
 Twitter’s Lack of Patents Seen as a Risk to Investors - RougeFemme
http://www.bloomberg.com/news/2013-10-18/twitter-pre-ipo-patent-paucity-seen-posing-investor-risk-tech.html
======
alexqgb
"If Twitter does deal with patent-infringement lawsuits, they don’t have too
many patents to lean on to countersue. That does put Twitter at a
disadvantage.”

And there's the rub.

~~~
nhebb
That's only the rub if the plaintiff is a producing entity. Some of the patent
litigation has been from NPE's, and in others I can't imagine that there is
often a tit-for-tat counter suit opportunity. My gut feel is that this article
is taking a hot topic (the twitter IPO) and blowing one angle of it out of
proportion.

------
thinkcomp
Twitter's patent portfolio (not including patents not assigned to Twitter,
Inc. that may be held by Twitter employee inventors):

[http://www.plainsite.org/flashlight/index.html?id=467846&tab...](http://www.plainsite.org/flashlight/index.html?id=467846&table=patents)

------
adventured
Apple's substantial patent trove didn't help them fend off Samsung (which just
printed a nearly $10b profit quarter), and Twitter's patent position also will
have absolutely nothing to do with their long term success or failure.

There's no core patent that is just going to shut down their business
tomorrow. Reid Hoffman & Co. are the only ones I know of with such a
_potentially_ nuclear patent position, and they seemingly have zero interest
in applying it offensively.

There's a large patent lobby out there, and I generally assume this kind of
article is mostly propaganda in favor of patents as some sort of huge
competitive value.

Facebook and Google as two simple examples, sure haven't been hurt by not
being high on the list of patent issuers and patent suit launchers.

------
ChrisNorstrom
Craigslist doesn't have any patents as far as I know and numerous companies
from Microsoft (with Live.com expo) and Ebay (with Kijiji) as well as others
(olx) have tried to de-thrown it and failed hilariously.

Patents are not the only weapon businesses can use, there's always design,
community, emotion, and the good ol fashion network effect.

~~~
joeblau
Craigslist is making money though.

~~~
mkhpalm
tou·ché

------
throwawaykf
The link to the study in TFA is broken, but here are some more relevant
studies:

1\. Study of startup patenting in various industries indicating entrepreneurs
say patents help getting financing:
[http://www.law.berkeley.edu/9135.htm](http://www.law.berkeley.edu/9135.htm)

(There was controversy around this study, where VCs with an anti patent
stance, such as Brad Feld, publicly disagreed with the analysis. As TFA shows,
they are probably in the minority.)

2\. Study showing startups with patents more likely to get late stage
financing and/or have a successful exit:
[http://papers.ssrn.com/sol3/papers.cfm?abstract_id=802806](http://papers.ssrn.com/sol3/papers.cfm?abstract_id=802806)

3\. Study (apparently -- it's paywalled unfortunately) showing startups with
"stronger than typical" IP more likely to succeed: [http://m.iam-
magazine.com/blog/detail.aspx?g=ae1d78db-9c5e-4...](http://m.iam-
magazine.com/blog/detail.aspx?g=ae1d78db-9c5e-41aa-a4f9-161c7de6c9fb) (Note
that the study was done by MIT Sloan and IPVision, an IP consulting firm, so
something to keep in mind.)

Keep in mind that all studies must necessarily make some assumptions to make
sense of their data, and some assumptions may be more valid than others. Also,
different data sets and different methodologies give different results. For
instance, the 2007 paper in [2] found much lower patenting rates in software
than did the 2008 survey in [1].

Yet the patent possession/success correlation is hard to doubt. In addition to
[2] and [3], there are other papers, such as by Rosemary Zeidonis, that also
show a robust correlation between patenting and eventual success in high tech
industries. Also, there's a working paper by a Pepperdine professor showing
firms with patents _four times_ more likely to succeed. I linked [2]
particularly because it has a greater focus on the software industry.

I do agree that Twitter's strength is in network effects, and so is less
likely to be affected by issues affecting other startups. Just trying to show
some numbers to explain why (some) investors see the lack of patents as
worrying.

However, the argument that the Innovators's Patent Agreement will attract the
"best and brightest" is a false premise, handily disproved by Google and
Facebook, just to pick two. It will attract a certain type of talent, maybe
something Twitter is particularly looking for, but "best and brightest" is not
necessarily it.

~~~
michaelt

      Yet the patent possession/success correlation is hard
      to doubt.
    

How do you tell apart correlation and causality in studies like this?

I mean, it seems to me patents are at their most useful when you have to make
large upfront research investments, which is mandatory to get your foot in the
door in some parts of the tech industry (IC fabrication) - but in other parts
of the tech industry people would prefer to test the market with an MVP, and
may be able to avoid a large upfront investment at all, so investors would
tolerate higher risks of failure (iphone apps).

So it's believable there could be confounding factors - how do studies control
for them?

~~~
throwawaykf
As far as I recall, most of these studies, especially [2], mostly just present
their findings of a correlation, along with the data and any variables that
may be relevant, without trying to prove causation. They may posit some
tentative theories in their analyses, but are careful not to make any
conclusions on those.

However, your observation about many software startups would prefer to release
an MVP and iterate rather than invest a lot of upfront work and patent is also
borne out by data in [1] and in other studies, such as some of Bessen and
Maskin's papers.

I think Malandrew's sibling comment is also a very salient point, and combined
with my hunch that a vast majority of startups (or, heck, software companies
in general) are not doing particularly technically innovative work, it goes a
long way in explaining the data in those papers.

------
ateeqs
Patents aside, I feel Twitter does not have much in terms of innovation.

~~~
nonchalance
Twitter may not have much in terms of technical innovation, but I believe that
isn't Twitter's goal. Their true value lies in the news-making ability (you
hear about many news events first reported on twitter and relatively few first
reported on facebook or google+ or other social networks). And in that sense,
they have much to offer.

~~~
johnchristopher
I think Twitter's value reside in connecting people but I am not really sure
about that.

Frankly, I think once Twitter (and FB) removed their RSS streams they could no
longer be fit to spread news in a efficient way or claim to be anything news-
related/efficient-to-spread-news.

I have a hard time using Twitter for its news-making ability. The noise is way
too much preponderant. Its ability to quickly spread news depends on how close
someone watches its subscribed streams and I am only checking it twice a day
or every other day.

But I am still using Twitter as a micro-blogging platform and I am only
following real people and NASA streams. + I have a tendency to un-subscribe
from streams that send too much information that are not related to the reason
why I first subscribe or that send information every 20 minutes about anything
they are doing (eg: William Gibson or Dresden Codak, because I want to hear
stuff about their work, not their personal life tidbits... But people close to
them might be more interested in tidbits than in comments on their work so I
may be the one misusing Twitter). But is everything news-worthy then ?

~~~
nonchalance
Actually, removing RSS streams is what makes twitter a business. They hold the
keys to the data and can charge customers for access to the firehose.

Your assumption is that the news consumption pattern ultimately dictates where
the producers flock, which makes sense in the traditional journalistic
business model. In a model where individual users contribute, the key factor
is which platform gives users an easy way to speak (and I would argue that
twitter has done a decent job at reducing the tweet friction)

~~~
johnchristopher
> Actually, removing RSS streams is what makes twitter a business. They hold
> the keys to the data and can charge customers for access to the firehose.

Following on the analogy: to me they replaced a very good firehose (RSS) with
a less efficient one.

> Your assumption is that the news consumption pattern ultimately dictates
> where the producers flock [...]

What ? No, my consumption pattern dictates where I (a user) go. And it turns
out Twitter as a news media don't work for me (not twitter's fault though).

> In a model where individual users contribute, the key factor is which
> platform gives users an easy way to speak (and I would argue that twitter
> has done a decent job at reducing the tweet friction)

I don't see how removing the RSS feeds makes it less easy for a user to
contribute. (shouldn't users who contribute be named producers in that context
?)

~~~
ProblemFactory
RSS feeds make it easier be only a reader.

If you use the Twitter user interface to read the stream, reply and post
buttons are right there. If you use an RSS reader, going to twitter to post
something on your own takes an extra step. Also, RSS feeds make it easier to
filter out advertising posts, whereas with the official API Twitter can ban
clients which introduce Adblock.

This assumes that at least some of the RSS users migrate to the official UI,
instead of abandoning the platform. But it might be a reasonable tradeoff.

~~~
johnchristopher
Nothing wrong with what you are saying but let's get back to what started this
conversation:

> Their true value lies in the news-making ability (you hear about many news
> events first reported on twitter and relatively few first reported on
> facebook or google+ or other social networks). And in that sense, they have
> much to offer.

My point is that regarding news it's more efficient and pratical for the
consumer/reader to get them via RSS than via Twitter streams. I am only
dealing with the 'getting news' pov here. The producer and the
conversationalist issues aren't the same as those of the reader.

------
pearjuice
A risk to investors? The only risk you have when "investing" (buying stocks)
in Twitter is that you have to step out at its peek. All this IPO will be, is
payout day.

------
krakensden
Since everyone is just going to do it anyway, I'll start:

Boo, hiss

Now we can talk about something else.

------
ivanbrussik
If Twitter were on Shark Tank right now, Mark and Robert and MR Wonderful
would be out due to lack of patent.

~~~
nhebb
To bolster @hayksaakian's point (plus I just like the name of the Chair
position):

 _" The current state of patents and patent litigation in this country is
shameful," said Cuban, owner of the Dallas Mavericks. "Silly patent lawsuits
force prices to go up while competition and innovation suffer. That's bad for
consumers and bad for business. It's time to fix our broken system, and EFF
can help. So that's why part of my donation funds a new title for EFF Staff
Attorney Julie Samuels: 'The Mark Cuban Chair to Eliminate Stupid Patents'."_

[https://www.eff.org/press/releases/eff-patent-project-
gets-h...](https://www.eff.org/press/releases/eff-patent-project-gets-half-
million-dollar-boost-mark-cuban-and-notch)

~~~
throwawaykf
I wouldn't put much weight behind Mark Cuban's words. He makes statements like
the one you quoted and the next thing you know, he invests in a patent troll
that's suing Google for hundreds of millions.

~~~
adventured
Not just his words. He put money into the EFF as well.

~~~
throwawaykf
He put 500K into EFF. And 2M+ in Vringo. Well, he's putting money and seems
it's more where his mouth isn't.

------
volaski
People who are saying stuff like patent doesn't mean anything as long as you
have good community and network effect don't know what is going on here.
Facebook owns a patent for activity feed. Theoretically Facebook can sue
Twitter once Twitter goes public. Although it's not likely going to happen and
it will be settled somehow even if it does happen, it's still an important
factor for investors.

~~~
adventured
If that were true, Facebook would have been better off destroying Twitter a
long time ago. Not waiting until they pick up another $1.5 billion in cash to
fight with and buy more patents with.

Facebook doesn't have to wait for Twitter to go public. There's no benefit to
waiting. Facebook would gain a lot more from killing Twitter (which is why
they'd have sued years ago), than even if they won a billion dollars in a
settlement via IPO cash. A billion dollars is meaningless to Facebook. What
matters is owning social.

~~~
volaski
What you say is all true. And what I say is true also. You're just talking
from Facebook's point of view, and i'm talking from investors' point of view,
which is what the article is talking about. As I also mentioned, it is
unlikely that it will happen, but from an investor's point of view you cannot
deny that it still is an existing risk. And I don't think it's nice to
downvote someone else's comment just because you disagree

------
sheikhimran01
I still don't understand why is twitter going for IPO? They have zero
innovation, Vine is apps for wasted people, Twitter users are not growing...

$10 Billion is a lot for twitter. Facebook story was different cuz it has user
locked into its system.

twitter should not be worth more than $3 billion

