Ron Bailey writes about last weekend’s excellent Planet Money story “When Patents Attack,” which focuses on the enormous market in “defensive” patents, purchased as a kind of retaliatory hedge against lawsuits from other technology companies:
In early July, the bankrupt tech company Nortel put its 6,000 patents up for auction as part of a liquidation. A bidding war broke out among Silicon Valley powerhouses. Google said it wanted the patents purely to defend against lawsuits and it was willing to spend over $3 billion to get them. That wasn’t enough, though.
The portfolio eventually sold to Apple and a consortium of other tech companies including Microsoft and Ericsson. The price tag: $4.5 billion dollars. Five times the opening bid. More than double what most people involved were expecting. The largest patent auction in history.
That’s $4.5 billion on patents that these companies almost certainly don’t want for their technical secrets. That $4.5 billion won’t build anything new, won’t bring new products to the shelves, won’t open up new factories that can hire people who need jobs. That’s $4.5 billion dollars that adds to the price of every product these companies sell you. That’s $4.5 billion dollars buying arms for an ongoing patent war.
Perhaps this is an obvious point, but it’s worth dragging it out explicitly: The very existence of such massive trade in “defensive patents” is, in itself, pretty strong evidence that there’s something systematically quite wrong with the American patent system—because a patent that’s useful for “defensive” purposes is very likely to be a bad patent.
As everyone acknowledges, there’s a large deadweight loss involved in the creation of any patent system (and intellectual property more generally), because it prevents people from making free use of an intrinsically non-rivalrous good: Information. The static loss is, in theory, supposed to be outweighed by a dynamic gain: The incentives created by the patent system lead to the creation of new inventions that would never have existed but for the inventor’s ability to fully internalize the value of that invention.
But now think about how defensive patents work. Companies aren’t buying them—or buying into the services of companies like Intellectual Ventures—because they provide otherwise unavailable technical insights. The point, rather, is to acquire (or have access to) a bundle of patents that any potential litigant who sues you is likely to be “infringing” in their own products. Like nuclear weapons, the point is not to actually use them—but only to be able to threaten to use them if anyone else should deploy theirs against you.
This only works, however, if other companies are almost certain to have independently come up with the same idea. A patent that is truly so original that somebody else wouldn’t arrive at the same solution by applying normal engineering skill is useless as a defensive patent. You can’t threaten someone with a countersuit if your idea is so brilliant that your opponents—because they didn’t think of it—haven’t incorporated it in their technology. The ideal defensive patent, by contrast, is the most obvious one you can get the U.S. Patent Office to sign off on—one that competitors are likely to unwittingly “infringe,” not realizing they’ve made themselves vulnerable to legal counterattack, because it’s simply the solution a good, smart engineer trying to solve a particular problem would naturally come up with.
Needless to say, every patent granted for an idea that any number of suitably skilled engineers could have (and would have, and did) come up with is a patent that probably shouldn’t be granted—a pure deadweight loss that’s actually compounded by the squandering of resources on the “arms race,” with no compensating dynamic gain. Actually, there’s probably a dynamic loss: You end up creating a huge incentive for smart and skilled people to spend their time and energy not coming up with a brilliant idea that nobody else would have, but instead trying to be the first to put on paper ideas that are obvious (to a properly trained and up-to-date person) but haven’t been locked down yet—the solution, again, that almost any professional would have come up with once they were actually trying to implement the relevant technology. A sector where investment in defensive patents is so massive, then, is a sector where—even if some of them do genuinely add value—patents are probably doing more harm than good on net.
Update: Conveniently, via Techdirt, some empirical support for this idea comes in a new paper by Stanford law prof Mark Lemley. Rather than being produced by a lone genius who must be granted a monopoly to encourage creation of a benefit we’d otherwise do without, major innovations are typically independently arrived at by many people or groups nearly simultaneously. They are, as the saying goes, ideas whose time had come.
27 responses so far ↓
1 Scott Francis // Jul 28, 2011 at 11:21 pm
the logical follow-up to your last paragraph is: money and time your company spends on acquiring defensive patents is, by definition, money and time not spent on innovation.
well spoken.
2 Well written post about one reason why software patents are inherently bad | Selfelected // Jul 29, 2011 at 10:33 am
[...] http://www.juliansanchez.com/2011/07/28/good-defensive-patents-are-bad-patents/ [...]
3 EverClassify // Jul 29, 2011 at 1:34 pm
The immense volume of patent law scares by it overwhelming nature, that anything you code, no matter how basic and rudimentary its function or process is to another process, has probably got a patent behind it.
4 asdf // Jul 29, 2011 at 1:38 pm
You made the logical leap that the “infringer” didn’t search through the patent library to find a “non-obvious” solution to the problem.
5 Noah Yetter // Jul 29, 2011 at 1:44 pm
“…it’s simply the solution a good, smart engineer trying to solve a particular problem would naturally come up with.”
Every software patent has this characteristic.
Every.
Single.
One.
6 Noah Yetter // Jul 29, 2011 at 1:46 pm
“You made the logical leap that the “infringer” didn’t search through the patent library to find a “non-obvious” solution to the problem.”
Software engineers don’t do this. Not only is it more work than just designing the solution yourself, software patent filings don’t actually have detailed enough descriptions of the “ideas” being patented to be helpful.
7 Julian Sanchez // Jul 29, 2011 at 2:27 pm
asdf-
It’s not so much a logical leap as my understanding that, in practice, actual coders & tech startups do this approximately never. Precisely *because* patent litigation can be so costly and annoying, firms with enough bank to be worth suing are a lot more likely to try to license a valid patent they’re knowingly using.
8 A Good Offense Against Defensive Patents | A High-Tech Blech! // Jul 29, 2011 at 2:51 pm
[...] Good Defensive Patents Are Bad Patents [...]
9 SeattleBob // Jul 29, 2011 at 9:17 pm
I think patents should ‘expire’ if the company/individual who owns them doesn’t make measurable progress towards commercialization within a reasonable amount of time. That would discourage the type of patent trolling/defensive patenting that seems to be prevalent.
10 progpropertyrightsguy // Jul 29, 2011 at 9:52 pm
The main function, economically and ethically of patents is to provide incentives: innovators get rewarded for their innovations, and entrepreneurs, by getting a piece of the patent pie, have incentives to invest in innovations. As soon as a patent is sold, those rationales disappear. Inventors and entrepreneur financiers no longer receive further value. Someone else who had no part in creating or financing the ideas, now gets the kind of control and economic benefit that makes sense only for those who played a role.
Once we step outside of these fundamentals and allow patents to be transfered (sold) to those who were neither creators nor enablers, we open the doors to a Pandora’s box of abuses. “Defensive patents” are only a drop in the bucket of patent abuses.
11 By Definition, A Defensive Patent Is A Bad Patent | Business and Pleasure // Jul 30, 2011 at 7:02 am
[...] Julian Sanchez brings up a key point in this discussion, which is that a good defensive patent, by definition is a bad patent. That’s because the only way a defensive patent matters is if there’s some likelihood [...]
12 Julian Sanchez // Jul 31, 2011 at 10:17 am
pprg-
But the right needs to be transferrable to have an incentive effect, unless the inventor *also* happens to be an aspiring CEO. This will especially be true for inventions that don’t really make sense as a freestanding product. If I invent an improved method of doing some part of the automotive assembly line process, it’s not like I’m going to start my own car company; I’m either going to want to sell or license it to Ford or Toyota or whatever. And it only makes sense for them to buy it if they get all those rights.
13 Depressing Sunday Links « Gerry Canavan // Jul 31, 2011 at 1:21 pm
[...] Julian Sanchez: “The very existence of such massive trade in “defensive patents” is, in itself, pretty str… I love that Planet Money and This American Life got non-IP people talking about [...]
14 The Economist: Patents against prosperity // Aug 2, 2011 at 10:09 am
[...] also references a post by Julian Sanchez, Good Defensive Patents Are Bad Patents, which “explains how the very existence of “defensive patents”, and of companies [...]
15 Intellectual property: Patents against prosperity | The Economist « Ye Olde Soapbox // Aug 2, 2011 at 8:24 pm
[...] and use them defensively against companies claiming patent infringement. Julian Sanchez lucidly explains how the very existence of “defensive patents”, and of companies in the business of [...]
16 Good Defensive Patents Are Bad Patents | TightWind // Aug 3, 2011 at 5:41 pm
[...] Defensive Patents Are Bad Patents August 3rd, 2011 Julian Sanchez: The very existence of such massive trade in “defensive patents” is, in itself, pretty strong [...]
17 Who’s suing whom in the mobile business // Aug 4, 2011 at 6:03 am
[...] A pretty graphic depicting a not-so-pretty situation [Design Language News] Related: “When Patents Attack,” NPR; Will Wilkinson, “Patents Against Prosperity”, The Economist; “Good Defensive Patents Are Bad Patents,” Julian Sanchez. [...]
18 Zoltan Manyoki // Aug 4, 2011 at 6:44 am
To the point “A patent that is truly so original that somebody else wouldn’t arrive at the same solution by applying normal engineering skill is useless as a defensive patent.”
Such a patent should not be issued in the first place due to obviousness. Every patent should center around a non-obvious invention. I think that’s a current governing principle.
19 4runner // Aug 5, 2011 at 12:58 pm
“This only works, however, if other companies are almost certain to have independently come up with the same idea. A patent that is truly so original that somebody else wouldn’t arrive at the same solution by applying normal engineering skill is useless as a defensive patent.”
This is simply not true. Defensive patents work perfectly well if the “same idea” was so good that somebody else is copying it.
20 Patent | Lite av varje // Aug 9, 2011 at 3:38 pm
[...] undantag inom patent. The Economist har ett blogginlägg som är mycket läsvärt och har länkar till två andra läsvärda artiklar. Share this:FacebookE-postBlogga det härDelaSkriv [...]
21 When Are Patents Obvious? // Aug 15, 2011 at 4:10 pm
[...] horror stories about ludicrously broad, bad technology patents that have given rise to a wasteful arms race between real tech companies and patent trolls. A growing body of scholarly literature suggests that [...]
22 Intellectual property: Patents against prosperity | The Economist | musings on things // Aug 16, 2011 at 8:19 am
[...] and use them defensively against companies claiming patent infringement. Julian Sanchez lucidly explains how the very existence of “defensive patents”, and of companies in the business of [...]
23 datanalytics » Google, Motorola, móviles, patentes e ideas // Aug 17, 2011 at 3:24 am
[...] defensivas. En pocos sitios se describe tan sucinta y claramente el problema como en el artículo Good defensive patents are bad patents, que pivota alrededor de dos ideas [...]
24 Club Troppo » Perhaps the penny is beginning to drop: Our IP system is a nightmare // Aug 23, 2011 at 10:05 pm
[...] of each other that underpins the profitability of patent trolling. “Julian Sanchez lucidly explains how the very existence of “defensive patents”, and of companies in the business of [...]
25 Gavin R. Putland // Aug 23, 2011 at 11:48 pm
The solution is to make patents like copyrights: coverage should be automatic; patents shouldn’t protect against independent reinvention; and whether the “reinvention” was indeed independent should be a question of fact to be decided by the evidence.
26 Gavin R. Putland // Aug 24, 2011 at 2:57 am
Perhaps I shouldn’t have said coverage should be automatic. At http://t.co/sWaQbxi I’m being criticized for saying that much; but so far, to my surprise, I’m NOT being criticized for saying that patents shouldn’t protect against independent reinvention.
27 sac à main // Aug 26, 2011 at 3:05 am
We have gotten many great comments from our customers and earn a good reputation in foreign makerts, more than 90% customers are satisfied with our products and service, till now our online members are beyond 80,000. As of right now, we currently serve customers from over 18 countries, and we are still growing. We really hope to expand our business through cooperation with individuals and companies from around the world.
Leave a Comment