Follow-on to Professor Merges: High-Tech Calls For Reform

As a follow-on to yesterday’s op-ed by Professor Robert Merges, I think that Sun Microsystems General Counsel Mike Dillon’s statement last September on the patent tax go to the point of what reforms many high-tech execs would prefer:

ScreenShot069[W]e were happy to recently host a visit to Sun by Congressman Lamar Smith. Along with Senators Hatch and Leahy, he has been a leader in the push for patent reform. In the course of our meeting, we shared our views on the need for significant changes to the current patent system, including the repeal of Sec. 271(f), limits on injunctive relief and the need to restrict damage awards to the value of the invention described in the contested patent. (Under the current system a plaintiff claiming a patent on a small, inexpensive component like a heat sink can claim damages based on the total profit for the entire product – even if it is something that contains thousands of other components.)

Although I suspect that Dillon is also upset about “bad” patents, patent quality was not even in his list of complaints. Rather, all these reforms would change the value of patents across the board. 

It is my perception that many high-tech execs are quite anti-patent after being burned a time or two.  Perhaps they should read Professor Merges recent empirical work on “Patents, Entry and Growth in the Software Industry.” In that paper, Merges finds that his data “suggests a simple overall conclusion: patents are not killing the software industry, and successful firms are paying attention to patent quality, at least according to some measures.”

Note:

  • Merges’ paper is focused on new entrants into the market. Thus, even after reading the paper, bastions of the old-software-market still might not be happy with the current state of patent law.

39 thoughts on “Follow-on to Professor Merges: High-Tech Calls For Reform

  1. 39

    ” I really don’t have any problem with the NTP patent if it had not fetched $600 million.”

    That’s just plain BS

    Read about early history of this whole NTP saga, for example, here:
    link to en.wikipedia.org.

    Campana was a *real* engineer and inventor and he had a legitimate claim to technology, he was just too early, and didn’t have resources RIM had, that’s why he failed as a businessman.
    RIM was initially offered a license for much less than 600 million, probably couple of mils, but chose to proceed with willful infringement.
    Thus 600 m.
    There must be some punitive measures for intentionally breaking the law, including patent law, don’t you get it ?

  2. 38

    big guy:

    The problem is not just that there are a lot of “obvious” patents out there. The problem is that obvious patents can end up being extremely valuable. I really don’t have any problem with the NTP patent if it had not fetched $600 million. I couldn’t care less if people want to spend money obtaining obvious and worthless patents.

    However, some people don’t want obvious patents, period. They feel granting obvious patents is a waste of resources, which is true. But, I’m happy to settle for a suboptimal solution, i.e., grant obvious patents, but don’t let them fetch ridiculous amounts of money.

  3. 37

    Tom asked, “In SF’s hypothetical, the infringer cannot be willful because he had no knowledge, so why would he pay the amount of damages as if it was willful infringement?”

    Good question. In my hypothetical, the infringer did not know at the time of initial design about the patent. You’re right that the infringer will not settle for past damages at the willfulness rate.

    I should have clarified that I was discussing how, after an adjudicated infringement, the threat of a permanent injunction could unfairly force an initially unintentional infringer to pay too much for a license for its future use of a narrowly patented, technologically intertwined component.

    With the injunction looming, the infringer knows about the patent, knows that their component infringes, and knows that they’ll be on the hook for willfulness if they do not cease infringing.

    Even without an injunction, the patentee would be able to sue the infringer again. This time, the infringer would likely have to pay treble damages and the patentee’s attorneys fees (and its own attorneys fees too). This is why the settlement for future infringement would be somewhere around treble damages and the patentee’s attorneys fees — but probably somewhat less as a compromise.

  4. 36

    birdman:

    I understood the apparent logical flaw that you pointed out, but it is only a logical flaw if you don’t know how things work in computer technology.

    Note that I restricted my statement to computer technology, but in your reply you broadened it to all technologies. I said “computer technology” for a reason. Based on my experience, most innovations in computer technology are published in research papers. The standard practice is to file a patent (often a provisional) and then publish the research. This was a “hidden” assumption that I didn’t state, but is well known to those who practice in this field of research. Another thing to note is that the “obviousness” bar for publishing in a research journal or conference is much higher than that of the PTO. So, many patents don’t have a corresponding research publication. However, according to my dictionary, many of these patents are not innovations.

    Just so that I’m totally clear about this. I wouldn’t make the statement I made for nuclear technology. Most of the technological advancements in that area are obviously kept under wraps.

  5. 35

    Screw you big guy

    “worthless patent” = unenforceable against big crooks by little patent holder without resources to reverse-engineer certain products and prosecute the infringers?
    yeah, probably true..

    Screw you again

  6. 34

    Sf said:

    “As to what the inventor has to sell, the inventor can still license the invention. The amount would be somewhere around three-times a reasonable royalty plus attorneys fees (which is what the patentee would likely get for willful infringement damages).”

    In SF’s hypothetical, the infringer cannot be willful because he had no knowledge, so why would he pay the amount of damages as if it was willful infringement?

    The point I was trying to make above is that without injunctive relief, the patent owner really doesn’t have anything to license. A license gives someone the right to make, use, etc., without the fear of being made to stop by the patent owner through the patent owner’s right to exclude. Without the threat of an injunction, there is less incentive for a company to license. Why license when a company can just practice the invention, make lots of money, and wait for the patent owner to sue. It is a win-win for the infringer. If they aren’t sued, they make lots of money. If they are sued, they end up paying a royalty from the lots of money they made, but they are not really much worse off than if they had licensed from the beginning.

  7. 33

    small guy:

    “Of course, every large infringer out there will say they didn’t know nothing bout freaking patent owned by some little guy”

    You’ll remain small because you don’t know grammar. You’re embarassing us inventors.

    I think you’re missing Anon’s point which is about QUALITY of patents. To me, the whole argument here is about the threshold of what constitutes a qualified patent. I think every inventor believes his/her creation is worthy of a patent, but that doesn’t mean that’s true in every instance just as everyone thinking he/she’s a star can’t possibly be true for every single one [watch that Fox show].

    Believe it or not, there are lots of worthless patents out there, and I venture to say yours is probably one of them.

  8. 32

    “Finally, if the infringer had knowledge of the patent and could have mitigated its design around costs beforehand, I believe an injunction that prevented use of the invention would likely be appropriate.”

    What do you propose, a polygraph test ?
    Or better yet,a torture chamber to get the truth out of those corporate execs
    Of course, every large infringer out there will say they didn’t know nothing bout freaking patent owned by some little guy

    May I remind you that there is no punishment for corporate counsels lying during a patent trial.
    See NTP vs. RIM saga…

  9. 31

    Tom:

    The Constitution gives Congress the power to create laws that give a right to exclude for a limited time.

    Congress could have created remedies that gave inventors an absolute right to an injunction. But it didn’t. Instead, injunctions remain subject to equitable considerations.

    My hypothetical included two facts related to equity: (1) the infringer did not have any knowledge of the patent and thus could not have designed around the patent and (2) the infringer could have easily designed around the patent because of its narrow scope, but now cannot without substantially more expense. Under these facts, I don’t see how equity (or good patent policy) would support leveraging a threatened injunction to obtain the payment of 10, 50 or 100 times the value of a reasonable royalty (that is, the hypothetical reasonable royalty that would have been paid at a time before the infringement began).

    As to what the inventor has to sell, the inventor can still license the invention. The amount would be somewhere around three-times a reasonable royalty plus attorneys fees (which is what the patentee would likely get for willful infringement damages).

    Moreover, rather than issuing an injunction that prevents further use of the invention, the court could simply issue an injunction requiring the payment of three-times a reasonable royalty plus attorneys fees.

    Finally, if the infringer had knowledge of the patent and could have mitigated its design around costs beforehand, I believe an injunction that prevented use of the invention would likely be appropriate.

  10. 30

    I agree with Tom Koluga that the right to exclude others from practicing one’s patent should be absolute. If there is a serious public policy issue raised by the enforcement of a particular patent or patents, then Congress should step in (as it has every right to do) and fix the problem.

    But consumers losing access to their particular handheld device or a preferred satellite TV provider is a laughable joke of a “problem” and for our elected representatives to step in to “cure” that problem would be disgusting waste of time that could be spent passing legislation which would have an immediate impact on whether human beings live or die.

  11. 29

    Sf said:

    “No, because, in the second case, the threat of the injunction unfairly skews the settlement well beyond what a reasonable royalty would be.”

    Unfortunately, without the threat of injunction and without the power to prevent others from using a patented invention, the situation is skewed in the opposite direction.

    Property has a value equal to what a willing buyer gives a willing seller. At least in a free market that is how value is determined.

    What a patent owner is selling, either through a license or assignment, is the right for the buyer to practice the invention without being stopped (by an injunction) and/or the right to exclude others (again, by an injunction) from practicing the invention. The only value a patent has is based on the right to exclude, which is the “exclusive right” referred to in the Constitution. Take away the right to exclude and what does a patent owner have left to sell? What is a reasonable royalty based on if there is no right to exclude?

  12. 28

    Anon:

    There is a simple logical flaw in your statement I quoted above. That is all.

    The fact that universites and big companies publish the most information/inventions/innovations/words, does not mean that they have the most or the best information/inventions/innovations/words. It may be evidence of that, but it does not “follow” in the logical sense.

    In order for it to follow, you have to assume that most information/inventions/innovations/words are published in research papers.

    That was my one and only point.

  13. 27

    birdman:

    It doesn’t follow if by “invention” you mean something that is “patentable” under the CAFC’s gobbledegook obviousness standard.

    However, if by “invention” you mean a true technological advance (as opposed to something that just passes the muster of “obviousness” as defined by the CAFC), then my statement does follow.

    But this highlights the real issue in the discussion. People mean different things by “innovation.” People like me who really care about technological progress have a higher standard for what counts as innovative than the typical patent attorney who is mainly worried about his job or career.

  14. 26

    Zed asked, “Shouldn’t we let the marketplace decide what is a reasonable amount to pay for each?”

    No, because, in the second case, the threat of the injunction unfairly skews the settlement well beyond what a reasonable royalty would be. That’s the point. In the second case, an unintentional infringer could be forced to pay 10, 50 or 100 times the value of a reasonable royalty for a narrowly patented, technologically intertwined component. Without the threat of the injunction, the parties would more likely settle for some value around three-times a reasonable royalty plus attorneys fees (which is what the patentee would likely get for willful infringement). This is a better result.

    Zed stated, “If this price is too high, a design around is likely to be engineered (or new technology developed) sooner rather than later, thus spurring innovation by necessity.”

    That assumes that the design-around would be an innovation. The design-around could just as easily be a prior art design that would have been chosen if only the unintentional infringer had known about the patent.

  15. 25

    “In computer technology, most research papers are published by universities and big company research labs. If research papers contain novel inventions, then it follows that most inventions occur at universities and large R&D facilities.”

    Anon:

    No, it does not follow.

    Your statement above is the logical equivalent to: Birds sing nice songs, therefore most nice songs are sung by birds.

    Plus, don’t forget to account for the publication quotas typical of universities.

  16. 24

    Rambus affair ???
    Just give me a break…

    “One day all computers will have to
    be built like this, but hopefully without the royalties going to Rambus.”

    (Siemens/Infineon Executive)

    Sounds awfully familiar to me…

  17. 23

    SF,

    I think the second scenario is similar to the Rambus affair. However, I am not sure that an injunction is unfair in the second case.

    In the first scenario, the invention has value because it is brand-spanking new/the area is wide open.

    In the second, the invention has value because it is an engineering issue.

    In both cases, the invention has intrinsic economic value (regardless of whether or not it is a “giant leap forward” or an “itty bitty step”).

    Shouldn’t we let the marketplace decide what is a reasonable amount to pay for each? If this price is too high, a design around is likely to be engineered (or new technology developed) sooner rather than later, thus spurring innovation by necessity.

  18. 22

    It seems to me that there’s a big difference between an invention (1) that is difficult to design around because of its legitimate breadth and (2) that is difficult to design around because the patented component is so technologically intertwined that it is difficult or impossible to remove once implemented, but would have been easy to design around at the time of the initial implementation.

    A patentee can rightly use the threat of an injunction in the first case. But in the second case, the patentee could unfairly abuse it by obtaining a settlement commesurate with the value of avoiding the design-around process — which often is much larger than the value of the invention itself.

  19. 21

    It seems to me that the question, once again, boils down to: what is an insignificant technological advancement?

    Just how does one measure significance? Doesn’t it intrinsically depend on the technical field?

    I personally doubt the “problem” with the patent system will ever be “solved.” Someone will always be unhappy about any system.

  20. 20

    Tom said: “Throw away all the patents that have zero market value, i.e. the sideways swing, and then see how many of the remaining were filed with an assignee that is a big company or a university.”

    Tom, you are making my point… well, kind of… The NTP patent will not be filtered-out using your approach because it does not have “zero market value” (although its market value has a lot of zeros). That’s precisely one of the major problem with the patent system.

    I says: Regardless of market value, throw away all the patents that are insignificant technological advancements, i.e. the NTP patent, and then see how many of the remaining were filed with an assignee that is a big company or a university.

    I also says: While we are at it, let’s keep all the patents that are insignificant technological advancements, i.e. the NTP patent, and then see how many of them have a high market value.

    Unfortunately, Dennis – or anyone else for that matter – won’t be able to help us, because as I noted before, determining whether an invention is an insignificant technological advancement is highly subjective.

  21. 19

    Tom

    “only innovators who can afford to sit around and write about their innovations for journals are those sponsored by big companies and universities.”

    I haven’t looked around but I doubt that’s true. Where there’s a hobby or interest, there’s usually some sort of forum for the members.

    But Google is our friend!

    link to startupjournal.com

    ***Small-scale inventors are responsible for more than half of all “significant inventions,” studies by the Small Business Administration have found. And some small inventions are quite profitable.***

    I suppose we should take that statistic that with a grain of salt, given the source. ;)

  22. 18

    Anon said:

    “Pick up any ACM or IEEE research publication and look at the authors’ bios. You will find that most of the authors either work at hi-tech corporations or at universities.”

    [Sarcasm on]Great way to prove a point. Look at a publication that caters to big companies and universities to see who writes about innovations.[Sarcasm off] Hmmm. News flash! The only innovators who can afford to sit around and write about their innovations for journals are those sponsored by big companies and universities. When I worked as an engineer, the only way I could afford to participate in IEEE or ISA was because my big company employer paid me to do so.

    To measure technological advances put forth in patents, look at patents. Throw away all the patents that have zero market value, i.e. the sideways swing, and then see how many of the remaining were filed with an assignee that is a big company or a university. Maybe we can get Dennis to do another statistical analysis. It would be interesting to just look at patents with assignees and compare the assignees to EDGAR or some other database to determine if the assignee is a big company or university.

  23. 17

    Unfortunately, “decent data” is hard to come by. Deciding whether an “invention” is a technological advance or a trivial improvement is highly subjective. But, FWIW, I’ve already stated one way of determining where most of the technological improvements in computer technology are being generated today. Pick up any ACM or IEEE research publication and look at the authors’ bios. You will find that most of the authors either work at hi-tech corporations or at universities. Only rarely do you find that an author is an “independent expert” who is not associated with a hi-tech corporation or a university. Even when you find such independent experts, they usually have spent a large portion of their careers in a university and/or a hi-tech corporation.

    I agree with Malcolm Mooney that the current obviousness standard (teaching/suggestion/motivation) allows too many trivial patents to be granted (both corporations and the so-called independent inventors are recipients of these trivial inventions). These trivial inventions would not have been problems if their “leverage” was equally trivial. However, as the Blackberry case (and many other cases) has shown us, these trivial inventions can give the owners an unjustifiably high leverage.

    Note that I’m not advocating squashing an independent inventor who has truly invented something worthwhile. I think it is important that we have a system that will allow an independent inventor to protect and exploit his or her invention. However, that is only one of the factors to keep in mind. I have a problem when people make that the overiding goal of the patent system. The patent system’s goal is to foster innovation, not to protect the so-called independent inventor at all costs. I agree with Bob Priddy when he says that we should “support strengthening patent quality while keeping these incentives reasonably balanced and strong.” For me, the operative phrase is “reasonably balanced.”

  24. 16

    “I want to be rude when I hear such nonsense about “almost all technological advances come from universities and large R&D facilities”

    How about somebody providing some decent data as evidence, one way or the other?

  25. 15

    “I could also give you the number of my own recently issued US patent, which is already widely infringed by the high-tech industry and will be litigated in some future times, but I will spare you from reading it”

    Oh, c’mon, smallguy! Bring it on! At the very least, we want to know how much non-patent prior art was cited.

    Show us yours and I’ll show you mine!

    Okay, I’ll just tell you about my high-tech invention. It’s a method of using a Blackberry or similar hand-held wireless computing device while swaying from side-to-side on a swing hanging from a horizontal member.

    This invention is not anticipated by any reference, and of course it seems obvious but only in hindsight, which is impermissible.

    I also have a business method of identifying and sueing people who are infringing my patents by monitoring parks for this behavior using a video camera.

  26. 14

    Anon wrote:
    “I don’t want to be rude, but someone has to take a stand against this independent inventor nonsense.”

    Bullshit !!!!!

    And do I want to be rude when I hear such nonsense about “almost all technological advances come from universities and large R&D facilities”

  27. 13

    Nathan Myhrvold is one of the owners of Intellectual Ventures, a super-troll. Peter Detkin is also at Intellectual Ventures. Hence, I’m not surprised that he said those things. But, I digress.

    So far none of the responses have tried to justify the RIM v. NTP settlement. That’s because they can’t justify it.

    So far the responses have not shown me any evidence that would contradict my previous assertion: almost all technological advances come from universities and large R&D facilities.

    Startups build on research done at universities and large R&D facilities. If you knew even a little bit of Silicon Valley history you would know that some of the major techological advances – GUI, Ethernet, and OOP, just to name a few – came from a single research lab: Xerox PARC (and if you didn’t know that, ask Steve Jobs – he will gladly tell you how he “stole” the GUI idea from them). There is a difference between coming up with new technological advances (this is what universities and research facilities usually do) and commercializing the technology (this is what startup usually do).

    I don’t want to be rude, but someone has to take a stand against this independent inventor nonsense.

  28. 12

    Paul PLH,

    Thank you for backing up Anon’s deep-think analysis (if that is what you are doing –it ain’t clear) and for demonstrating how the great minds at the Universities are the only ones who come up with all the great inventions while the small guys in garages (i.e. Hewlett & Packard; Wilbert & Orville; William F. Morse; Alexander G. Bell; etc.) never come up with anything and how the small guys are the frauds.

    I guess that has to be so because [sarcasm on] the small guys have their lives on the line with the ‘publish or perish’ mandate and the small guys will fail to graduate with their PhD’s and show mummsy that the last 7 years were not wasted unless the small guys fabricate data and create fictitously positive results –gee like those non-University guys in Korea with all their great stem cell results. [/sarcasm off]

    And indeed the paper you cite from the November 16-17, 2006 conference on how to destroy the patent system (Software Patents, A Time for Change?)
    link to researchoninnovation.org
    finally answers the question that has plagued at least my clueless mind: What is “software”?

    Aha. Now I finally clearly see the holy truth, the gospel from the mound of those who get their “research” funded by [sarcasm on] The Rightous-little Ole’ Ladies League for Preventing Little ‘um Guys From Suing Us ’cause We a’stole Their Useless Lill Inventions (TROLL-for-PLUG-FSUCWASTULI)[/sarcasm off]. Bessen-Meurer Chapter 9.1 provides the answer I have sought for so long:

    “… software is an abstract technology.”

    Wow that is so deep. Thank you, thank you. Now the next time I load my FPGA’s with “software” I will understand that the process of moving physical electrical signals into memory and the process of configuring FPGA blocks into operable hardware is all just “abstract” because some University genius who probably never dirtied his/her? fingers at a soldering station says so. Thank you for “enlightening” me. Thank you for lighting up the entire Universe with that brilliance and unassailable logic. Ah for one, am deeply moved. Why, if only they hadn’t just announced the Oscars, I would have nominated your little ‘ole piece for an award: Gone with the Santa-Anna Wind (aka: hot air).

  29. 11

    Even if the conclusions of Merges’s paper were capable of reassuring the critics of the expansion of software patentability, the paper is deeply flawed:

    link to researchoninnovation.org

    And since patent quality is of great concern to the high-tech sector – including the profoundly economically important* “rabid open source and “free software” advocates”, as Merges calls them – and what concerns them is probably “invention quality” rather than “patent quality”, then because e.g. forward citations are not among the paper’s proxies for patent quality, the paper can’t really offer any reassurance there either.

    * link to ec.europa.eu

  30. 10

    anon wrote:
    “The independent inventor’s contributions to the advancement of technology is just a romantic fantasy.”

    Perhaps you should read the congressional testimony of Nathan Myhrvold (former MicroSoft CTO) which can be found here: http://www.piausa.org

    Just a couple of passages for your education:
    “…. Individuals and small businesses in aggregate have substantially more processor patents than Intel or IBM- — indeed more than the two combined.”

    (our) “patent system exists to protect and encourage invention, not products.”

    I could also give you the number of my own recently issued US patent, which is already widely infringed by the high-tech industry and will be litigated in some future times, but I will spare you from reading it – nothing like NTP patent I can assure you…

    For another example of relatively recent invention which rightfully made its inventor a rich person, please google “Brent Townshend”

  31. 9

    In computer technology, most research papers are published by universities and big company research labs. If research papers contain novel inventions, then it follows that most inventions occur at universities and large R&D facilities. If you don’t think research papers contain novel inventions, then you will be taking a position that is completely against the evidence. The evidence clearly suggests that almost all the innovative products that we use today, be it computers or the Internet, have come either from universities or well funded startups or from big corporate research labs. The “independent inventor’s” contributions to the “advancement of technology” is just a romantic fantasy.

    Those who defend the so-called independent inventor should explain the justification behind the RIM v. NTP case. To call the NTP patent “innovative” is a stretch. The NTP patent didn’t advance the state of the art – the invention was obvious. Yet, it fetched $600 million. Why? Because the “patent system” is “broken.” I don’t think anyone has a good answer as to how to fix the “patent system.” But just because you don’t know how to fix it doesn’t mean it’s not broken.

  32. 8

    I agree with Mr. Priddy. I am worried about the
    fact that corporations
    such as SUN have the ear of congressmen such as Lamar Smith
    and senators Hatch and Leahy. Who is looking out for the little
    guy? (that has financial and lobbying resources)

  33. 7

    My apologies if the following seems obvious and somewhat sophomoric, but I just have to say it. Those who villify “patent trolls” and large corporations in these posts may provide interesting reading, but may be wasting time and taking their eye off of the ball.

    In over 45 years of Patent Office, licensing and litigation experience, representing big, medium and small companies and individual inventors at close range, I have seen that (1) a substantial portion of touted company R&D is “routineering” (those capable of thinking outside the box do not always fit well into corporate R&D environments), (2) a significant portion of important inventions made in the U.S. come from individuals and small organizations, (3) in many instances, the ability of these innovators to raise capital to bring inventive products and processes to market for the benefit of all depends on having strong or at least respectable patent protection (including a real threat of injunctive relief), (4) these innovators are often defenseless against uncompensated use of their inventions by large entities without such protection, and (5) most of those who are willing to invest capital and/or contingent fee-based services on worthwhile inventions, and are lumped with so-called “patent trolls” provide vital incentives for patenting and disclosure of important inventions by individual innovators lacking the capital to bring their patented products to market themselves.

    I don’t think big business is bad, and that it is important to have big companies for some purposes. Companies should not be villified merely because they are big. I have watched some of my large corporate clients and opponents deal honorably with individual inventors and small entities. But we should oppose use of corporate power and prestige to attack remedies that protect and encourage individual inventors and small companies, thus undermining an important source of technical progress and fairness in our country.

    Anyone, big corporation attorney or otherwise, taking a long-range view of what should be done to counter changes in our global and domestic technological position and to maintain the type of vigorous economy that benefits large and small comapnies and individual inventors should emphasize and support strengthening patent quality while keeping these incentives reasonably balanced and strong.

  34. 6

    Likewise I have two points (among many):

    I have never seen a large corporation complain about the patent system when they are on the asserting end.

    I have always seen large corporations complain about the patent system when they are on the receiving end. Importantly, the main complaint heard is one of cost to defend. Never mind that the corporate mindset is to hire the most expensive firm to be found (using 2-3 partners and about the same number of associates seems to be the norm). After all, how can the business community, which knows precious little about what lawyers are doing, contradict in-house counsel. The defense I have heard time and time again is “I got the very best so there is no way I can be criticized”, relying on cost as the primary indicator of quality and competency. Equally important, most litigation is handled by generalists, involving everything from the selection of trial counsel to litigation strategy. Heaven forbid that those who actually know the facts and the law play a meaningful role.

  35. 5

    Two points:
    First, even if SUN spends 15% on R&D, I suspect 14.99% is D and 0.01% is R. The development side (D) includes paying developers salary and benefits for cranking out code that is not inventive, but is more
    “boilerplate” in nature. I am a fan of SUN but I think to characterize
    SUN as a huge innovator based on saying they spend 15% on R&D
    would need more clarification to convince me.

    Second: If individuals have ideas that are patentable, the
    system is that if they share their inventions with the public,
    the public will grant them exclusive rights for a limited time.
    This is no different than if a large company invents something
    and therefore serves to promote the progress of science
    and the useful arts every bit as much as if SUN were to invent
    something. Why should the little guy have less rights than
    SUN? It seems to me that SUN wants to take other peoples
    inventions and exploit them for profit without having to
    be responsible for stealing the ideas. This seems contrary
    to the idea of awarding patents to begin with. SUNs
    concern should be patent quality because it is in the awarding
    of poor quality patents where the system would break down
    and there would be a “tax” on the system.
    However, in the “legal thing” article, the author
    complains about patents with broad claims. If the
    result of the patent examination is a grant for broad claims,
    then SUN should have to honor the validity of the patent
    of a small inventor
    just as much as if a large corporation invented it.
    Clearly, large companies such as SUN would like to legalize
    stealing work of small inventors that can not otherwise
    afford to enforce their patents.

  36. 4

    I’m not going to defend the substance of Dillon’s posts, but I wish the commenters would provide more than scatological epithets.

    The post is meant to be a response to those commenters who suggested, in response to Merges’ post, that corporations were pro-patent. Dillon’s piece is decidely anti-patent. As Dennis notes, Dillon doesn’t mention patent quality.

    I think the reason for this is that Dillon has given up on the ability of the courts or the PTO to distinguish between good and bad patents without substantial cost to the litigants. That’s what I take away from this:
    —begin quote
    What I’ve described is a destructive perversion of the intent behind the U.S. patent system. The plaintiffs in these cases are not investing in R&D “to promote the progress of science and useful arts”, nor are they adding value to society. Instead, they are using the current system to maximize lucrative settlements.
    —end quote
    The part of Dillon’s argument I don’t quite get is when he says that, because of the availability of contingency fee arrangements, “there’s no real cost to the plaintiff in litigating the case and plenty of upside for the attorney.” An attorney would only take a case on contingency if he thought he had a chance of winning, no? And an attorney’s chances of winning (or coercing a favorable settlement) have some correlation with the value/validity of the patent. Thus, Dillon’s statement is either an implicit argument that bad patents are not separable from good patents at a sufficiently low cost, or it’s an argument that anyone with an issued patent can plausibly threaten Sun.

  37. 2

    small guy,

    Thanks for the link to the “innovative” Sun lie-fest.

    LOL– “Sun has always been about innovation. … Call me “old fashioned”, but I still prefer baseball.” … “But, as a [ unbiased Sun] shareholder, and with all respect to my [lawyer] colleagues, I’d rather invest in creative engineers [over seas] than creative attorneys [who support creative American inventors]” –ROFL, or maybe crying instead, not sure.

    Do these sycophantic lickers of corporate butt barf have no shame?

  38. 1

    Sun Microsystems General Counsel is lying in public and smiling at the same time:
    link to blogs.sun.com

    OK, let’s take this piece of crap apart:

    “For those of you who are new to this area, here’s the reality.
    An individual, law firm or small group of investors will form a partnership or LLC
    to acquire a broadly written patent that can be used against the maximum number of target companies.”

    Let’s see. he does not even mention the question of patent validity. According to him all broad patents are
    bad if they are owned by “an individual” (note that he does not want to use the word “inventor”) etc.
    According to him all broad patents owned by “individuals” are BAD patents..

    “In most of these cases, the plaintiff will be represented by an attorney
    who is working on a contingency basis. In other words, rather than an hourly rate,
    the attorney is compensated based on what is received through settlement or trial
    – usually this is between 30% and 50% of any recovery.
    Thus, there is no real cost to the plaintiff in litigating the case
    and plenty of upside for the attorney.”

    Let’s see.. The cost of initiating a patent litigation against a large corporate infringer is
    somewhere around 2-3 million dollars nowadays. How can an individual or even a small company
    afford paying such expenses ?

    “When the case is filed, the plaintiff requests an injunction as well as claims substantial damages.
    The company is then faced with a big decision. Does it settle to avoid the risk of a sizable judgment
    and the possibility that it will be prevented from shipping it’s product?
    Or, does it fight the case in court? We always choose the latter and have invested significantly
    in legal resources to help us defend against these cases.”

    Very telling… In other words he would rather bankrupt an indepnedent inventor asserting a perfectly valid
    patent against his company than pay a small royalty so that inventor can make a living.

    “But, as a shareholder, and with all respect to my colleagues,
    I’d rather invest in creative engineers than creative attorneys.”

    Oh yeah, creative engineers at Sun must be really happy. After all they get something like 1000 bucks for each patent filed
    on behalf of their corporate masters. As for creative attorneys, this guy is certanly much less creative then
    e.g. Peter Detkin, the father of the “patent troll” nonsense (never mind he is troll himself nowdays..)

    “What I’ve described is a destructive perversion of the intent behind the U.S. patent system.
    The plaintiffs in these cases are not investing in R&D “to promote the progress of science and useful arts”,
    nor are they adding value to society.
    Instead, they are using the current system to maximize lucrative settlements.”

    Oh yeah, now he wants to talk US Constitution…
    He just forgot thaty the full quote is this:

    By what do you want from this corporate type – he just doesn’t want to hear about any “inventors” and their “discoveries”

    What a bunch of shameless corporate lies !

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