

How Patent Trolls Are A Tax On Innovation - brlewis
http://www.avc.com/a_vc/2009/02/how-patent-trolls-are-a-tax-on-innovation.html

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chollida1
> Byron Scholls once told me that the Black Scholls Model isn't widely used
> because it's right. It's right because it's widely used.

I think the quoter or the author meant:
<http://en.wikipedia.org/wiki/Myron_Scholes>

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paulgb
What if there were a company that insured start-ups against patent trolls? The
insurance would be set up in a way that gave the companies a large incentive
to pursue the lawsuit fully, and to sue for expenses. For example, the
insurance could cover legal costs of the defence suit and expenses lost, and
also give a financial incentive to sue the troll for legal expenses (perhaps
by matching some percent of any legal fees recovered from the troll).

The idea would be that a company with this insurance would not be a target for
trolls, as long as the company made it known they had the insurance policy,
because the trolls would realize that the company stands to gain by fighting
the troll in court.

~~~
vaksel
The problem is that any time a company trolls, they always have the risk of
someone fighting in court. So a company having insurance won't really prevent
them from trying.

~~~
paulgb
The patent trolls know that the rational (in the game-theory sense of the
word) decision for the victim company is to settle, because the cost of taking
it to court (in both legal fees and lost time) exceed the cost of the
settlement.

It's like an asymmetric game of chicken. Both players know that the troll has
the advantage of having less to lose in a "collision" (a lawsuit), so the
troll can count on the victim to "swerve" (settle). If the victim was able to
eliminate the cost of a collision, and the troll knew that the cost of a
collision to the victim company was eliminated, it would make more sense for
the troll to swerve (drop the claim).

(More chicken strategies here:
[http://mindyourdecisions.com/blog/2009/01/20/4-tips-for-
winn...](http://mindyourdecisions.com/blog/2009/01/20/4-tips-for-winning-in-a-
game-of-chicken/) . This strategy is most similar to #3.)

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noonespecial
I think that the system has become broken enough that we can now say that the
patent system in general has become a tax on innovation.

In its current implementation, it almost always favors the current (and
largest) monopoly player, or the legal entity/corporation that _doesn't_
actually make anything but lawsuits.

A strange tragedy of the commons has developed where it makes good sense for
any one startup to pay the extortion fee but its exactly the wrong thing to do
for the good of the community because it simply funds and encourages more of
the same.

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kragen
It's the same prisoner's-dilemma situation referenced by Thomas Jefferson:
"Millions for defense, not one cent for tribute."

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elecengin
On paying legal fees in frivolous cases:

I completely agree this would help in many situations. It isn't easy, though,
to determine what constitutes as a baseless claim. Are all claims that seem to
be just aggressive litigation deserving of costs? Or just ones from "patent
trolls"? If so, what defines a "patent troll"? It isn't always easy to tell
who deserves to be punished.

On "Use It Or Lose It":

This is not as easy at it seems. Right now, there are many incentives to file
for a patent as soon as the invention has been reduced to practice. In fact,
if the invention becomes disclosed, the inventor only has a year in order to
secure his patent. This results in patents for technologies which are
frequently at the prototype stage. This is a good thing - now, the technology
has been described in a publication that is publicly accessible.

Imagine if there was a requirement to "use it" after it was patented... In
many cases, that would be impossible: just because something is patented, does
not mean it is manufacturable. Furthermore, it may not have a use in a
commercial product right after it is patented... Although five years later, it
could be an integral part of a product.

In short, requiring the invention to immediately "used" may appear to solve
problems, but will probably open up a whole new set of problems.

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anamax
Note that Wilson's two solutions both have the "side effect" that companies
need not pay for IP from outsiders. (The "can only sell to operating
companies" proposal means that operating companies need not buy because the
inventor can't do anything if they don't buy.)

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marcus
You're forgetting that in any field that isn't controlled by a monopoly, every
single competitor always wants more leverage over the other players.

~~~
anamax
You're forgetting the "honor among thieves" that is present in every line of
work. For example, book publishers don't plagarize from each other.

They only use patents to shut down new competition.

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mtkd
Imagine a world where patents only last 3 years and all closed source code and
research had to be made public in that time too.

We'd all have to innovate faster and more consistently to stay ahead of our
competition.

We would probably have cured cancer, have infinitely more efficient fuel
sources and be able to feed the world.

~~~
paulgb
I think it depends on the industry. If patents only lasted 3 years, high tech
may move faster because a 3 year advantage is enough incentive to innovate in
an industry that moves fast anyway. I'm not so sure about pharmaceuticals
though. 3 years isn't even enough to complete clinical trials, so the
companies would effectively have no incentive to innovate at all.

