While looking for this week’s software patent, I came across this story about about Transmeta’s lawsuit against Intel:
Transmeta was the first company to emphasise that power consumption was going to be a major headache for chip and computer makers. It claimed that its Crusoe processors would be able to run the same software as Intel chips, but gobble up less electricity, thus leading to longer battery life.
Although the company landed early deals with Sony and Fujitsu when Crusoe arrived in 2000, it did not live up to its goals. Crusoe’s performance was middling, and Transmeta had several problems getting new versions out the door. Deals with Toshiba and others evaporated.
The chipmaker then went through several rounds of layoffs and changed its chief executive three times before refashioning itself into an intellectual property firm last year.
I wonder if “intellectual property firm” is a euphemism for “patent troll.”
It’s really quite a sad story. Transmeta was an innovative company with some amazing technology. As near as I can tell, they were crippled by poor execution and some bad business decisions. It’s too bad that this will be the final chapter of their corporate history.
Matt Yglesias posts an email he got from minority leader Pelosi:
House Democratic Leader Nancy Pelosi, the Democratic leadership, and senior members of the Ways and Means Committee sent a letter to President Bush today calling for immediate action to promote and safeguard American intellectual property (IP) around the world. The Democrats made the case that cracking down on piracy and theft of American IP is critical to restoring economic growth, creating jobs and shrinking the trade deficit.
His analysis of this is exactly right:
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John Batelle has a great interview with EFF’s Fred Von Lohmann, where he discusses the legal implications of Google’s YouTube acquisition:
YouTube has already been sued (by LA New Service), so Google is essentially buying that lawsuit. But I don’t think that’s a problem–frankly, precedent set against YouTube will likely exert strong influence over the entire video hosting industry. So, in essence, Google is just getting more direct control over a lawsuit that is important for its existing and future business. And when it comes to lawsuits, Google has top-drawer talent (both in-house and in outside law firms), strategic vision, and a stellar track record. Google’s executives (like AOL’s and Yahoo’s before them) understand that shaping the legal precedents is a critical part of their business.
And it’s important to consider who are the people suing YouTube. I’ve thought for some time that the first lawsuits against YouTube (and other video hosting services) will be from small copyright owners (like LA News Service), not from major media companies. That’s good news for YouTube (and Google). Small timers tend to lack the resources to bring top-drawer legal talent to bear in these fights. As a result, they often lose, creating useful precedents for the Google’s of the world. In fact, Google has already been successful in securing good precedents against unsophisticated opponents who thought that they could squeeze a quick settlement out of Google (Field v. Google, Parker v. Google). What the small-timers don’t appreciate is that Google would much rather spend money on setting a good precedent than on settling.
I think there’s another factor that’s likely to lessen the legal peril for Google: a judge may perceive Google as too big and important to fail.
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EFF links to a New York Times article on a Department of Homeland Security program to “let the government monitor negative opinions of the United States or its leaders in newspapers and other publications overseas.” The EFF’s Marcia Hofmann thinks that it “could affect the willingness of journalists to report negative information or controversial opinions about the United States, and otherwise chill online speech protected by the First Amendment.”
My reaction is rather different: the program strikes me as being somewhere between harmless and silly. They’re just taking publicly available stories and running them through text analysis software in an effort to gauge how “hostile” they are. It’s not obvious that this software will be able to do anything that a team of human analysts couldn’t. In fact, in the short term, at least, the human analysts are likely to be substantially better, as natural language processing technology is far from prime time.
Even if I’m wrong and this turns out to be an incredibly powerful tool for monitoring foreign media, I don’t see how it would be a threat to free speech. This is
foreign media we’re talking about, so DHS couldn’t censor them if they wanted to. And all the information they’re using is available to the general public, so I don’t see any serious privacy implications. We can debate whether it’s worth the $2.3 million price tag, but this doesn’t seem like a program that civil libertarians should be upset about.
Here’s one more example of startups and intellectual property: this summer, a startup company called Kiko decided to throw in the towel, and they did it by putting the company’s assets up for auction on eBay. The shareware site Tucows bought it for $258,100. What’s most interesting about this is that the sale occurred in a very public manner, and the winning bidders have described in detail why they bought it. For the purposes of my discussion about startups and IP, I think this is the most interesting part of their analysis:
It was clear from their posts and such that Justin and Emmett were no longer passionate about the calendar space and were excited to do something else. They felt, and we agree, that this was worth much more with them along for the ride. Probably by a factor of ten. It would have then attracted a completely different type of buyer. We would not have paid that premium for the people. Not that they aren’t worth it. Just that our financial calculus was different. This probably kept some of the natural buyers out of the process.
We also did not need a huge base of retail users. They are nice and we will provide them with a great home but if this had been much of a success outside of Mike’s 53,651 it probably would have attracted more financial buyers or domainers and the price might have ended up more than we were willing to pay. It is worth noting here (and we also talk more about this in the podcast) that there was clearly interest in the domain name and the traffic. We will certainly monetize that as it is a space we know well, but we also may choose to sell the name off as it is not core for us. Either way it is another place where we, more than most/all other buyers who would be interested in the calendar functionality, will be uniquely able to take advantage of the assets.
This is interesting because this gives us a rare opportunity to guage the value of a company’s bare code without the staff, customers, and other assets that usually accompany it. Both Kiko’s founders and Tucows seem to believe that the code is valuable–$258,100 is obviously not pocket change–but that a functioning company is worth an order of magnitude more.
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Here’s another example where the the theory that startups and platform companies need intellectual property to do business doesn’t seem to apply. I just noticed today that MapQuest has unveiled a beta of an ajaxy web-based map feature. They’ve basically copied Google Maps, which I raved about last year. It appears that Yahoo! Maps also recently unveiled a clone of Google’s map interface. Microsoft and Rand McNally appear to still be behind the times.
I’m very surprised that it’s taken them this long. The concept behind Google’s draggable maps is not complicated. Indeed, a lot of the code is right there in the page source, where anybody can look at it. Writing the server-side code to support it isn’t trivial, but it’s hardly a mammoth undertaking. It’s possible that the problem was that it requires beefier servers (or better load balancing, or whatever) to handle the increased load from serving up more images, but this is Microsoft, Yahoo, and AOL we’re talking about. If anyone has the resources and know-how to build scalable web sites, it ought to be them.
What does this have to do with the startups and IP issue? It seems to me that this is a perfect test case of his hypothesis that companies can “simply take any ideas revealed and implement them.” There was very little mystery, in the abstract, about how Google’s mapping feature worked. Yet it took two of the deepest-pocketed companies in the computer industry 20 months to implement the idea, and a third is still working on it. In Internet terms, 20 months is forever. Mapquest has been bleeding tech-savvy customers like me that whole time.
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Jim DeLong likes to talk about how strong intellectual property rights are necessary to allow small companies to do business with larger companies. As he put it in IT&T News this summer:
Without IPR, innovators have no way to deal with platform companies, who could simply take any ideas revealed and implement them. And even if the platforms wanted to compensate the innovators, they would be unable to, because any competitor could copy the innovation without payment.
The platform companies know it is in their interest to have innovators protected by strong IPR, because without these, people would not be willing to invest in innovative companies.
It seems to me that Google’s YouTube acquisition is a counterexample to DeLong’s theory. YouTube is an innovative company that secured several millions of dollars in venture capital and used it to create a billion-dollar company in less than a year. Yet as far as I know, strong IP rights have not been an important part of YouTube’s strategy. They don’t appear to have received any patents, and their software interface has been widely copied. Indeed, Google has been in the video-download business longer than YouTube, and their engineers could easily have replicated any YouTube functionality they felt was superior to Google’s own product.
It would of course be silly to claim that copyrights and patents are never important assets for a startup company seeking a corporate buyer. But I think DeLong seriously overstates his case when he says that entrepreneurship would be impossible without these assets. Like all businesses, most of the value in technology startups lies in strong relationships among people, not from technology, as such. Technological change renders new technologies obsolete very quickly. But a brilliant team of engineers, visionary management, and a loyal base of users are assets that will pay dividends for years to come. That’s why Google was willing to pay a billion bucks for YouTube.
The New York Times reports on a protest against France’s new anti-circumvention law:
In mounting their protest, members of the group in Paris saw themselves as foot soldiers of the digital generation battling against ever-tighter controls over songs, film and all digitized culture.
Greeted at the police station by almost as many armed riot police officers as there were protesters, they explained their infractions to passers-by.
“Not only did I not use an iPod to listen to an iTunes song, but I transferred the film ‘Blade Runner’ onto my hand-held movie player,” Mr. Martinez, 28, said. “I am willing to face the consequences of what they consider an offense.”
By his own calculation, Mr. Martinez could face a fine of as much as 41,250 euros, or about $52,000, and six months in prison.
Mr. Martinez patiently laid out the case he built against himself, offering details about his infractions, which included switching music from one format to another and transferring the DVD’s to different players.
“They say the law is intended to stop piracy, but I am not a pirate,” Mr. Martinez said. “I support artists with legally purchased works, but I do not want to be forced to use a particular device to play them.”
This is a clever publicity stunt, but the problem is that Big Content is too media savvy to prosecute individual consumers. They focus their legal guns on the makers of third party media devices. As a result, the average consumer just knows his media devices don’t interoperate. He has no idea that laws like the DMCA and EUCD are responsible for the lack of compatibility.
Avi Rubin quotes Walter Mancuso, a Republican Chief Judge in the September 12 primary in Montgomery County, Maryland:
Approximately a week after the primary I received a telephone call from the Montgomery County Board of Elections inquiring as to why one of the eight touch screen voting machines that we used on election day had recorded no votes, even though 55 voters were logged onto the machine. Neither I nor the Democratic chief judge had any explanation. The person at the [Board of Elections (B of E)] told me that they would investigate, talk to Diebold, and get back to me. After a week I called the Board and asked what they had discovered. I was told that at 6:50 AM (prior to opening the polls) that particular touch screen machine had been rebooted, and the memory card had been removed and reinserted into the machine. I was told that removing the memory card activated a security feature of the touch screen unit, and thus nothing was recorded on the memory card. By the way, no error message was displayed to indicate that that machine had been tampered with and thus should not be used. When we accumulated the votes on the zero machine after the polls closed, that particular machine reported than no voters had used the machine during the election. Thus, prior to talking to Diebold we assumed that the 55 votes were lost.
Rubin notes:
Walter goes on to explain the the board of elections used the hard drive of the voting machine to recover the 55 missing votes.
So, according to this, there is a security feature that causes a machine with a memory card that is ejected and then reinserted to not record any votes on that memory card. I don’t understand what security threat this is designed to counter. Even if a rogue memory card is inserted, how does not recording votes on that card protect anything? Furthermore, this introduces a new risk. A malicious poll worker (i.e. a malicious person who decides to become a poll worker to disrupt the election) could insert and remove each memory card at the precinct during setup. If you believe the message from Walter Mancuso, that would cause none of the votes in that precinct to be recorded anywhere except on the hard drives of the voting machines.
These machines are a disaster waiting to happen.
Mike Masnick notes another data point in the great King Kong debate. George Lucas thinks that the era of the $200 million blockbuster is over.
Spending $100 million on production costs and another $100 million on P&A makes no sense, he said.
“For that same $200 million, I can make 50-60 two-hour movies. That’s 120 hours as opposed to two hours. In the future market, that’s where it’s going to land, because it’s going to be all pay-per-view and downloadable.
“You’ve got to really have a brand. You’ve got to have a site that has enough material on it to attract people.”
…Lucas said he believes Americans are abandoning the moviegoing habit for good.
“I don’t think anything’s going to be a habit anymore. I think people are going to be drawn to a certain medium in their leisure time and they’re going to do it because there is a desire to do it at that particular moment in time. Everything is going to be a matter of choice. I think that’s going to be a huge revolution in the industry.”
I’m very reluctant to argue with the man who created three of the top 10 grossing films of all time, but this doesn’t seem quite right. People have been predicting the decline of the movie theater for decades, first in response to the television, and then in response to the VCR. It hasn’t happened yet. The reason, I think, is not only that the big screen makes for a better experience, but also that people like to go out, and seeing a movie is a good excuse for doing that. It’s the same reason that people go to bars when they could buy alcohol and consume it at home for a lot less money. As long as there are thousands of movie theaters, it seems to be there will be demand for big-budget blockbusters to draw people into them.
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