Do Small Companies Need Software Patents?

by on December 15, 2006 · 20 comments

In a comment on Wednesday’s post on software patents, Patrick Mullen offers the following argument:

I think patents actually make it harder for companies like Microsoft and Apple. You can be the best programmer in the world and write the best program ever, but if a company with the resources of Microsoft has the ability to copy your program, who do you think will have the market share? Do you think you would stand a chance against their marketing machine?

I would find this argument more persuasive if there weren’t so many counterexamples. Let’s start with Google. They entered what everyone thought was a mature industry in 1998 and created a $150 billion company in under a decade. Yahoo and Microsoft did their best to copy the technology, but they were unable to stop Google’s momentum.

Or take YouTube. Google–by 2005 a large company with deep pockets–actually beat YouTube to market with a flash-based video site. Yet YouTube surged past them, and after 18 months they had beaten the company so soundly that Google was forced to shell out $1.5 billion to buy them.

There are plenty of other examples: MySpace, FaceBook, Flickr, Hotmail, Digg, and probably hundreds of smaller firms I’m not thinking of. Most of these had big companies try to replicate their success. And in most cases, those efforts failed miserably; the competing products weren’t as good, or couldn’t generate the buzz of the original. As far as I know, software patents were not an important component of any of these startups’ business models.

Now, of course some small companies have been crushed by larger rivals. Netscape is the obvious example. Kiko is arguably another. But it’s not clear to me why we should consider that a problem. One of Netscape’s big problems was that Netscape version 4 sucked, and then they took 3 years to release an even more sucky version 6.

As Mike Masnick emphasizes over and over again, it’s a good thing that companies have to keep innovating if they want to succeed. Giving a company a patent that guarantees it a lock on a particular market simply reduces their incentive to keep improving the product. That doesn’t seem like good policy to me.

  • http://weblog.ipcentral.info/ Noel Le

    1) When did MSFT try to “copy” Google’s technology.
    2) Nice job. The assumption of your whole post is that proponents of software patents say they’re essential in every business model. Thats not the case.
    3) How do patents “guarantee a lock on a particular market?”
    4) Don’t you think having a patent will incent a company to continue investing in commercializing a technology? Otherwise, competitors will work around the patent, or figure out how to commodify the patent holder’s revenue stream.

  • http://weblog.ipcentral.info/ Noel Le

    1) When did MSFT try to “copy” Google’s technology.
    2) Nice job. The assumption of your whole post is that proponents of software patents say they’re essential in every business model. Thats not the case.
    3) How do patents “guarantee a lock on a particular market?”
    4) Don’t you think having a patent will incent a company to continue investing in commercializing a technology? Otherwise, competitors will work around the patent, or figure out how to commodify the patent holder’s revenue stream.

  • http://weblog.ipcentral.info/ Noel Le

    One more point, Tim, for future reference, it would be great for you to show how software patents stifle or drive small companies out of the market. Here, you seem to say that these companies did fine without software patents, but nobody ever claimed they relied on software patents to begin with.

  • http://weblog.ipcentral.info/ Noel Le

    One more point, Tim, for future reference, it would be great for you to show how software patents stifle or drive small companies out of the market. Here, you seem to say that these companies did fine without software patents, but nobody ever claimed they relied on software patents to begin with.

  • http://www.techliberation.com Tim Lee

    Noel,

    1) Both Yahoo and Microsoft have been working hard to improve their search engines to make them work more like Google’s “page rank” algorithm.

    2) That was the assumption of the quote I was commenting on, was it not?

    3 and 4) Most of the software patents I’ve seen cover broad concepts like “wireless email” or “Internet video streaming.” By definition, such patents give you a monopoly over the market described by the patent. And I don’t see how you “work around” such a patent.

  • http://www.techliberation.com Tim Lee

    Noel,

    1) Both Yahoo and Microsoft have been working hard to improve their search engines to make them work more like Google’s “page rank” algorithm.

    2) That was the assumption of the quote I was commenting on, was it not?

    3 and 4) Most of the software patents I’ve seen cover broad concepts like “wireless email” or “Internet video streaming.” By definition, such patents give you a monopoly over the market described by the patent. And I don’t see how you “work around” such a patent.

  • http://weblog.ipcentral.info/ Noel Le

    Tim, so, Yahoo! and Microsoft want to compete with Google’s search functions, but lets not say they are “copying” Goole. Perhaps they’ve reverse engineered Google to understand how it works, and seek comparable functions, but lets not use the word copy because that entails some IP-specific connotation.

    Who assumes that IP is necessary for all innovation. I’ve told you so many times that is not my position, nor that of anybody I know of who comments on technology. Perhaps you’re thinking of the pharma industry (by the way, a lot of support for *expanding* IPRs comes from the pharma, not the technology industry. Note the software industry consens, even by disparate groups like EFF, PFF and MSFT, in the KSR case.

    I think you’re main criticism of patents is how their hairbrained claim construction, lacking in technical merit and quality, lead to almost infinite scope that would cover an entire market. I don’t believe any court has upheld such patents though.

  • http://weblog.ipcentral.info/ Noel Le

    Tim, so, Yahoo! and Microsoft want to compete with Google’s search functions, but lets not say they are “copying” Goole. Perhaps they’ve reverse engineered Google to understand how it works, and seek comparable functions, but lets not use the word copy because that entails some IP-specific connotation.

    Who assumes that IP is necessary for all innovation. I’ve told you so many times that is not my position, nor that of anybody I know of who comments on technology. Perhaps you’re thinking of the pharma industry (by the way, a lot of support for *expanding* IPRs comes from the pharma, not the technology industry. Note the software industry consens, even by disparate groups like EFF, PFF and MSFT, in the KSR case.

    I think you’re main criticism of patents is how their hairbrained claim construction, lacking in technical merit and quality, lead to almost infinite scope that would cover an entire market. I don’t believe any court has upheld such patents though.

  • http://www.techliberation.com Tim Lee

    I think you’re main criticism of patents is how their hairbrained claim construction, lacking in technical merit and quality, lead to almost infinite scope that would cover an entire market.

    OK, so we agree that many software patents are bogus. What’s an example of a good software patent?

  • http://www.techliberation.com Tim Lee

    I think you’re main criticism of patents is how their hairbrained claim construction, lacking in technical merit and quality, lead to almost infinite scope that would cover an entire market.

    OK, so we agree that many software patents are bogus. What’s an example of a good software patent?

  • http://weblog.ipcentral.info/ Noel Le

    There are bogus software patents. Have I ever disagreed with this.

    How would you describe RSA and other encryption patents.

    By the way, take a look at “hindsight” bias, as described in PFF’s KSR filings. Its too easy to look at a patent, and say its obvious or meritless.

    I still think you’re putting too much weight on claim construction. Have you ever sat through a patent licensing deal or negotiations. I think they talk about a bit more than just claim construction.

  • http://weblog.ipcentral.info/ Noel Le

    There are bogus software patents. Have I ever disagreed with this.

    How would you describe RSA and other encryption patents.

    By the way, take a look at “hindsight” bias, as described in PFF’s KSR filings. Its too easy to look at a patent, and say its obvious or meritless.

    I still think you’re putting too much weight on claim construction. Have you ever sat through a patent licensing deal or negotiations. I think they talk about a bit more than just claim construction.

  • http://www.techliberation.com Tim Lee

    I haven’t looked at the RSA patent in any detail, but I’ll look into it. Can you name an example of meritorious software patent that was granted in the last decade?

  • http://www.techliberation.com Tim Lee

    I haven’t looked at the RSA patent in any detail, but I’ll look into it. Can you name an example of meritorious software patent that was granted in the last decade?

  • http://weblog.ipcentral.info/ Noel Le
  • http://weblog.ipcentral.info/ Noel Le
  • http://www.techliberation.com/ Tim Lee

    Is there one of those in particular that you think is worthwhile? Because from a quick glance, most of those look pretty obvious to me. If not, I guess I’ll choose one of them at random for next week’s patent of the week.

  • http://www.techliberation.com/ Tim Lee

    Is there one of those in particular that you think is worthwhile? Because from a quick glance, most of those look pretty obvious to me. If not, I guess I’ll choose one of them at random for next week’s patent of the week.

  • http://weblog.ipcentral.info/ Noel Le

    I’ll look them over too. I”m traveling over the next few weeks, so write about them all you want.

    I still think you should combine case law with your patent of the week series: introduce the patent, give your usual critique, then show how a court (preferably the CAFC or SCOTUS) interprets the patent.

  • http://weblog.ipcentral.info/ Noel Le

    I’ll look them over too. I”m traveling over the next few weeks, so write about them all you want.

    I still think you should combine case law with your patent of the week series: introduce the patent, give your usual critique, then show how a court (preferably the CAFC or SCOTUS) interprets the patent.

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