Popular media hypes up a trivial Apple 3-D gesture patent

Science fiction writer Michael Crichton once said about journalists' cluelessness on subjects that require special knowledge:

“Briefly stated, the Gell-Mann Amnesia effect is as follows. You open the newspaper to an article on some subject you know well. In Murray's case, physics. In mine, show business. You read the article and see the journalist has absolutely no understanding of either the facts or the issues. Often, the article is so wrong it actually presents the story backward—reversing cause and effect. I call these the "wet streets cause rain" stories. Paper's full of them.
In any case, you read with exasperation or amusement the multiple errors in a story, and then turn the page to national or international affairs, and read as if the rest of the newspaper was somehow more accurate about Palestine than the baloney you just read. You turn the page, and forget what you know.”

The recent media coverage of US 8,933,876 awarded to Apple is a remarkable case of baloney reporting. For example, in a CNBC news segment Dan Costa, the Editor-in-Chief of PCMag.com says, he's surprised how broad the patent is. Obviously, Dan is clueless because in reality the patent claims only a vertical unlock gesture - a narrow set of functionality that is extremely easy to work around, e.g. by implementing it horizontally.

The Business Insider header says, "Apple Just Patented 'Minority Report'-Style Gesture Controls." This statement is a huge stretch of reality because Apple patented just a tiny extension of the technology already implemented in, e.g. Microsoft Kinect, Nintendo, and other devices.

As a rule, when you read something about patents in popular media consider yourself under the influence of the Gell-Mann Amnesia effect.

tags: patents, apple, media, information, error

Why Tesla gives away its patents to copycats?

Wired reports on the latest in patent news:

Tesla CEO Elon Musk announced today that his company will not “initiate patent lawsuits against anyone who, in good faith, wants to use our technology.” In plain English, that means that if other car companies want to produce electric cars, they can use Tesla’s technology to do it, and, in turn, advance Musk’s sustainability vision.

What's the significance of that?

I looked up Tesla's patent portfolio on the US PTO website this afternoon: 156 issued US patents and nothing of great importance there. In comparison, BMW and Toyota have thousands of patents. In a patent fight against its direct competitors Tesla has a slim to none chance to win. Therefore, giving away a weak patent portfolio is not a big loss for Tesla. On the other hand, if the company succeeds inducing the competitors to give up their patents, that would be great! Besides, Tesla promises to gives its patents to those who want "to use our technology" only. Interesting. This brings our attention to Tesla's new business model.

Recently, the company announced that it is going to build a huge battery-making plant in the US. For this project to be successful, Tesla needs economies of scale: a lot of electric cars made by those who use Tesla batteries and electric drive technology. Selling batteries to a potentially huge market would be more profitable than trying to enforce weak patents in a small market. Giving away the patents is a shrewd PR move by Elon Musk. This reminds me of an ancient Chinese stratagem called "Tossing out a brick to get a jade gem." It means "Bait someone by making him believe he gains something or just make him react to it ("toss out a brick") and obtain something valuable from him in return ("get a jade gem")."

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In the system model terms (see our book Scalable Innovation), Tesla intends to make money on the battery, i.e. the Packaged Payload, while encouraging others to build more electric cars, i.e. the Tools.

2013 Patent Litigation costs

Just a few data points for future reference:


According to the American Intellectual Property Law Association (AIPLA), in 2013 typical patent litigation costs were as follows:

Source: AIPLA 2013 Report of the Economic Survey

Surprisingly, the costs stayed close to 2005 levels:

Source: The Entrepreneur's Guide to Law. 3rd ed.

The textbook mentions that "Intellectual property represents approximately 70% of an average firm’s value."

tags: patents, law, economics

"The Yoga Pants War": Design Patents in Apparel

According to the Wall Street Journal (9/11/2012),

Lululemon, in a complaint filed in federal court in Delaware last month, claims that Calvin Klein is selling pants that "have infringed and are still infringing" on three patents, including one for a distinctive waistband featuring overlapping panels of fabric. The company was awarded one of the patents last year, and the two others in June.

Lululemon is trying to chart a new path by filing and litigating patents secured on the basis of its designs.
Such patents, called design patents, have "for too long been grossly underappreciated" by the fashion industry, said Perry Saidman, a design-law expert and lawyer in Silver Spring, Md.
Fashion designers have only sporadically gone to court over such patents. But slowly, design patents are coming into vogue across a widening number of industries. Apple Inc. made them a key part of its case in its recent legal victory over rival Samsung Electronics in which a jury found that Samsung had copied Apple's designs.

 Design patents is a great weapon against copycats. Unlike utility patents, they are easy to get and their scope usually well defined. Moreover, design patents are simple; they don't require highly technical expert testimonies to demonstrate infringement to a lay jury.

The Creative Destruction of Nokia.

WSJ (June 15, 2012) on Nokia's remaining asset value:

BMO Capital Markets analyst Tim Long wrote that Nokia was grinding "its way toward irrelevancy" despite the new round of restructuring and management changes. As a result, he said BMO would take a new approach and value the company based on its cash and intellectual property. Mr. Long now values the company at less than $9 billion, which includes $6 billion of cash and $2.5 billion for its portfolio of patents and other intellectual property.

"We assume zero value for the device and Nokia Siemens Networks businesses," he wrote. "We see little hope for a turnaround from here even with a refined strategy."

Nokia's hardware and software combined seem to be worth nothing.  Only some electronic digits in the bank and some paper files on the shelves in the patent office can fetch some value on today's market.

tags: patents, notes, nokia, s-curve

Creative self-destruction of RIM.

When NTP sued RIM, the manufacturer of Blackberry phone/e-mail devices, for patent infringement, many people believed that patent trolls were the company's worst enemies. In 2006, after years of litigation, RIM ended up paying NTP a $612.5 million settlement.

It turns out, RIM's own management did a lot more damage to the company than any patent troll could even imagine. Because RIM missed on major innovation opportunities in the mobile industry, the company lost multiple billions of dollars in market value.

tags: innovation, patents, strategy, s-curve

Facebook June 2012 issued patents.

1	8,209,743		CAPTCHA image scramble
2	8,209,380		Multimedia aggregation in an online social network
3	8,206,071		Cabinet anchor bolt assembly
4	8,204,952		Digital file distribution in a social network system

Facebook US Patent 8,204,952 as post-modern literature.

Last week USPTO issued US Patent 8,204,952 to Facebook, the patent covering "Digital file distribution in a social network system." The core idea behind the patent is simple enough: user profile page contains a link to a digital file that can be retrieved by another user.

To make things interesting, Facebook's patent lawyers in cooperation with the USPTO wrote Claim 1 as a piece of post-modern literature, where time and space are intermingled in a highly idiosyncratic manner. In the patent claim, the timing of the steps necessary to implement the method of the invention has very little to do with the order of appearance in the claim.

For example, setting up user and privacy rights to access the profile page and the digital file are mentioned last (steps 10 and 13 out of 13), despite the fact that the setup has to happen before any content distribution can take place (see Table below).

If IKEA wrote their furniture assembly instructions in this manner, they'd be long out of business.



The table below has three columns:
1. The logical order in which the steps of the method need to be implemented.
2. The order of appearance in Claim 1.
3. A brief description of each step.
 

Logical order	Order of appearance	Description of the step
of the method	in Claim1
1	13	set up rights for PPt2 re other users
2	10	set up rights for PPt1 re other users
3	3	ID enables retrieval of P.P.
4	2	PPt1 associated w/user 1
5	1	storing ID for PPt1
6	6	insert ID into PPt2
7	4	receiving request from Tool for PPt2
8	14	decide on rights for PPt2
9	5	sending PPt2
10	8	insert ID into request
11	7	receive request from Tool for PPt1
12	9	decide on rights for PPt1
13	11	retrieve PPt1 from source by device
14	12	decide on rights for PPt2

The good news is our system model works really well for analyzing patents, even the ones that are intentionally obfuscated.

tags: patents, system, media, facebook, distribution

323 Steve Jobs Patents

On Nov 23, 2011 NYT published a media presentation with links to all 323 Steve Jobs' US patents. It's a must have reference for anybody interested in evolution of computing and communication devices.

I wish they had a simple timeline without any grouping.

Zynga vs Personalized Media Communications.

Feb 14, 2012. WebProNews -- Personalized Media Communications filed a patent suit in the U.S. District Court for the Eastern District of Texas against Zynga. They claim that the social games maker has infringed on four of their patents.

The four patents in the suit ( US7,797,717; US7,908,638; US7,734,251; US7,860,131) are continuations of an application filed in 1981, now US4,694,490.


tags:patents, information, deontic, gaming, business

Ripping off for fun and profit - 3

VBeat runs a story on 14 best copycat Internet services/apps in China. Definitely, there's a different understanding of innovation there.

Jan 22, 2012. VBeat -- People outside of China often wonder why the Chinese love to copy things. The answer is that it’s the way they’re taught to learn. Follow the teacher, recite books, and don’t challenge authority.

Not copying would almost represent a missed opportunity.

One trend we noticed is that the best clones are often created by very large Chinese tech companies with existing resources and money. It shows how tough the environment is for grassroots startups trying to compete against the big guys. It is also telling of the health of China’s startup eco-system — big companies can and will simply crush anything they see as a threat.

How is it possible to compete with this business model? Keeping technology secret seems to be the only way to succeed. In other words, globally we are back to the 17th century intellectual property system.

tags: business, model, patents, internet, service, intellectual, property

A burst of creativity?

 

Source: Patent Failure, by J. Bessen and M.J.Meurer.

What happened in the US in 1855-60? Was it the railroads that triggered the burst of patent activity?

Quote of the Day: Mark Twain on patents

...a country without a patent office and good patent laws was just a crab, and couldn't travel any way but sideways or backways.

-- Mark Twain. A CONNECTICUT YANKEE IN KING ARTHUR'S COURT.

tags: quote, patents

Lunch Talk: (TED) An alternative to pharma patents.

In this talk at TEDxCanberra 2011, ANU and Yale academic and ethicist, Professor Thomas Pogge outlines an idea that could revolutionise health outcomes and distribution of pharmaceuticals in both the developed and developing world.

Thomas Pogge is developing a complement to the patent system to stimulate pharmaceutical innovations that would be accessible, without delay, to poor and affluent patients alike around the world.

tags: health, patents, lunchtalk, problem

link

The fundamental flaw of the current patent system.

The fundamental flaw of the current patent system is that it assumes that invention is reductionist rather than holistic in nature.

The system works ok for pharma because reductionism is difficult to apply there. That is, chemical formula of a particular drug cannot be reduced to the sum of its parts. In other words, an H₂O (water) molecule is not the sum of two atoms of hydrogen and one atom of oxygen.  Rather, everybody "naturally" understands that water is a different substance. Therefore, if you have a patent on hydrogen you can't sue the inventor of water.

In information technologies reductionism rules. People think that iPhone is successful because it has the mutli-touch screen as its part. (This is due to the causal thinking bias explained in Kahneman's book.) The public discounts the fact that multi-touch was available before iPhone but was not successful commercially. iPhone made multi-touch a successful component because consumers want phones with a multi-touch screen.

Steve Jobs and his team created a new "water" - the iPhone - that is a totally different "substance" than its parts. But the patent system treats multi-touch and other technological pieces of iPhone as more important than the iPhone itself. Thus, we have patent wars where those who invented the new "water", those who stole it and added flavors, and those who knew how to make hydrogen, are treated the same.

Understanding this system-level flaw helps us (me) put together  good IP/invention strategies. At a certain point the bug becomes a feature.

tags: patents, system, synthesis

Assumptions behind Open Innovation.

A 2010 paper "How Open is Innovation?" [doi:10.1016/j.respol.2010.01.013], by Linus Dahlandera of Stanford University and David M. Gannb of Imperial College London provides a good literature review for the concept of Open Innovation. It's a valuable contribution to our understanding of the process because many people use Open Innovation as a buzzword without really knowing what it describes. For me, it was interesting to see Open Innovation assumptions spelled out in some detail.

The concept [Open Innovation] has common currency for at least four reasons.

- First, it reflects social and economic changes in working patterns, where professionals seek portfolio careers rather than a job-for-life with a single employer. Firms therefore need to find new ways of accessing talent that might not wish to be employed exclusively and directly.
- Second, globalization has expanded the extent of the market that allows for an increased division of labour.
- Third, improved market institutions such as intellectual property rights (IPR), venture capital (VC), and technology standards allow for organization to trade ideas.
- Fourth, new technologies allow for new ways to collaborate and coordinate across geographical distances.

The third item on the list is particularly important (in the context of this blog) because it shows that Open Innovation assumes strong intellectual property rights. The disconnect with the reality is that many participants of the Open Innovation process assume that it implies availability of technology free of IP claims. As a result, they get unpleasantly surprised when the claims are asserted against technologies acquired through Open Innovation.
One of the reason behind the latest round of patent wars is this gap in understanding of what Open Innovation is vs what it is thought to be.

tags: innovation, patents, battle, mobile, technology, business, model

Patent battles: how media makes us clueless.

The media does a major disservice to the public when they describe current patent disputes between various parties in the mobile industry. For example, the headline in Wired reads: Google Thumps Oracle In Heavyweight Bout Over Android. What's behind the headline? A minor change in the number of patents asserted against Google.

Dec 29, 2011. Wired -- Just before the Christmas holiday, as reported by Groklaw, the US patent office effectively invalidated one of the seven patents Oracle asserted against Android in a suit filed in August 2010.

Instead of 7 patents we've got 6 patents active in the lawsuit - big deal. And what if Oracle prevails, which is a highly like outcome? Wired claims "the case could have a very real effect on the mobile phone and tablet market." What's the impact?

The two sides would enter a “hypothetical negotiation,” Dergosits says, where each hires economists to estimate Google’s revenue from the product and what it’s paying other licence holders. The jury would then award damages based on these estimates.

Based on industry discussions, top estimates for licensing fees for Java are about $5 per unit. If Google wanted, they could've negotiated a volume discount, similar to the deal Microsoft made with Samsung. But Google provides Android for free and makes money on search and other services, which default to Google properties on Android phones. This way Google can claim losses on Android and try reject demands for licensing fees, which are customarily calculated as a percentage of revenue. Usually, the seller of software operating system includes the fees into the price. But ... Android is "free." Tricky, tricky, tricky.

It's funny though, that a dispute about a method of calculating licensing fees is presented in the media as a battle for or against innovation. 

tags: business, strategy, mobile, google, patents

Why patent trolls sue and win with weak patents.

Joshua Walker, the CEO of Lex Machina will be one of the guest speakers at The Patent Paradox, a course John Kelley and I will teach this quarter (Winter '12) at Stanford University Continuing Studies program. The 2010 NBER paper Joshua co-authored with John R. Allison (University of Texas, Austin) and Mark A. Lemley (Stanford University) analyses the quality of highly litigated patents. The authors discover a strange phenomenon:

But what we found was dramatic and unexpected: the patents and patentees that occupy the most time and attention in court and in public policy debates—the very patents that economists consider the most valuable—are astonishingly weak. Nonpracticing entities and software patentees almost never win their cases.

That is, patent trolls sue with very weak patents. Most, if not all of the patents, get invalidated in the process. Why do they do that? The authors of the paper are buffled:

Finally, our results are a bit of a puzzle for the most common law and economics models of litigation. ... they do beg the question of what is motivating the parties in these cases.

I think the answer to this puzzle can be found in Daniel Kahneman's book "Thinking Fast and Slow." In the Fourfold Pattern chapter he describes risk-related behavior with low-probability loss outcome.

The key to understanding is not the troll's, but the defendant's behavior. The defendant in a patent suit faces a very low probability of losing against a weak patent portfolio. Since the defendant, usually a large corporation, is loss averse and the probability of loss is non-zero, he is willing to settle under unfavorable conditions (lower-right corner.) On the other hand, the troll with a weak portfolio is facing a high probability of loss; therefore, he is risk seeking (upper-right corner.)
The most likely outcome of this confrontation is an out of court settlement which favors the troll.


References:
Patent Quality and Settlement Among Repeat Patent Litigants. 2010, John R. Allison, Mark A. Lemley & Joshua Walker.
Thinking Fast and Slow. 2011. David Kahneman. 

tags: patents, control, game, business, model, strategy

Patent system: a perfect experiment.

The question whether the US patent system helps or hurts innovation can now be resolved experimentally. So far, all decisions on patent infringement, e.g. today's Microsoft vs Motorola, involved the US Trade Commission, which rules on "importation into the United States." That is, the infringing mobile phones and tablets cannot be imported into the United States, but can be sold freely in other geographies, e.g. China, India, Japan, Russia, etc. Therefore, if patents hurt innovation, over the next 5-10 years we should see major differences in the pace of smartphone/tablet innovation between the US and the rest of the world. Right?

I very much doubt this is going to be the case.

Lunch Talk: Software Patents - a debate at the Computer Museum

tags: lunchtalk, patents