Patently Cynical
Two similar stories cross the wires today. In one, Ebay announces a $30 million charge to account for losing a lawsuit brought by the holder of an important ecommerce patent. The second story reports the outcome of the latest Microsoft patent infringement suit: Microsoft must pay $521 million to the patent holders of a method for embedding applications in web browsers.
These are just the latest skirmishes in the ongoing battle over business process and technology patents. Last month, Amazon was sued by Pinpoint over some ecommerce personalization patents. And of course, back in 1999 Amazon itself sued Barnes & Noble over its 1-Click patent and Priceline sued Microsoft, among others.
In the early stage venture financing world, we tend to see patents more as a defensive maneuver. Build a picket fence around your technology and keep others from your garden. But you would rarely if ever see a company get funded on the basis of patent portfolio alone especially if the business involves bits not atoms.
In the end, so much of a patent's value is in your ability to defend it. And if given the option, a venture investor would always rather fund a business over a lawsuit. In general, I think the Valley has a healthy cynicism about patents. Get them because everyone else is getting them, but hope you never have to use them.
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I'm reading High Stakes, No Prisoners by Charles Ferguson which is the story of Frontpage, how the startup came up and then was finally acquired by big bad MS. Ferguson stresses on the importance of getting patents and stressed that one of the reasons ... Read More
The recent very arguable decisions are just a result of the very wide software patents granted to applicants in US. The big advantage is there is simply much more IP to protect or trade. This helps lawyers and surely makes M&A of software companies a bit easier. However it's very arguable if it is possible to issue patents for software solutions.
Germany for example goes a different way. It's nearly impossible to get patents for software registered as it's in the eyes of the patent office just a business process coded in a rather universal manner. This is not unique enough and therefore a patent does not make too much sense.
Would VCs be in support of US software patents going away, or do you see the value of the "picket fence" outwaying the possible risks and long term exposure?
Derek
I don't know anyone who would suggest they go away, being able to protect intellectual property is still an important thing. I guess my meta point (which I never actually made) is that start-ups are about executing on the idea but not really the idea itself. It's still nice to protect the idea, but don't count on it to build the long-term value in your company by itself.