Archive for the ‘Patents / IP’ Category

GREAT New Blog – IP Law for Startups

Today, I learned that former classmate of mine at the University of Michigan has started a blog for startups dealing with intellectual property issues.

Jill Bowman is a great person and her blog is not only informative, but is also written in her voice, not legalese.  (Her husband says it’s too “girly” but I totally disagree). 

Jill promises to dish on IP “train wrecks” (her words) that she’s seen over the past decade and hopefully her wisdom can save some folks future headaches.

She also promises to talk about costs savings in IP controversies and expose how some big firms are ripping off their clients. 

Her first post is Ten Smart Reasons to Learn About IP Law.  Jill, welcome to the blogosphere.  We are happy to have you. 

February 2nd, 2010     Categories: Law, Law Firm 2.0, Patents / IP    

An Open Letter to Mr. Obama on Innovation Policy

Dear Mr. President,

I feel compelled to write you a letter to express my thoughts and frustrations regarding innovation policy in our country.  While I have modest expectations that you’ll actually read this, perhaps someone in your inner circle will and represent my thoughts.

First of all, I hope that you realize how very fortunate we are as a country to have an innovation and entrepreneurial engine at the heart of our economy.  It is part of our culture and is a pervasive mind set that is the envy of the rest of the world.  Furthermore, it was not created, nor is it (currently) regulated by the government.  If you look at the venture capital industry as a proxy (since many innovative startup companies need some financial backing to prosper), one can see how important this ecosystem is.  The latest report from the National Venture Capital Association called "Venture Impact" talks about the important of venture-backed companies in the macro U.S. economy.  Among the highlights:

- Venture-backed companies employed more than 12.1 million Americans in 2008;
- Venture-backed revenues were $2.9 trillion in 2008, equating to 21 percent of US GDP; and
- Venture backed companies grew jobs and revenues faster than their non-venture counterparts from 2006-2008.

Best of all, none of this costs the government anything, nor does it require any bailouts.  The jobs created in this country are real, high paying and reflect the newest opportunities in the world economy and aren’t shipped overseas.  One would think that you would want to do everything in your power to encourage growth in the innovation sector and make sure current proposals don’t unnecessarily negatively impact this gift that our economy has been given.  So I propose to you some things that your administration should and should not do.

What your administration should do:

1. Reform immigration policy.  My partner Brad Feld wrote a post last week on the "Startup Visa Movement," based upon the earlier writings of Paul Graham.  The basic premise is this:  we should openly encourage and enable people from different countries to move to the United States, start companies and create jobs.  Clearly, there would need to be some limitations and thresholds to ensure that the companies created were "real," but I am frustrated by how many foreign founders are being forced home due to our overly-restrictive policies.  I’ve seen two companies this year in Boulder, Colorado, that would have received U.S. venture funding and stayed here, but won’t be able to.  There are many of such cases across the country.  

Also, we still don’t have a handle on the H1-B issue.  Every year, our U.S.-based investments struggle to hire all of of the computer science talent that they need and their growth is stunted.  It’s time to de-politicize the immigration debate and concentrate on ways that we can make this country’s workforce even stronger. 

2. Enact real patent reform.  There are many points of view out there – from abolishing some types of patents, to materially revising the way jurisdiction is handled in patent cases, but, regardless, the loud chorus from the innovation economy is that the patent process is not working.  Patents are too costly to obtain, are too uncertain in the rights they grant when obtained and then all too often, end up with meaningless lawsuits that amount to nothing more than a tax on innovation in favor of lawyers.  We need to clearly define what is patentable and what should not and re-architect the system to deal with the realities of a connected world.  

3. Push for FASB to "figure out" valuation methodologies.  Over the past few years, venture funds have had to "mark to market" their investments.  This "FAS 157" (or Topic 820, as it’s been recently renamed), has placed a tremendous burden on venture firm managers and their investors.  In short, not even the accountants can tell us how to accurately value our portfolios and there is tremendous cost and uncertainty about the asset class because of it.  I’ve written about the issues, here, in detail.

4. Get a handle on Sarbanes Oxley / help with opening of the capital markets.  The last financial meltdown earlier this decade brought about increased regulations through Sarbanes Oxley.  While some credit the act for deterring and lessening fraud in public companies, it’s easy when almost no companies are going public.  In my opinion, the frauds perpetrated in the most flashy cases (Enron, Worldcom, etc.) were the work of bad actors and lazy accountants.  They were not systemic in the industry and even the rules today can be easily circumvented by two unscrupulous executives with a criminal agenda.

What the effect has been is to stop the flow of companies going public which has greatly hurt venture capital returns and has driven venture firm investors (limited partners) out of the market.  This has severally constrained the amount of capital able to fund new and innovative businesses.  I think a complete review of all of these rules needs to be undertaken, as I’ve had many conversations with entrepreneurs who don’t even want to go public due to all the red tape involved with Sarbox. 

The secondary effect has been a rush to other foreign markets, whether they are in London, China or India and thus the U.S. is losing its market share of new offeringings and further weakening our financial industry.  

What your administration should NOT do:

1. Regulate the Venture Capital Industry.  We aren’t hedge funds.  Nothing we do increases "systemic risk" in the economy.  In fact, the entire VC industry invested a total last year of $28 billion dollars (not an atypical year).  That sum is less than half the amount that Bear Stearns was borrowing every night before its collapse.  Regulating us, in the best case, foists additional costs upon us that smaller, early-stage VCs can’t afford and worst case, materially and negatively impacts the VC industry’s ability to fund new companies.  Lastly, it should be noted that investors in VC funds are of the highest sophistication levels.  This isn’t the case of protecting the average investor.  The WSJ recently had a great opinion piece supporting this position

2.  Increase taxes, especially capital gain taxes.  There is quite a bit of research that shows correlations between low capital gains taxes and high GDP growth rates.  I won’t pretend to have a PhD in economics (although I did manage to get an undergraduate degree from the University of Michigan in it), but many of the entrepreneurs I speak to say they specifically take the outsized risk of starting a business because of the potential financial gains.

Additionally, changing the characterization of venture capitalist’s carry is inconsistent with how VCs invest – long term with high risk of capital loss.  I also have a hard time delineating between founder shares and VC carry and wonder if VC carry is changed will founder shares be next?  The reason behind capital gains treatment was to incentivize long term investing and also to help make up losses from risky asset classes that benefit our society in the long run.  This is precisely what VCs do. 

3. Engage in activities that will devalue the dollar.  One thing to keep in mind is that with some of the current issues detailed above, it is harder and harder for VCs to raise money to fund startups.  Small businesses must do more with less.  If the dollar becomes devalued, these companies would effectively have less money to spend on hiring and other activities to make them successful in the global marketplace.

Again, Mr. President, I urge you to consider how your policy makers are taking into account one of the most important drivers of this country’s economic future.  This is not about venture capitalists:  it is about the ecosystem of innovation which venture capitalists spend their lives funding.  We’ve been blessed in this country with a large population of entrepreneurs and we need to foster this culture so that we can maintain our competitiveness as the greatest economy in the world.  To that goal, the government can largely stand out of the way and help on the margins to tweak some things that will benefit all. 

I humbly ask for your consideration. 

September 21st, 2009     Categories: Entrepreneurship, Frustrations, NVCA, Patents / IP, Technology, Venture Capital    

Great Article on Intellectual Ventures (sucking)

For those of you who share my disgust with the current patent ecosystem, here is a great piece from Timothy B. Lee on “Intellectual Ventures.”

I use quotations, because it’s nearly impossible for me to call them “Intellectual Ventures” as I see nothing intellectual about the firm but for their desire to further deteriorate innovation in this country while trying to bilk a buck or two (or millions) from hard working entrepreneurs.

Timothy summarizes Malcolm Gladwell’s expose of IV where he stated that IV

“hires smart people to participate in brainstorming sessions and then has patent lawyers immediately file patent applications for every idea that comes up during the discussion, without bothering to actually implement any of them, or even devoting much effort to verifying that they actually work. IV then approaches firms that are doing the hard work of implementing “their” ideas and demands a cut of their profits.”

If you aren’t disgusted, you should be.  Timothy asks how any of this benefits anyone other than IV and the patent bar.  His take on patent reform?

“a good yardstick would be to look for policy changes that would tend to put Myhrvold and his firm out of business.”

Brilliant. 

September 9th, 2009     Categories: Frustrations, Patents / IP    

The End of Software Patents?

One can only hope.  I think it’s optimistic thinking on my part that software patents will one day go away, but until then I can enjoy a GREAT article from the Cato Institute on why they think they should go away.  It’s a must read for anyone thinking about the issue.

August 31st, 2009     Categories: Patents / IP    

Coldplay Sued by Joe Satriani and Why I Love Music Copyright Lawsuits.

If you haven’t seen it yet, Coldplay has been sued by Joe Satriani over Cold Play’s hit song Viva La Vida.  Joe is claiming that his song was ripped off.  I think the following video best explains the lawsuit. 

It’s really uncanny how similar the songs are.  They are even the same key.  But is it copyright infringement?  I love lawsuits like these because there are such interesting issues at play.  My former law school professor Susan Kornfield is to thank for creating all of my interest in this subject.

The key here is that Joe must prove Coldplay ACTUALLY copied his work.  George Harrison was found guilty of plagiarizing "He’s so Fine" when he released "My Sweet Lord" when the court found that he subconsciously copied the song.  He’s so Fine was a big enough hit that it was hard for George to argue that he had never heard the song and although he contended there was no intent, the court said that subconscious infringement was still infringement. 

Let’s assume for a moment that Coldplay did not intentionally steal Joe’s song.  (And if they did, they were idiots – couldn’t you guys at least change the key?).

The question is did they have access to hear Joe’s original work?  Joe’s song certainly never got any airplay.  Even my rock and roll guitar partner Ryan had never heard of it.  This will be very interesting to see how it plays out.  The chord structure is nothing novel, it’s really all about the melody.

If you like interesting cases like this, make sure to check out John Fogerty being sued for allegedly copying himself and Ray Parker Jr. having to pay Huey Lewis for Ghostbusters.

December 7th, 2008     Categories: Music, Patents / IP    

Cool Patent Startup Pays People To Discover Prior Art

Article One Partners has recently launched and it looks like a winner.  In short, they are paying people to research and discover prior art related to patent studies they find interesting.  There first three related to the drug Lipitor, Semiconductor memory devices and my favorite, video game patents.

They are offering up to $50,000 bounties for the discovery of new prior art.  I think initiatives like these will only increase the transparency in patents and decrease some of the worthless patent litigation in this country. 

November 19th, 2008     Categories: Patents / IP, Venture Capital    

A Patent Even I Can Support

My friend Craig Neugeboren sent me this link today on an interesting patent.  It’s essentially a patent for non-inventors acquiring and asserting patents against others.  Think of this as patenting the idea of patent trolling.  :)

The Bilski court may have something to say about this, but it’s still entertaining. 

November 7th, 2008     Categories: Patents / IP    

Interesting Patent Statistics

In my continuing venting of frustrations related to the current state of affairs of the patent system in our country, I was turned onto some very interesting statistics by my friend Chris Graham at Dechert.  (Despite his mean looking picture, he’s actually a really nice guy).

Chris’ partner, James Elacqua put together a presentation regarding litigation surround patents, with a particular look at business method patents (which I abhor). 

So with full credit to Jim and with thanks to Chris for passing along, here are some interesting numbers. 

1. Patent cases filed has nearly doubled in the last ten years.  Today, nearly 3000 cases are filed a year.

2. Direct costs (not including man hours lost, and costs related to losing one’s patent) for these cases (assuming more than $25m is at stake) are $5m for the median case, up 10x from the 1980s.  If we use just the median case, these patent cases have direct costs of $15,000,000,000 per year.

3.  Amount of jury versus bench trials have doubled in the past decade, now standing at 43%.  If you’ve ever been on a jury, think about which ones that you’ve been on that you think are capable of really understanding a patent case.

4.  Of course, jury trials normally return 8x the damages that bench trials do.

5.  Business method patent filings are on the rise and applications are far outpacing issuances.  When the PTO says it is overwhelmed with applications, this might have something to do with it.

    

image

 

Unfortunately, I don’t see a short term fix for any of this, especially after attending a debate last week at the DNC where Obama and McCain camps debated potential changes to the patent systems.  Neither side impressed me having a clear vision of how we are going to better our system, although there was plenty of rhetoric and mudslinging around.  Sigh…

September 5th, 2008     Categories: Patents / IP    

Update on "Stupid Patent Case of the Week"

A couple of weeks ago, I blogged about the "Stupid Patent Case of the Week."  The comments were much more interesting than the original blog, especially with some of the emotions that came out. 

By way of update, I received word tonight that one of the defendants (Monster.com) was released with prejudice after sending a nasty-gram to our "friend" Michael Powell threatening him with a frivolous lawsuit and also serving discovery on his current employer, Quinn Emanuel.

Mike’s response was to immediately drop the case against Monster.  Now, if that isn’t conviction about your case, I’m not sure what is.  Unfortunately, our defendant ended up spending some money on attorney’s fees (although not a horrible amount), while our lovely plaintiff got off free using his wife as his counsel.  Maybe it’s his turn to pick up the dry cleaning this week. 

Good luck to the rest of the defendants.

September 2nd, 2008     Categories: Patents / IP    

More Patent Stupidness

Seen at the Denver airport today:

image

 

My partner Brad has a great blog about this.  Ugh. 

August 21st, 2008     Categories: Patents / IP