Patenting vs Secrecy: Impact on Company Financing

by Dennis Crouch

Anecdotal whispers in my ears suggest that many companies are now looking more toward trade-secrecy as well as confidentiality and non-compete protections in reaction to both (1) shifts in patent law that have incrementally weakened the power of patent rights and also (2) to the potential creation of a national trade secret cause of action under the new Republican congress.

Disclosure vs Secrecy: A major public policy difference between patents and trade secrets is that patents require full public disclosure prior to obtaining rights while trade-secrecy requires just the opposite – affirmative steps to keep the information from the public.

Most discussions of the differences focuses on the public value of disclosure on a macro-economic scale.  However, an interesting new article by a group of economists at Georgia Tech (N. Dass) and Rutgers (V. Nanda and S. Xiao) look instead to the micro-economic impact — asking whether a relative shift in legal rights toward either patents or trade secrecy impacts the innovative companies. To be clear, these economists are not experts on intellectual property law, but instead are experts on stock market liquidity and ways that information impacts that liquidity.

Information Asymmetry: Market transactions generally have some amount of information asymmetry where the seller may know more about the product than the buyer or perhaps one buyer knows more than other buyers.  Major asymmetry tends to gum-up market transactions because buyers encounter more risk and may need to do more due-diligence investigation.  This is a recognized problem and, as such, many of the rules associated with publicly traded companies serve as attempts to avoid the information asymmetry.  Prior studies have found that information asymmetry tends to decrease stock liquidity for publicly held corporations.

Public Information and IP Rights: Patents provide investors with direct information regarding the rights held by various companies.  On the other hand, companies generally cannot disclose their trade-secrets to investors (except for closely-held private companies).  From these origins, the Dass makes the following hypothesis:

We expect the choice between secrecy and patenting to be affected by the degree of relative protection provided and to have distinct implications in terms of stock liquidity and equity financing. Our hypothesis is that stronger secrecy protection will encourage firms to adopt more secrecy, therefore increases information asymmetry and reduces stock liquidity. By contrast, better patent protection is hypothesized to cause firms to disclose more information by patenting their inventions, resulting in higher stock liquidity.

To test this hypothesis, the authors conducted a retrospective study that looked to historic changes in patent law (TRIPS implementation) and trade secret law (states strengthening law) and considered market reaction to those changes:

We find that exogenous, staggered passage of state-level statutes that strengthened trade-secret protection increase opaqueness, reduce stock liquidity and worsen the market’s reaction to announcement of seasoned equity offerings (SEOs). By contrast, implementation of [TRIPS], that strengthened patent protection, enhanced transparency and stock liquidity of patenting firms and reduced the stock market reaction to SEOs.*

Read the Article.

The basic result here is that a relatively stronger patent regime provides companies with an incentive to obtain patents which, in turn, makes it easier for those companies – especially smaller companies – to raise money in the capital market. Now, although the study was primarily focused on market liquidity, the authors also found that increasing either IP-schema (patents or TS) has the impact of increasing R&D activity.

In recent history (up until the past few years), both patent and trade secret rights have only been on the rise and so the authors were unable to study if the market phenomena also work in reverse.  Lucky (at least for these academics), Congress and the Supreme Court have offered a natural experiment for a follow-on investigation in a few years.

= = = = =

* Here, although not entirely clear from the study, the authors apparently use “transparancy” and “opaqueness” to actually mean that the company received respectively more or less patents following the legal change.

 

 

165 thoughts on “Patenting vs Secrecy: Impact on Company Financing

  1. […] Patenting vs Secrecy: Impact on Company Financing … link to patentlyo.com expect the choice between secrecy and patenting to be affected by the degree of relative protection provided and to have distinct implications in terms of stock liquidity and equity financing. Our hypothesis is that stronger … […]

  2. “We find that exogenous, staggered passage of state-level statutes that strengthened trade-secret protection increase opaqueness, reduce stock liquidity and worsen the market’s reaction to announcement of seasoned equity offerings (SEOs). By contrast, implementation of [TRIPS], that strengthened patent protection, enhanced transparency and stock liquidity of patenting firms and reduced the stock market reaction to SEOs.”

    Why is the the first sentence written in present tense and the second sentence in the past tense?

    1. The latter occured some years ago. But what are these alleged new “state-level statutes that strengthened trade-secret protection?” Are not almost all states still having a version of the uniform trade secrets act?

  3. The premise of this research seems to be that you can never have too much “market liquidity” and that patents have an impact on said market liquidity. Does this mean that if Google shifts to trade secrets over patents that it will get harder to buy and sell shares of its stock on any of the major exchanges? Given the extreme velocity with which shares are traded now, can the quantum of information provided by issued patents (or published applications) really have much impact?

    Also, and in light of what one Edward Snowden managed to do to our national “trade secrets” using little more than a flash drive, I don’t expect to see a huge movement towards favoring trade secrets over patents any time soon. Rather, I think what we will see is that the amount of money that the some of the big filers are willing to spend on getting U.S. patents will decline as companies become more selective in what they patent, with little impact on R&D expenditures.

    1. What it will mean is that Google won’t be talking about what they are doing. Their employees will be terminated if they talk about what they are doing. Their employees will be locked into working for Google forever or switch to a new technology area all together. It will probably mean that standards will go by the way side as companies like Google try to lock-up their markets with proprietary standards. Expect lots of web services that are dark. You will get functionality, but zero knowledge how that functionality is achieved.

      Just look at how Microsoft was in 1985. Super, super, secret rooms. Large projects on how to deliver code that can’t be decompiled.

      Encryption is going to become huge. Probably chips will start having large portions devoted to decrypting code.

      It is going to get ugly.

      1. In a somewhat ‘charming’ tie-in to the “Top Patently-O Subscribers” thread, the only “controlling” terms I could locate to the Feedburner mechanism were Google’s.

        I wonder if this is the right ‘Cahoots’:

        link to clubplanet.com

      2. Google doesn’t talk about what they are doing now, so how is that going to be a change?

        Microsoft hasn’t change a bit. They never released code from their “Super, super, secret rooms.”

        And since you didn’t notice, encryption is ALREADY huge.

        The problem with chips to do encryption (it has been tried before you know) is that such chips, once compromised, can’t be replaced easily. And that makes the equipment containing those chips much more expensive.

      3. Night, if I recall correctly, one of the points of the government’s antitrust settlement was that Microsoft had to make public how to interface with its operating system. So long as they could keep that a secret, they had a built-in advantage over any competitor trying to build products that work with its OSs.

        Given Microsoft’s success in building and extending a monopoly based upon trade secrets, trade secret protection is extremely important for software – far more important than copyright, and far more important than patent protection in particular situations.

        That said, one of the problems any small business had a may still have in trying to get off the ground in software was Microsoft. If they invented a product that was highly popular and useful, Microsoft would soon put that product’s functionality into its own products. i4i is a good example. Without a patent, i4i would have been completely sunk and without value.

        On Google, I would think that it would, like Microsoft, depend heavily on trade secrets until and unless the government sues them like they did Microsoft. Apple’s patent wars with its rivals has shown that software patents have very little value in the end.

            1. It may be a different legal issue.

              But for all practical purposes, i4i still lost more than they gained by the patent.

              They were luckier than Stacker though.

              i4i is still in at least some business.

              1. You do realize that your phrase “for all practical purposes” is quite meaningless in the context of the discussion here, right?

                You are doing that ignoring the context of the discussion thing again. See Sun Tzu.

          1. jesse, you may be right there about the legal expenses. MS put on more than an full court defense. It was fanatical, even going to the Supreme Court. I think MS was trying to make a point — something about might makes right.

            1. The best I can find is “more than 10 million” was spent. But did the 290 million cover the lost development time and the lost business?

              i4i was lucky.

              1. I4i chose to spend the development time on litigation. They could have tried to build something for their customers instead. Microsoft certainly didn’t make them.

                And i4i didn’t lose any business because Microsoft never copied anything from them.

        1. “Microsoft had to make public how to interface with its operating system”

          Microsoft actually always did that. The DDK and SDK were always available to the public. There were some unfair allegations of secret APIs but thorough investigation revealed that there was nothing available to Microsoft apps that was not available to the public.

          “So long as they could keep that a secret, they had a built-in advantage over any competitor trying to build products that work with its OSs.”

          That is not factually accurate and never was. There was some advantage to Microsoft in that internally they knew what new features they would be marketing in the upcoming versions, but there was never a technical advantage. And beta versions of new features were widely available far enough ahead to dissolve even the small advantage that secrecy about future plans could have created.

          1. Neither included HOW. Just tools that would – and those tools were not portable. They only worked on Windows.

            Even when the EU REQUIRED MS to produce the documents, they couldn’t.

            They had to get help from the Samba team to write it.

        2. “Given Microsoft’s success in building and extending a monopoly based upon trade secrets”

          Microsoft’s monopoly was not based on trade secrets; it was based on network effects. Almost nothing Microsoft was doing in its monopoly era was a secret. Competitors provided all the same functionality Microsoft did.

          “i4i is a good example. Without a patent, i4i would have been completely sunk and without value.”

          That is just hilariously wrong. I4i’s business was viable with or without a patent. Microsoft never copied anything from i4i, neither ideas, nor software, nor technology. And i4i’s patent was one of the worst examples of abusive nonsense software patents that should never have been allowed by a sane PTO.

          There are plenty of businesses that have been swallowed by Microsoft’s predatory abuse of its monopoly. I4i was never one of those that Microsoft predated or treated unfairly; it is just a successful abuser of the failures of the patent system in an area where patents do not belong.

            1. Keeping the source code secret makes it harder to interoperate with Microsoft systems and promotes the network effect.

              None of the functionality was protected by keeping the source code secret since the competitors already knew how to write operating systems that did everything Windows did. Apple IIGS, MacOS, Linux, PC-DOS, IBM OS/2, BeOS, GeoWorks, 386BSD, and more did everything Microsoft’s systems did. They just didn’t have the network.

              Microsoft’s interfaces had a set of bugs and inconsistencies that were and are difficult to emulate. For independent software vendors, it was always a matter of rewriting software to run it on another system that didn’t require the same bug fixes and workarounds. The result was mass Microsoft lock in and antitrust issues. But it wasn’t based on trade secrets.

              Preventing bug-for-bug compatibility and solving the network effect problem was the purpose of source secrecy.

              1. The Samba project had lots of problems with MS interaction.

                It wasn’t “a set of bugs and inconsistencies that were and are difficult to emulate”, it was a total lack of documentation. Even MS didn’t know how it worked.

                Preventing bug-for-bug compatibility and solving the network effect problem was the purpose of source secrecy.

                I thought that is called a “trade secret”.

                1. Secret / not secret
                  Win / lose
                  Lucky / unlucky

                  Did you both enjoy your stay at the Holiday Inn last night? How was the screening of the new Jim Carrey movie (based in part on your antics)?

                2. secret:

                  1.
                  done, made, or conducted without the knowledge of others:
                  secret negotiations.
                  2.
                  kept from the knowledge of any but the initiated or privileged:
                  a secret password.

                  Trade secret:
                  A trade secret is a formula, practice, process, design, instrument, pattern, commercial method, or compilation of information which is not generally known or reasonably ascertainable by others, and by which a business can obtain an economic advantage over competitors or customers.

                  Yup. I think that covers why MS doesn’t publish, and explains why MS doesn’t want what it does public.

          1. Owen, all have to put your comments down as your personal opinion because I believe a jury found that Microsoft willfully infringed. Your post makes it seemed as if Microsoft did not infringe at all.

            1. Sorry if I gave you that impression. In fact, Microsoft and all the inventors of modern markup had been infringing i4i’s patent for years, probably more than a decade, before i4i filed for the patent and still infringe today.

              Not that I give any credit to the technical conclusions of a randomly selected jury, but they did see that much.

              What I mean to say is that no one who understands the technology in question and its history could conclude that i4i’s patent constituted an invention, anything new in the field, any kind of contribution to the art, or any kind of inspiration or aid to Microsoft’s products.

              1. Actually, the only difference is that the “patent”, described a dynamic modification of the underlying data. (Which is the same thing every query to a database does…)

                Certainly it is junk.

                Yet it was also issued by the PTO.

                What made MS guilty was doing it AFTER holding rather extensive interaction with i4i and learning what they were doing.

                They didn’t present the same results before that.

                1. You don’t understand hind sight. You sound like a typical software engineer that has not taken a step back and thought about these issues. So, you just get on here and pour out your ignorance and make us all suffer through it.

                2. jesse,

                  You continue to admonish others on points that you need to apply to yourself.

                  Note that the field you work in is NOT called “Maths Philosophy”

                  Why do you think the term “engineering” is included?

                  Plain fact that you still need to come to grips with: software is a machine component, a manufacture built by the hand of man for a (typically, and admittedly not always utility that falls within the Useful Arts).

                  You ignore this bedrock at your continued peril of ignorance.

                3. Because “engineering” is the term given.

                  Remember, when it was first applied the engineers objected as it didn’t call for an engineering degree, training, and didn’t (and still doesn’t) provide the reliability of what a real engineer provides.

                  I agree that “software engineering” isn’t really engineering. It was used because programmers were combining pre-defined solutions to provide new solutions. In that limited context, “engineering” does apply.

                4. jesse,

                  You continue to exhibit such shallow thinking.

                  Why do you think the term “engineering” was the term given?

                  Why does it apply – even if the context is limited?

                  You seem unable (or unwilling) to grasp the meanin under discussion.

                  The provision of solutions IS engineering and IS the type of utility-driven human behavior meant to fall under patent law.

                  Once again – this was NOT called “Maths Philospohy” for a reason.

                  Please stop ignoring the bedrock of what software is.

                5. Sorry – the term “engineering” also contains liability for failure.

                  Software has none other than what some contract includes – thus “at your own risk”. and why MS isn’t held liable for all its software failures.

                  If engineers produced so many failures they would have been sued out of existence.

                  And the bedrock of software is math.

                6. The bedrock of ALL engineering is math.

                  This proves the point against you.

                  Come my 2 Dimensional friend, you do not have to be trapped in that circle, you can step over that line.

                7. How wrong can you be…

                  The bedrock of ALL engineering is PHYSICS.

                  The math is just a tool that can describe reality, but even there, there are limits where the physicists have not figured out how.

                  Not all math can be used in physics.

                8. The bedrock of physics is Maths.

                  I am not wrong at all – you are merely at the limits of your intelligence, my 2 Dimensional friend.

                  And by the way, tools are patent eligible.

              2. The bedrock of Physics is the universe.

                Math can make all kinds of things predictable…. but that doesn’t make those predictions real.

                The universe has a way of proving that…

                1. So you are now saying that your version of ‘math’ is a man made tool and not the same as the underlying universe…?

                  It is a manufacture then, made by man for some utility….

                  You do know that you have just shown that your version of ‘math’ is exactly the type of thing that is meant to be protected by patents, right?

                  You have proven the case against your own professed views.

                  Congratulations.

                2. Can you copyright something ‘of the mind?’

                  You are the one being “short sighted” confusing the thought of software with software (and yes, you are also forgetting the defined nexus of software as a machine component – and machines do not think [anthropomorphication])
                  (you are doing that monologuing thing again)

                3. So now we are talking abut copyright.

                  Pretty much anything written can be and is copyrighted. The current presumption is it is copyrighted as soon as it is written.

                  Actually, machines can do the same thinking of math that people can. Things like adding two numbers together, comparing numbers, and selecting the next step.

                  Of course, that is exactly how you do it – thus the machine “thinks” in math. It can’t do anything else though.

                4. Human cognition is required for thinking.

                  You keep on attempting to use words outside of their recognized meanings, thus your ramblings are simply meaningless.

        3. Ned as usual you come up with your nonsense to try to cloud the issues around information processing.

          Face it: trade secrets are powerful and can lead to monopolistic behavior. You are essentially agreeing with me. Patents break that down and encourage disclosure and openness.

          Microsoft is much more open then they were and a good measure of that is patents.

          Silicon Valley companies have already been caught colluding on salary caps for employees. Patents are one of the great reasons why Silicon Valley can’t capture employees. The disclosure of a patent kills the trade secret and makes it so the employee can easily slide over to another job.

          All of this is basic. Those that deny these basic facts are operating for Google and their ilk. That is reality.

          Those Silicon Valley tech employees are in for quite a surprise when they see new contracts that turn them into slave laborers. And Lemley has never disclosed the contracts he makes his employees sign. Let’s see them Lemley. Disclose. Interesting how Lemley is supposed to be for the future of openness and how things are magically funded and yet—Lemley is secretive about all his activities and the reality of what his employees have to sign.

          1. Night, the problem of so many big companies existing side-by-side in one area is that it is easy to pirate the employees of another as a form of competition. This is what the companies were complaining about recently. Major companies would target key employees of another simply to do them damage or to retaliate.

            When I first moved to California to join the aerospace industry in Southern California, it was booming. There were multiple companies all doing aerospace R&D in Southern California. Engineers could move around quite freely, thereby driving up their salaries. At the time, the average stay of an employee on the job was one and a half years. I don’t know if it’s changed very much since.

            I used to talk to engineers on a regular basis inside my company. They were constantly complaining that loyalty was punished because new hires, of less seniority or position, had to be hired in at higher salaries than they were making. In order to keep people happy, there was a constant need to keep salaries of loyal engineers competitive. The wage spiral was significant, and it was one of the reasons why companies wanted to restrict as best as possible the movement of employees because without some restraint, it became almost impossible to place an R&D facility in California.

            1. Ned,

              You are conflating many factors together and have lost any “point” that you were trying to make.

              Are you trying to say that Big Corp should be allowed to engage in overt wage control?

              Are you saying that the government should step in and stop wage escalation as an R&D policy matter?

              Are you saying that escalating wages are a good thing with a natural self-limiting ceiling (Big Corp says ‘no mas’ and moves elsewhere?

              I cannot figure out what you are trying to say, much less how it fits into the patent law discussion here.

              1. anon,

                1. companies know they cannot restrict movement of employees.

                2. employees take advantage.

                3. there is an investable wage spiral due to proximity of so many companies hiring skilled engineers.

                4. companies are wont to move out of California because of this alone.

                5. companies seek to limit the damage by not mutually agreeing not to target employees of each other.

                6. the recent scandal exclusively involved reciprocal non targeting deals.

                1. Great Ned – but what is your point?

                  Are you merely listing these items, but not saying anything meaningful about them? I am well aware of the items already.

                  What are you adding? How does what you are attempting to add impact patent law?

                  Read again my post at 9.1.4.4.1.1 and note that the questions put to you remain.

                2. Well for one thing, anon, targeting is a method of obtaining technology from one’s competitor. To the extent that has been made legal in California, it only made matters worse.

        4. I’d also point out too that I was the one that said that new trade secret law would be coming to cancel out CA law. And it did. I said that two years ago.

          1. And it did

            Sorry NWPA, but that is not true (yet).

            As discussed on the previous thread concerning the national law, that national law was NOT pre-emptive and merely added another layer of law on trade secrets.

            The California (and other states’) law survives.

              1. anon, I agree that Congress cannot constitutional legislate to control California intrastate commerce.

                But this is not the same Supreme Court as we had in the 1800s when the Trade Mark Cases were decided.

                1. Sorry Ned, but I only see your comment as muddling the situation (and the Federal Government could if it wanted to enter this field and preempt State law – this is easily within the reaches of Wickard v Filburn).

  4. Threats to use more trade secrecy protection instead of patents are too often made by people who do not realize its serious limitations versus patents. It will not protect a sold product that can be reverse-engineered. It does not protect against independent re-inventions by others. It will not survive public disclosures or unrestricted access. It requires proof of access to and unauthorized using of that trade secret, not just proof of doing essentially the same thing.

    1. BTW, the whole concept of rating companies technological prowess by the number of patents they obtain is a highly dubious proposition. One good patent providing protection from competition for a major product is worth more than hundreds of patents of no economic significance cranked out by another company.

      1. Very true Paul – it is difficult to make a one to one numbers comparison.

        Such things as a ring of patents to keep the competition away and make them attempt costly research is not adequately reflected in those “no economic significance” ones you may have misjudged.

        The game is far more intricate than a shear numbers game.

    2. Paul,

      You may be overlooking the tandem of one entity having a patent while the holder of a trade secret has the shiny new right known as the Prior Uset Right – all the benefits and none of the costs.

      1. The AIA expansion of the prior commercial user right does not give any patent-like protection. Nor does it overcome any of the trade secrecy law disadvantages noted in these comments. It provides an additional defense for a prior commercial user from later-filed patents of others IF special proof obligations are satisfied. Neither this statute or its predecessor have ever yet been successfully used.

        1. Not true Paul – take another read: the protection afforded let’s you operate under the umbrella of the patent holder – your customers cannot be purposes as your sale counts as an exhaustion event (even though the patent holder does not benefit).

    3. Kudos to above comment about the huge amount of trade secret material that any one employee or c0ntractor can now walk of with on a mere pocket-fob flash drive, given the mass trend to “paperless” offices and factories.

    4. Paul, agreed.

      Also, one cannot get a permanent injunction with trade secret misappropriation. Damages can be big, but injunctions in the end are more valuable. See. post 9.2.

  5. Prediction: if small “innovative” companies aren’t allowed to patent methods of planning meals “on a computer” and earn money buy threatening hotels, restaurants, hospitals, nursing homes and universities with their patents, then investors will be less likely to gamble on the success of those small companies.

    This is just like rocket science, folks.

    The real trick is understanding that this result is a net positive for pretty much everybody except for this special class of “innovators” and the gamblers they attract.

    1. Your spiel that all information processing patents are junk is absurd on its face. It is nice that you like to get on here and vent that you don’t like information processing patents, but reality is not on your side. Please adjust.

    2. But if they keep their technology for mouth animation and meal planning and frequent flyer mile trading secret, society will lose the essential disclosure of their brilliant mysterious methods. As with Greek Fire, future generations may never be able to rediscover such power. Without investment liquidity, their learning will be lost.

      We will be as the Dark Ages looking back on the Roman ruins and wondering how such men could play bingo on a computer. Surely with their esoteric secret of doing escrow over the Internet they were less as men and more as gods.

      1. no they don’t.

        Neither is that complicated.

        The Romans invented cement and concrete. It was rather public information at the time.

        Yet it was forgotten – loss of education mostly.

          1. They DID excel at technology.

            They had electroplating, long range navigation, excellent building construction and design. Well designed roads. Far ranging commerce, indoor plumbing, central heating…

            The collapse was from the government. Remember, they started outsourcing the army, and attempted to overcontrol the population. The government began believing in magic… and declaring things true that could not possibly be reality. At that point they were coasting… The collapse was inevitable.

            1. Jesse, read more about Rome and technology. It is true they invented an enormous number of things, but it is also true that they stagnated and did not capitalize on their inventions. There was no motive.

              Rome is not on your side of the argument jesse. Not even close.

              1. If you would study some history, it wasn’t Roman technology that failed.

                It was the government that collapsed. The problems of government promoted a “save yourself”, which took up most of the time.

                People WOULD have continued advancing. Rome WAS good at adopting anything tech that helped. They didn’t hide that. They spread it widely.

                1. Actually this is quite wrong. Rome had lots of technology that was never disclosed or used widely because they didn’t have patents.

                  Moreover, technological advance was often only at the whim of the rich when they funded patrons or extravagant luxuries for themselves.

                  Sorry ankle biter, but–again–you want to just ignore reality.

                2. I don’t believe you know what a “patron” was.

                  They were the ones providing the funding.

                  And “patents” are useless when they can’t be read.

                  You need to revisit history.

                3. Jesse,

                  Oh gee I mistyped patron. I guess you have to hold on to whatever you can find, which isn’t much.

                  Rome is a perfect example of why patents are needed. Probably a good argument can be made that with patents Rome never would have fallen. They did have massive political problems, but they fell because they stagnated. Their tech was no longer better than their adversaries.

                  And, they had some great tech that was only used by the very rich when it would have been very good for mob (you know that group that you resemble.)

                4. Rome fell for a number of reasons – lead poisoning for one.

                  But once the education failed, it was headed down.

                  Patents would not have helped – they would not be readable… and only good for starting fires.

                  Even now, patents are not written for learning – they are written for people that already have an education in the field.

                  Unfortunately, that field happens to be law, not technology, which makes them nearly unusable, except in a court.

                5. Jesse you have no idea of what you are talking about.

                  You don’t understand patents. You react on a visceral level to patents like most under-educated software engineers. You act like a dog that is told he can’t eat a bone. Read and educate yourself.

                  You are a tool of Google.

                  And–ankle biter–think about Rome some more and the USA. The only reason the USA hasn’t fallen is because our tech is better. Rome rose because of their technology. Rome fell because it stopped being better because they didn’t have patents.

                  The only countries and the only times when tech has excelled is with patents.

                6. Are you sure the US isn’t falling?

                  Most of your patents are now being owned by foreign companies.

                  All that does is funnel more money out of the US.

                  And the government of Rome did fall – along with the infrastructure, the education facilities, the construction, AND the technology.

                  The US isn’t immune to a collapse either.

                  Rome lasted some 500 years before it was visible to collapse.

                  The US is 200 years. Yet there are already signs of collapse. The education system lags behind other countries. Libraries are underfunded. The technology has started to lag (guess who makes most of your technology? US? nope. China).

                7. jesse, your points are not reaching what you think they reach.

                  Innovation itself carries with it its own fall – that is why it is called waves of innovation.

                  I suggest that you read a little about this thing called innovation. I suggest that your reading include Kondratieff.

                8. ALL of this is in the context of innovation jesse.

                  You may choose to pretend otherwise, but you are only deluding yourself in so doing.

                  I do expect you to recognize and join the dialogue in this context. If you want to rant otherwise, your monologue is not welcome.

                9. So government, education, and cultural failures is “innovation”?

                  Hmm…

                  I don’t think so. Such “innovation” causes a lot of wars, starvation, and death.

                  We could do with a lot less such “innovation”.

                10. Your descent into shallow pedantic semantics while ignoring the context of the discussion on innovation belies that you have exceeded the limits of your knowledge an intelligence.

                  I suggest (again) that you read up on the topic of innovation in order for you to be able to join a meaningful conversation.

                11. The quit ignoring the fact that patents will do nothing if you can’t read them.

                  And that is a culture/government/infrastructure failure.

                12. Your post is a non sequitur to this conversation and a truism that applies to anything (it is hence meaningless drivel).

                  Try to keep up with the conversation – the topic is innovation.

                13. You are letting your own shallow thinking get in your way again – the underlying concept behind Rome and a patent system is innovation – try to step over that circle. Take some time to read and understand the larger concept of innovation (I have provided several references for you) and then maybe – just maybe – you will recognize why the reference of you not understanding Sun Tzu is so germane.

        1. jesse, on the collapse of education and the rise of a belief in magic and miracles, I totally agree. One has to only read Gregory of Tours.

          But another cause of the loss of technology was not simply the loss of education, but the loss of the Roman Army. It was the Army that knew how to build things.

          1. I don’t think it was just the loss of the army that did it.

            The members of the army knew how to do it – but because of the loss or government, the members no longer needed it to survive.

            Since it was no longer needed, people just forgot about it. The loss of education destroyed the information to make it – the value of books/scrolls was less than finding a meal, or staying warm.

            Even now, if civilization collapsed, cement would again be forgotten – as the locations that hold the information would be destroyed. Those locations that didn’t get destroyed, would still be unusable – people wouldn’t be able to read.

            Even now, the language used in the patent itself is out of use, and some of the words no longer mean what they did at the time of filing.

            1. jesse, education in know how in those days was not in schools, but in apprenticeship. Gregory of Tours described how even that system largely collapsed with the loss of government.

              But knowing how to build roads, bridges, buildings, and aqueducts was largely in the army, like today’s Army Corps of Engineers. When the army vanished, so did all that know how.

              But one could also observe that the decline in the Roman Army itself was gradual as it was gradually replaced first by German troops, and then by German commanders. That new army was Roman in name only. It no longer built things or even maintained things. That army was not an army of skilled workers.

              1. Quite true. That was the result of outsourcing their army.

                When the personnel that did the training in construction disappeared, so did the the education system.

                When they died, no one was left.

                1. Maybe they needed a system of promotion that rewarded a quid pro quo that would have prevented that very loss of knowledge…

                  You know, like a patent system.

                2. BTW, Night…

                  ALL civilizations die eventually.

                  The Chinese empire lasted several thousand years without needing patents. And then it imported the idea.

                  The British Empire collapsed in spite of it having patents.

                  So also with the various Germanic empires.

                  And since you seem to have forgotten, the US itself was partially founded on ignoring patents from Europe.

                3. jesse,

                  The problem is NOT that innovation will fail (the inevitable downside of the wave) – the problem is the archaic mindset NOT to recognize the next wave of innovation.

                  This is exactly the problem exemplified by the anti-software patent philosophy, by those attempting to NOT recognize the current wave of innovation (Kondratieff’s K5 wave).

                4. There is very LITTLE innovation in software.

                  Create a new machine – yes. Innovation there.

                  software? nope.

                  All that is being done is to derive math solutions to a math problem.

                  Doesn’t make it easy. But it isn’t exactly new “innovation”.

                5. Once again jesse you are using terms and exhibiting that you do not understand those terms.

                  Take some time and educate yourself on this topic before replying. I have provided you some leads – avail yourself and come up to speed in this terrain (see Sun Tzu).

                6. Congratulations on reading Sun Tzu. Now you need I understand the material as you evidently do not understand it at this point.

                  As for the foundations of software, I understand them completely – and recognize the difference between them and the “pure” Maths Philosophy that you have mired yourself in.

                  Come back when you understand not only that there is a difference, but that difference fully aligns with the reasons for having patents.

                7. There is nothing here that supports your naked assertion that I do not understand the math foundations.

                  Nothing.

                  On the other hand, you exhibit a gleeful ignorance of the law and of the topic of innovation.

                  Please stop embarrassing yourself.

                8. Because you say so..?

                  Given your decimation on all of the other points in the discussion, your “say so” just is not compelling.

                  At all.

                  Besides, my view of software is 100% correct and you have shown no part of software being a machine component and manufacture to be incorrect.

                  You are batting 0.000 and proclaiming yourself “King” – try to do something (anything) more than just your “say so.”

  6. Keeping applications secret for as long as possible is essential for critical technology that can be copied and for which patent protection is not effective in the nations who might copy. Thus forgoing foreign protection in exchange secrecy is a middle ground that we have to keep in mind.

  7. Rest assured that everything “bad” that happens to the investor class or the Junior League of Super Important Small Innovators is going to be blamed on the oh-so-unfair and utterly anti-American efforts to deflate that shiny junk-filled patent bubble.

    That’s as predictable as the night follows day.

    News flash: everybody “innovates” at the sub-barrel-bottom level at which our broken patent system was functioning. And nearly all of that “innovation” was kept “secret” (intentionally or otherwise), as has always been the case and will continue to be the case.

  8. Well the coming of trade secrets is terrible news. Tech employees will be very sorry when they have to sign those employment agreements (and yes that federal law will cancel out CA law).

    Going to go back to the early 1980’s when a tech employee would get sued or fired for talking about what they were doing on board or to a magazine. And, the Internet will provide many ways to hide how things work.

    Sad news.

    1. And, the Internet will provide many ways to hide how things work.

      Um… The internet is rather big on revealing how things work.

      Even over the objections of the various governments and corporations.

      Trade secrets are how the world turns. Do you think software patents are why proprietary software vendors always include “do not disassemble” clauses?

      1. Jesse: do you just type in the opposite of what I say?

        Now, go and read up on how the Internet can be used to facilitate trade secrets and come back and comment.

    2. “Well the coming of trade secrets is terrible news. ”

      That is so. Trade secrets do not promote progress and the law should look on claims for them them with deep skepticism.

      But trade secrets cannot protect ideas nobody wants and fake inventions. Overwhelming majorities of software and business patents have no value except as land grabs against actual programmers writing real software. They represent no invention or discovery. They are simply a power grab for a monopoly to blackmail real businesses. None of the §101 cases this year involve any invention or offer any value in their disclosure to the victims of their extortion.

      So one benefit of trade secrets is that, unlike patents, you actually have to invent something to have one.

      1. Owen,

        Your koolaid mantra only shows that you understand neither trade secrets or patents (you need no invention to have a trade secret).

        1. You need to actually know how to do something to have a trade secret. It’s not enough to want a cut of productive activity somebody else is doing. The troll patents that die under §101 are all about schemers who contribute nothing harassing productive companies with arbitrary demands.

          That won’t fly with trade secrets.

          1. Owen,

            Your anti-patent rhetoric and lack of understanding of patent law continue to infect your posts.

            You need to remember that the patent right is ONLY a negative right providing no “right to make.” Further, there is NO “must use” notion in patent law, and for the vast body of patents that are improvement patents (improvements on other’s patents), such “must use” would be immediately problematic.

            Once these fundamental principles are understood, the rest of your post merely reflects raw emotion that has no ground in the law being discussed.

  9. many companies are now looking more toward trade-secrecy as well as confidentiality and non-compete protections in reaction to both (1) shifts in patent law that have incrementally weakened the power of patent rights

    In most cases, those companies should never have been using the patent system to protect their “innovations” in the first place.

      1. I don’t think anybody cares what you think, nor do I think that anybody ever will.

        And there’s great reasons for that. Want me to list them all? Let me know because it will take a while.

        1. You mean like you denying that there was an effort to bi-furcate pharma from electrical as part of the AIA? And then you posted a video on here where your hero stated it was common knowledge and a substantial effort was made to bifurcate?

          There are many other examples that are just like that.

  10. an interesting new article by a group of economists at Georgia Tech (N. Dass) and Rutgers (V. Nanda and S. Xiao)

    One simple question for these economic “experts”: what were they saying two years prior to the massive land-scape altering economic meltodwn that occurred in 2008? Did they see it coming? Because some “experts” certainly did. I tend to put more, ahem, stock in the opinions of those “experts” versus those who simply cheered for more because, hey, we gotta give those rich people what they want, right? After all, those billionaires always somehow end up on smelling great no matter what happens so they must be really, really smart. Right?

    although the study was primarily focused on market liquidity, the authors also found that increasing either IP-schema (patents or TS) has the impact of increasing R&D activity.

    Fascinating stuff. More bingo research, please! Also, I have no idea what to eat for lunch today. Guess I’ll have to steal someone’s software.

  11. “shifts in patent law that have incrementally weakened the power of patent rights” and the result is more secrecy and less disclosure of new technologies — one step forward and two steps backwards

    1. So, no real change in the last 30 years.

      Industry has been moving out of the US, and patents will not stop it.

      In fact, most of the newer workers can’t even add without a calculator, much less understand the fundamentals.

        1. Not sure. Now all of the following is just my opinion, and I can’t back it up.

          Part of the problem is education, part of the problem is general government, and part of the problem seems to be cultural.

          The cultural part seems to be that the people no longer values knowledge, instead it is “status”. Knowledge no longer provides status like it did from the late 30s through the early 70s. Status also isn’t gained by making things – all of that has been outsourced. Making things is hard.

          People seem to get status by two ways – have lots of money (buying status), or control lots of people (which in turn gets lots of money). Buying status means you have to be fairly high up in companies having status – which currently seems to be the financial arena. So get an MBA and con lots of people. If you do it big enough, you won’t go to prison. The other way is directly criminal – hence the gangs.

          But some of the cultural problems are being caused by population – there is no place for people to go to try things out, to try different ways to live. People no longer can really make money on farms… only megafarms really survive now, and they don’t employ the same number of people. Crops are no longer self supporting but are deliberately damaged such that they cannot reproduce. Yes, hybrid corn grows really well – but no research into developing varieties that can, and still produce well (there is no money in it). Lawsuits against farmers doing nothing wrong also discourage farming.

          Education seems to be failing – not absolutely sure why, but some of it is due to the way teachers are rewarded – not for being able to impart knowledge and inspiration, but for getting students into the next grade. You really shouldn’t penalize a teacher that fails a large number – after all, the students may not want to learn. That isn’t necessarily the teachers fault – but could be the parents fault. It used to be that the PTA meetings were about how common problems student had could be worked out with the parents. Now it seems to have become a “why didn’t you pass my kid” rant session, even when parents show up.

          Patents prevent students from learning – after all, they are no longer allowed to look “under the hood” to find out how things work. This penalizes education the same way. None of the introduction to computers allows the student to find out how software really works, why it works. The success of the Raspberry PI shows that people really do want to know. The software patents I have read don’t even include all of the “how they did it”. They always leave out the details and only tell “what they did”. And block anyone for nearly an entire generation. Even after that, they can’t find out – the software is no longer available, and the source version isn’t available either (that is the trade secret, with both copyrighted for 90+years) – thus no experimentation. It also used to be that research paid for by government funds was in the public domain – after all, the public paid for it. Nowdays, it belongs to either the school, or the license entity – and neither allow it out.

          The cultural part of the problem is that non-technical people start poking into controlling things they treat as “magic”. Magic, just because they don’t understand it. Thus the rise of fantasy in education – it is something they can control.

          The government part of the problem is related to the cultural problem – both seem to believe in magic. Government lack of understanding seems to foster fear – and anything becomes something to “control” as that will reduce fear. Scare the public so that the next control will be permitted… And confuse the concept of safety with control, when such control has nothing to do with the fear. Freedom means taking chances, taking chances is not safe – people do die. It can’t be stopped – but the drive to be “safe” kills taking chances, and leads to stagnation.

          Ah well. All off topic of course.

            1. NWPA,

              It’s worse than that – caused by certain idealogues who know that they do not understand the terrain upon which they stand, and yet persist in mouthing the koolaid blatherings in their monologue fashion.

              Endlessly.

              Refusing to integrate the valid counterpoints raised into any sense of a dialogue.

              1. It is like watching Fox News. I watch it every once in a while just to see it. I watch it and my head swims and I wonder how people can be so disassociated from reality.

              1. jesse,

                A little tip for you: bloggers who merely engage in monologues and who do not integrate valid counterpoints into their position have even LESS control (by way of vastly reduced influence).

                Regardless of what some may think (possibly as a token of ‘politeness’), when your posts are shown to be lacking any touch with law, your opinion – while fully your right to have and express – compells those capable of critical thinking to the opposite conclusions that you hold.

                1. Not relevent.

                  The law is supposed to reflect reality, and how people are willing to be controlled.

                  When law becomes obvious fantasy, it gets ignored. And that promotes ignoring other parts of the law, whether good OR bad.

                2. On the contrary jesse, the point is extremely relevant.

                  That you refuse to recognize and accept this is a shining example of you choosing to remain in ignorance.

                  You need more than just not liking something to be effective in your advocacy. You need to stop denying the reality presented to you, stop your “software is maths” crusade and recognize and accept the fact that software is indeed a machine component and man-made manufacture built to be a machine component.

                  Nothing more.
                  Nothing less.

                3. Just saying something is false doesn’t make it false.

                  It is usually called lying.

                  Software is mathematics. It was designed from mathematics, It has been shown to be another form of mathematics.

                  Your illogic doesn’t change the fact that it is mathematics.

                4. Caught in the filter yesterday…

                  jesse,

                  You keep on using terms like ‘logic’ (or illogic) and ‘software’ not as those terms are used by Persons Having Ordinary Skill In The Art.

                  You need to recognize your limitations.

                  Software is defined as a machine component. If you think that you have something that is not a machine component and you choose to call it ‘software,’ it just is not so.

                  Shall we again visit your f@t@l flaw regarding copyright as well?

                5. “Software” is what the field I have worked in for about 40 years calls it.

                  It was called that to distinguish it from the hardware that provides the support (from around 1960).

                  It is the field of law that is misusing it.

          1. jesse, on “making things,” there are a number of factors that drive manufacturing offshore, but the most important seems to be corporate taxes. The choice of where to make things correlates well with an educated population and a stable government. Thus China.

            1. Which in my mind is in the government control activity… The government can’t keep expanding its functions. It has already exceeded its available money, and will go broke – eventually.

          2. Patents prevent students from learning – after all, they are no longer allowed to look “under the hood” to find out how things work.

            Absolutely false.

            Looking under the good has always been deemed non-infringement.

            Now if you want to do more than just look under the hood, the story is quite naturally different.

            1. Then explain all the “do not dissassemble” clauses in the software licenses?

              Explain the lack of sources with all the proprietary programs.

              You can’t look under the hood when it is forbidden.

              1. jesse,

                I cannot – and will not – teach you what you need to know in patent law.

                However, for this point under discussion, may I recommend that you read chapter 12 of Cases and Materials On Patent Law by Martin J. Adelman, Randall R. Rader, and John R. Thomas.

                Please do not choose ignorance.

                1. What you are choosing is to talk in complete disregard for the contex of this discussion.

                  You are rambling nonsense.

                  Please try to educate yourself on the topic under discussion.

                  (Hint: EULA is just not a controlling point in this discussion).

                2. jesse,

                  You are doing that monologue thing again and not paying attention.

                  If you want to do more than just ‘look under the hood’ then the Microsoft lawyers may contact you – but if you only look under the hood, then those same lawyers will not be contacting you.

                  Please educate yourself on the topic you wish to discuss.

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