic, therapeutic, and surgical methods and plants and animals other than microorganisms, but those plainly don’t apply to software patents.

    I don’t think software implemented inventions fall under any of those exceptions. It’s a pretty hard argument to make, in my opinion, that software patents offend morality or threaten life or the environment. Of course, even if a country violates TRIPS by banning software patents, good luck enforcing the treaty. As is so often the case in international law, enforcement is the real issue.

  22. because it does not have the money to update its infrastructure. How do you propose the USPTO pay for the increased measures you illustrated above?

    It has been proposed to let them have more money.

  23. I am not aware of any treaty that says software must be patentable.

    Does this sound familiar? “patents shall be available for any inventions, whether products or processes, in all fields of technology, provided that they are new, involve an inventive step and are capable of industrial application.”

    I guess the good news is that as long as software is technically not an “invention” we’re in the clear. Also, treaties aren’t binding on national courts as far as I know.

  24. So if the problem is that the PTO and the courts are effectively letting applicants get away with writing unhelpful / harmful applications, then the cure is to simply ban those sorts of patents entirely? Why wouldn’t it make much more sense to require applicants (in all technology areas) to write better applications?

    There are all kinds of policies we could try: tighten the written description and enablement requirements, improve the examiner turn over rate with better pay and opening up satellite offices around the country, eliminate or at least dial down the presumption of validity, etc, etc. On a more focused front we could eliminate the double standard for computer science majors seeking admission to practice before the PTO, which would lead to more competent patent attorneys and agents in that field.

    The idea of banning software patents or business method patents because a lot of them are overbroad and expensive to invalidate strikes me like banning the construction of homes because people keep building ones that are fire hazards. Wouldn’t it be much better to simply strengthen the building code?

    Not if the administrative costs for strengthening the building code are too high. We already have a USPTO that’s technologically living in the 20th Century because it does not have the money to update its infrastructure. How do you propose the USPTO pay for the increased measures you illustrated above?

  25. The idea of banning software patents or business method patents because a lot of them are overbroad and expensive to invalidate strikes me like banning the construction of homes because people keep building ones that are fire hazards. Wouldn’t it be much better to simply strengthen the building code?

    Nice idea, James. As we have seen, the reaction to any attempt to update the “building code” will be identical to any attempt to enact an outright ban, so what difference does it make? Far better to demand the ban and, if some coherent argument against the ban is made along with tacit admissions that the system is fxcked, accept the updated code as a compromise. That’s how you have to play with these patent teabugger types.

  26. Perhaps. And we all know the US has no qualms about repudiating international treaties.

    I am not aware of any treaty that says software must be patentable. If there is such a one, then I’m pretty sure Europe is also violating it.

  27. I understand that, but when it is apparent that an entire sector of patents are proving more harmful than helpful, then perhaps it is prudent to excise that particular sector from the patent system.

    So if the problem is that the PTO and the courts are effectively letting applicants get away with writing unhelpful / harmful applications, then the cure is to simply ban those sorts of patents entirely? Why wouldn’t it make much more sense to require applicants (in all technology areas) to write better applications?

    There are all kinds of policies we could try: tighten the written description and enablement requirements, improve the examiner turn over rate with better pay and opening up satellite offices around the country, eliminate or at least dial down the presumption of validity, etc, etc. On a more focused front we could eliminate the double standard for computer science majors seeking admission to practice before the PTO, which would lead to more competent patent attorneys and agents in that field.

    The idea of banning software patents or business method patents because a lot of them are overbroad and expensive to invalidate strikes me like banning the construction of homes because people keep building ones that are fire hazards. Wouldn’t it be much better to simply strengthen the building code?

  28. but when it is apparent that an entire sector of patents are proving more harmful than helpful, then perhaps it is prudent to excise that particular sector from the patent system.

    Perhaps. And we all know the US has no qualms about repudiating international treaties.

    But is it really apparent that patents are doing more harm than good to the progress of the useful arts as it relates to that sector? It’s clearly not apparent to the companies in that sector, since engaging the patent system is optional and they’re still doing it.

    Even if all patents do for them is secure VC funding, that’s good enough. The entire point of patents is to create an economic incentive for investment in new inventions and a business model for bringing them to market, and that’s exactly what’s happening.

  29. Apparently I suck at formatting. That “help” standing alone above should have been underlined, not set apart from the rest of the post.

  30. You say that you understand that the written description is not the only thing that’s supposed to promote progress, but then you tell us that the benefits of the written description alone must outweigh the cost of the patent grant. Where does that come from? Saying it over and over doesn’t make it so.

    Perhaps I did not explain myself well enough. When I say “

      help

    promote progress”, I am speaking of written descriptions in conjunction with other things, not just acting on its own.

    According to the Constitution, the patent scheme is supposed to promote progress, at least enough so that the benefit of patents to society outweighs the societal cost of granting legal monopolies to various entities. It would be nice if every single patent grant promotes progress more than it costs, but I don’t see where a corresponding requirement would come from, and I don’t expect that it’s practical to build a system that ensures a positive return for every patent, much less for each written description all by itself.

    I understand that, but when it is apparent that an entire sector of patents are proving more harmful than helpful, then perhaps it is prudent to excise that particular sector from the patent system. Just because it may be impractical to design a perfect system does not mean that we should turn a blind eye to the significant problems that exist.

  31. Ah Willton,

    You continue in your novice mistakes:

    “If it’s not doing that,” – But it is doing that – Patent law is not geared to individual groups – you must look at the complete picture.

    “the cure should not be worse than the disease” – But the cure is better than the disease – again, you must look at the complete picture.

    Then why don’t you explain the “complete picture” to me, all-knowing one? Feel free to show me what I’m missing and how that outweighs the dead-weight loss of the costs of patent procurement and enforcement in the software industry.

  32. A written description is supposed to help promote progress, at least enough so that the benefit of patent to society outweighs the societal cost of granting a legal monopoly to a single entity.

    You say that you understand that the written description is not the only thing that’s supposed to promote progress, but then you tell us that the benefits of the written description alone must outweigh the cost of the patent grant. Where does that come from? Saying it over and over doesn’t make it so.

    According to the Constitution, the patent scheme is supposed to promote progress, at least enough so that the benefit of patents to society outweighs the societal cost of granting legal monopolies to various entities. It would be nice if every single patent grant promotes progress more than it costs, but I don’t see where a corresponding requirement would come from, and I don’t expect that it’s practical to build a system that ensures a positive return for every patent, much less for each written description all by itself.

  33. Ah Willton,

    You continue in your novice mistakes:

    If it’s not doing that,” – But it is doing that – Patent law is not geared to individual groups – you must look at the complete picture.

    the cure should not be worse than the disease” – But the cure is better than the disease – again, you must look at the complete picture.

  34. The patent system is not there as a crutch to those fields that need some external source of promotion. The patent system is there across all fields to accelerate promotion.

    I understand that, but the cure should not be worse than the disease.

  35. Wilton, your argument appears to be premised on the notion that the “promoting progress” aspect of the patent system is furthered only by the patent documents themselves. That’s clearly incorrect. Once patent protection is ensured, innovators can launch products that can be easily copied and/or improved upon, researchers can write and present technical papers that people actually do read, etc.

    The patent specification is principally a legal document, and the PHOSITA is a fictional construct. The fact that real-world engineers don’t get their technical information from patent documents doesn’t really tell us much about whether we’re getting the quid for the quo.

    Cy, I understand that the written description is not the only thing that’s supposed to “promote the progress”. But Section 112 of the Patent Act was written for a reason, and it wasn’t just to make life harder for patent applicants. A written description is supposed to help promote progress, at least enough so that the benefit of patent to society outweighs the societal cost of granting a legal monopoly to a single entity. If it’s not doing that, then perhaps we need to rethink the system.

  36. Ah Willton,

    You make the novice mistake of misunderstanding why the patent system is in place with your comment of:

    If progress is being sufficiently promoted in a particular field without the use of patents, then the imposition of a burdensome patent system in said field is likely not necessary.

    The patent system is not there as a crutch to those fields that need some external source of promotion. The patent system is there across all fields to accelerate promotion.

  37. PHOSITAs in the software industry can learn how to make and use particular software innovations more easily by reverse engineering the software itself than by reading the disclosure of a patent.

    It seems to me that the natural conclusion to draw here is actually that the written description and enablement requirements need to be tightened up, particularly at the examination level, so that the reader of a software patent can actually understand and make the invention, not that software patents are special snowflakes that need to be banned outright.

  38. Wilton, isn’t this a case for a patent system? If reverse engineering is so easy, trade secrets won’t save the little entrepreneur when Microsoft decides to reverse engineer their nifty product?

    The purpose of a patent system is not to prop up business models; it is to “promote the progress of science and the useful arts.” I don’t see why a patent system should be concerned with the little entrepreneur that can’t hack it because competitors are offering competitive products.

  39. “PHOSITAs in the software industry can learn how to make and use particular software innovations more easily by reverse engineering the software itself than by reading the disclosure of a patent.”

    Wilton, isn’t this a case for a patent system? If reverse engineering is so easy, trade secrets won’t save the little entrepreneur when Microsoft decides to reverse engineer their nifty product?

  40. “Microsoft was well known for its “embrace, extend, extinguish” strategy. If a competitor’s feature is covered by software patents, however, Microsoft (or any other competitor) cannot easily embrace the feature, much less extend it or use its market dominance to then extinguish the competitor.”

    James, as a techie with some experience dealing with patents, I agree with you. What chance would a startup have against a Microsoft if it couldn’t protect its innovations through patents? First-to-market might give you a head-start, but particularly in markets where network effects are present you still have to succeed in reaching the tipping point first, not an easy feat when you’re racing Microsoft. Trade secrecy might slow the competitor down, but the size of the bump-on-the-road is technology dependent. You’re essentially left to hope that you don’t show up on the radar long enough to establish your toe-hold. So, sure, from the techie’s point of view patents can be an annoying distraction, but some of us appreciate that they can also be vitally important to the success of our company.

    Ps – Malcolm, why such derisive comments, do you take this personally?

  41. Without software patents, how would anyone ever figure out how to do an experiment to determine which internet ad is getting the most hits?!?!?!?!?

  42. Our fourth major result is that our respondents—particularly software companies—find the high costs of patenting and enforcing their patents deter them from filing for patents on their innovations (see Fig. 1 below).

    BOOO HOO HOO HOO HOOOHOOOO!!!!

    Based on the disclosures in a typical software patent application, the R&D for developing the “software” disclosed therein is near zero.

    If these guys can’t afford to file patents, then maybe they simply sxck at running a business.

  43. Tell me, how many software engineers do you know that actually read patents for their own personal education?

    Wilton, your argument appears to be premised on the notion that the “promoting progress” aspect of the patent system is furthered only by the patent documents themselves. That’s clearly incorrect. Once patent protection is ensured, innovators can launch products that can be easily copied and/or improved upon, researchers can write and present technical papers that people actually do read, etc.

    The patent specification is principally a legal document, and the PHOSITA is a fictional construct. The fact that real-world engineers don’t get their technical information from patent documents doesn’t really tell us much about whether we’re getting the quid for the quo.

  44. This is a very good point. The natural conclusion …

    Not really. It’s pretty easy to reverse engineer many patented mechanical apparatuses as well. Besides, I’m not sure exactly how you define software patents, but some of them describe technology that’s d@mn near impossible to reverse engineer. Take one of Ned’s favorites, for example – I bet you can’t reverse engineer the inner workings of software for implementing a Viterbi decoder. Or reverse engineer the software implementing the RSA encryption algorithm.

    I think you need a little more support for your “natural conclusion” …

  45. Funny it is then, that the patent system has no legal basis for differentiating amongst the useful arts and “providing benefits / having different requirements” based on those different arts – it’s an all or nothing type of gig and the penalty “for the nothing” far outweighs the penalty “for the all.”

  46. “PHOSITAs in the software industry can learn how to make and use particular software innovations more easily by reverse engineering the software itself than by reading the disclosure of a patent.”

    This is a very good point. The natural conclusion is that the underlying effect of the software patent game is really not so much the classical quid pro quo of disclosure that benefits society in exchange for monopoly, but can better be seen as a market-based anti-trust effect that ensures a relatively oligopolic market (consisting of small fiefdoms of monopoly via patents) but also prevents any single company (Microsoft) from dominating the entire industry. I’d say that this result is better than perhaps the status quo ante, but certainly worse than ideal. However, because there really is no practical benefit to the disclosure itself, it does raise questions about whether it serves the actual constitutional purpose of the patent regime.

  47. Survey participants must be mistaken.

    I would like to work at the firm that Palin works for if they are charging $16k to write an application! Or, maybe even better, just introduce my firm to some of their obviously over-paying clients if they have any left. If this $38k patent was a software patent, assume that it was pending before the office for at least 5 years! LOL. And, only 2 responses to office actions? Palin must be an old timer who worked back in the 70′s and 80′s. Most software-related patents prosecuted in the last 20 years, I would bet, have had at least 3 or more office actions, an interview, maybe an RCE or two or three, one or two appeal briefs filed after which the examiner re-opened prosecution, maybe the last re-opening after an appeal brief coming with a notice of allowance. So, $38k does not seem out of line with the current state of examination/prosecution. It’s certainly out of line with the way examination/prosecution should be, but I’m hopeful that things will improve.

  48. Wilton, they do not incent disclosing of inventions because the cost/benefit ratio does not justify the time and effort, let alone the damage caused by the disclosure of trade secrets. So, the software innovations stay secret — and only the few who know the code are educated.

    So, you say, this is OK. Patents are not necessary for the software industry to make a buck. Possibly true. But mankind is impoverished by the lack of disclosure, and this is both wrong and wrongheaded.

    Oh please, spare me the BS. PHOSITAs in the software industry can learn how to make and use particular software innovations more easily by reverse engineering the software itself than by reading the disclosure of a patent. Tell me, how many software engineers do you know that actually read patents for their own personal education?

    The costs of reverse engineering software is far less than the institutional cost of engaging in the patent system, both from a procurement and enforcement standpoint. If the industry does not want a patent system, then we should not be forcing it upon them.

  49. So Willton, your remedy for scant usage is to make the patents less attractive?

    How exactly does that fit the constitutional mandate to promote?

    You have a funny way of looking at bugs/features.

    Scant usage requires NO remedy. If progress is being sufficiently promoted in a particular field without the use of patents, then the imposition of a burdensome patent system in said field is likely not necessary.

  50. do away with these software patents before capitalism triumphs

    Capitalism always triumphs. Patents just move the goalposts a little, so capitalism can win without tearing up the playing field too much.

    Survey participants must be mistaken.

    Clearly, you know how much they spend better than they do. If we assume they spent less than what they say they spent, they are obviously mistaken about what they spent.

  51. “Another of our survey questions revealed that the average out-of-pocket cost for a respondent firm to acquire its most recent patent was over $38,000.”

    Seems rather high. Assuming the application cost $16K and prosecution costs were $5k each for two responses to office actions, with issue fees that would be only around $28K. Survey participants must be mistaken.

  52. Obviously these S/W cmopanies do not patent in Europe. The EPO costs will knock their socks off.

    And no, there is no gain from the Attorney’s fees over in Europe. They cost just as much as the Americans.

    Cheers from Europe.

  53. Nice fantasy world. I especially like the way it’s self-fulfilling.

    There are worse fantasy worlds – take for example the IMHO-Ned Law world, a pretty spectacular place where all types of presumptions and nuances exist and case cites grow from dung. It’s a shame that to get there you have to forget general logic and trip your way there. Down the rabbit hole we go.

  54. “then it should come as no surprise why people in the industry don’t want patents”

    They must have been traumatized watching Netscape’s Internet cookie patent get clubbed like a baby seal by a judge in the ED VA earlier this year.

  55. More business method patents means more entrepreneurs can start up and compete with big comps like Google, Microsoft, Apple etc. And since every new business creates at least one new job that means business methods patents can and will save our economy.

    Let’s face it. Socialism has failed and we need patents, particularly business method patents to prevail.

  56. Well, Mooney, we have both Google and not just Microsoft because of the patent system: two companies for the left to despise for their creating new and innovative products, wealth for their investors, sprawling industrial parks with high paying jobs and that are enormous boons to their communities. We need to unite, comrades of the left, and do away with these software patents before capitalism triumphs and brings the people endless abundance and prosperity, enough to eliminate the need for a government handout and the reason and excuse for our very existence.

  57. Google is built on software patents on web search, advertising, and distributed computing

    Right. So if Google didn’t have patents, we’d all be using Microsoft’s web search site instead.

    Nice fantasy world. I especially like the way it’s self-fulfilling.

  58. LOL.

    Microsoft was well known for its “embrace, extend, extinguish” strategy. If a competitor’s feature is covered by software patents, however, Microsoft (or any other competitor) cannot easily embrace the feature, much less extend it or use its market dominance to then extinguish the competitor.

    For example, in the early 1990s, without effective software patents Apple had to resort to suing Microsoft on the somewhat flimsy basis of copyright infringement, which failed. As a result, Microsoft was able to ride on the coattails of Apple and Xerox’s innovations in graphical user interface design.

    Contrast that with today, where Apple has been able to patent numerous features of the iPod, iPhone, multitouch technology, etc. As a result, Microsoft hasn’t been able to simply copy those technologies into the Zune, Windows Mobile, etc.

    Or consider that Google is built on software patents on web search, advertising, and distributed computing. Those patents have no doubt contributed to Microsoft’s inability to dominate those markets.

  59. One major reason those companies got so big and impossible to compete against was that their competitors lacked the leverage provided by software patents.

    LOL.

  60. Wilton, they do not incent disclosing of inventions because the cost/benefit ratio does not justify the time and effort, let alone the damage caused by the disclosure of trade secrets. So, the software innovations stay secret — and only the few who know the code are educated.

    So, you say, this is OK. Patents are not necessary for the software industry to make a buck. Possibly true. But mankind is impoverished by the lack of disclosure, and this is both wrong and wrongheaded.

  61. Antitrust violations? I thought IBM and Microsoft got to their positions of dominance by enforcing their copyrights.

  62. IBM, Microsoft, and lots of other companies selling software spent *decades* using only copyright for protection, and the software industry thrived.

    That’s funny because I seem to recall that the years that IBM and Microsoft dominated the software industry were actually pretty bad and not what I would call ‘thriving’ at all. Just ask Borland, Corel, Lotus Software, and a whole host of other companies. Both IBM and Microsoft were sued by the government for antitrust violations (although IBM’s case was dropped), you may remember.

    One major reason those companies got so big and impossible to compete against was that their competitors lacked the leverage provided by software patents.

  63. So Willton, your remedy for scant usage is to make the patents less attractive?

    How exactly does that fit the constitutional mandate to promote?

    You have a funny way of looking at bugs/features.

  64. Cost of procurement, ease of designing around, excessive cost to enforce, and “best of all,” disclosure of trade secrets without much, if any, benefit: is there any wonder why patents in the software industry are not an incentive?

    What this tells me is that we really need to increase the reward for proof of infringement and increase, rather than decrease, the presumption of validity by prohibiting reexamination except upon reliable proof of an anticipating reference and get away from the namby-pamby and ridiculously low barrier of “substantial new question.”

    Increase the reward for infringement? Wouldn’t that be considered a windfall? I don’t see how society benefits from those proposed changes unless the hurdles for obtaining a patent are likewise increased.

    As has been said a lot here, “it’s not a bug; it’s a feature.” If patents only provide a scant benefit to the industry (i.e., they do not promote progress in the particular art), then it should come as no surprise why people in the industry don’t want patents.

  65. Les,

    Ya got a point with “ why would someone have to buy a license to “acquire technology”?

    It aint too hard to acquire what’s there for the world to see. It be a different story if you want to use that technology. Of course, since the tech is public, a savvy person can design around, and that’s actually a feature of the patent system, aint it?

    IBP,

    Something like horology…” Way too easy to make fun of.

    phil,

    Get rid of softwarre patents, and more programmers can enter the market.” and “I speak only as a programmer.

    LOL – I thought the market was too crowded already – and – gee really? With the lack of legal knowledge, you had me fooled. I thought you had a number between Ned’s and Kenny’s.

  66. Michael L. Slonecker: What does strike me as startling is that the authors seem a bit surprised by what they collected.

    I like it when academics are surprised by their results. It gives me a higher confidence level that their results aren’t conditioned by their pre-conceived notions.

    phil long: If I pay off a mobster, he won’t kill me. I can re-write that sentence as ‘If I pay a patent attorney, I reduce my chances of getting sued’ (and at least the mobster gives me a 100% chance of not getting killed!).

    That’s not true. If you pay off a mobster, he can’t guarantee you won’t be killed. His only promise is that he won’t kill you, but he can’t even guarantee that because he might get a better offer from another client.

    If you pay off a patent attorney, you can be 100% sure that patent attorney won’t sue you, even if someone else offers him more money.

  67. I second Slonecker’s observation that the substance of these articles is unsurprising, and I have only been in patents for 10 yrs, not since the early 80′s!

    It would have been nice had the study included an industry sector that wasn’t as politically charged as biotech, medical device, or software.

    Something like horology…

  68. “I would also suggest that the indicated 35.63% belief that trade secrecy provides adequate legal protection is to a considerable extend affected by considerable legal missperception on that subject. [Especially in California?]”
    100% correct.

    link to examiner.com

  69. If a patent includes an enabling disclosure, why would someone have to buy a license to “acquire technology”?

    Because if you keep reading after the enabling disclosure, the patent also includes claims.

  70. Thanks Dennis for deleting my post calling out the general bias and patent hostility emanating from Berkeley…

    This is not an objective survey.

  71. IANAL; I speak only as a programmer. To me, patents are a hindrance, not a help. No patent lawyers of whom I am aware work for free, and my money is spent more productively on computers, not legal advice. IBM, Microsoft, and lots of other companies selling software spent *decades* using only copyright for protection, and the software industry thrived. How is forcing me to seek legal advice any different from the ‘protection’ racket? If I pay off a mobster, he won’t kill me. I can re-write that sentence as ‘If I pay a patent attorney, I reduce my chances of getting sued’ (and at least the mobster gives me a 100% chance of not getting killed!). There is no value added in either case. Get rid of softwarre patents, and more programmers can enter the market.

  72. If a patent includes an enabling disclosure, why would someone have to buy a license to “acquire technology”?

  73. The substance of these articles should be unstartling to anyone who has practiced patent law for any extended period of time. What does strike me as startling is that the authors seem a bit surprised by what they collected. Perhaps this is a key difference between those in academia who study patent law and those in the private sector who practice it. This is not a criticism of those in academia, but merely an observation.

    Of far more interest, and what I submit is worthy of study, are the “financials” associated with the “process”. Have the financials reached a point where the promotion of progess has lost its luster and is more accurately characterized as the demotion of progress? Personally, I happen to believe this may very well be the case, a “slippery slope” that commenced in the early 80′s when Congress decided to have the USPTO become self-funding.

  74. Ah, I see that the actual survey paper has a more detailed breakdown by industry for the chart on page 1313. I also see that my guess was wrong: not wanting to disclose was significantly more commonly cited by biotech companies than software companies. I skipped over the mention in the article here, too.

  75. I would also add that there is a competitive alternative to patents in software, namely open source.

    This is true, but it’s hard to say whether that was a significant factor here without knowing how many of the software startups use an open source development methodology.

    I would really like to see a more complete breakdown of the chart in this article. As it is one can’t tease out industry differences or see whether VC funding made a difference. For example, the cost of getting a patent is probably a much more significant barrier for unfunded companies, and not wanting to disclose information probably rarely comes up in the biotech context where eventually a great deal must be disclosed to regulators.

  76. I would also suggest that the indicated 35.63% belief that trade secrecy provides adequate legal protection is to a considerable extend affected by considerable legal missperception on that subject. [Especially in California?]

  77. Re: “we asked how much of a role patents play .. Somewhat surprisingly, the responses on the whole are rather tepid.”
    That is not so surprising if one takes into account the fundamental responsive-biasin all surveys like this. Even if the company is responding to such an unprivileged survey without getting full facts AND legal advice from its legal counsels, the natural tendency of competent legal counsel, with natural legal sensitivities to any possible future anti-trust concerns for clients with patented products, is to advise the client NOT to suggest that their patents are highly important and vitally protective.

  78. And yet, we have record numbers of applications flowing in.

    There is a disconnect on the logic somewhere.

    Perhaps not, if the percent rate of growth of patents in software is lower than the percent rate of growth of start up companies in software.

  79. is there any wonder why patents in the software industry are not an incentive?

    And yet, we have record numbers of applications flowing in.

    There is a disconnect on the logic somewhere.

  80. Cost of procurement, ease of designing around, excessive cost to enforce, and “best of all,” disclosure of trade secrets without much, if any, benefit: is there any wonder why patents in the software industry are not an incentive?

    What this tells me is that we really need to increase the reward for proof of infringement and increase, rather than decrease, the presumption of validity by prohibiting reexamination except upon reliable proof of an anticipating reference and get away from the namby-pamby and ridiculously low barrier of “substantial new question.”

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