A Case Against Patents

People often ask me how many patents Marki Microwave owns. The answer: zero. “What? But you’re a technology company, how can this be? Aren’t you worried that someone is going to steal your idea?” Well, not really, and I will try to explain the logic behind this position. Some will read this and disagree, I have no doubt. I actually think patents do have important benefits given the right set of circumstances, but I think for small tech companies like Marki Microwave, patents do not provide as many benefits as is often assumed. I believe it is false to assume that a good idea should always be patented, here’s why…

1. Patents create a false sense of security. In general, I’m opposed to people trying to lay claim to scientific discoveries and innovation. I know many engineers who spend most of there time writing patents, re-writing patents, and conceiving of ways to get around other’s patents. To me, this is a sub-optimal strategy for success. There is a difference between “patent competition” and “technological competition”. Patent competition is the act of performing a metaphorical patent land-grab, this is not necessarily useful for the greater good of society. Technological competition, however, is supremely good for society and the economy. Most people are motivated by adversity. Therefore, when you have a technological competitor, regardless of whether they own a patent or not, you are forced to innovate beyond your current means. The patent owner, however, might be tempted to believe he is safe from copy-cat technologies. I believe this complacency is a very dangerous mindset to have in a competitive marketplace. You can’t control whether your competitor will leap-frog your technology and render your patent useless. No technology company can survive forever without constantly improving their “wheel”, a patent does not provide us reprieve from this fundamental Truth.

2. Trade secrets are more important than patents. I love when my competition writes patents because they give me insights into the thought process of the inventor. I have read several patents that were so novel in their approach that they actually triggered new ideas for me, which I subsequently used for my own applications. Did I violate the patent? No. In fact, my idea was for something totally different. However, the patent described the technical details in such a way that served as a sort of creative inspiration. Had the inventor never written the patent, I doubt I would have come up with the same idea in such a short amount of time. I believe that trade secrets are more powerful than patents because they foster many more questions than answers for the competition. If you are a small tech firm, it is perhaps more valuable to develop your “secret sauce” in private and let your competitors try to reverse engineer your product later. In my area of hardware, the money is in the packaging details. In other words, I can give a Marki mixer to a competitor, but they still might not be able to copy it due to the fabrication complexity and assembly subtleties. However, if I write the patent and describe the function and detailed embodiment of the design, then they are more likely to understand the meaning behind my design choices. This is dangerous, and the single biggest reason Marki does not write patents for mixers.

3. Would you really sue over patent infringement? The best argument I have ever heard for why a small company should own a patent is that it gives you a legal precedence to continue to sell your product. In other words, you don’t patent something so you can sue someone when they violate it, you patent something so they can’t sue you when they try to steal your idea by patenting it themselves. It is backwards logic, but it makes sense. Moreover, how many small companies have the financial power to litigate potential patent infringement? Not many. Even the most air-tight patent can be circumvented with a few clever strokes of the pen, or an equally intimidating legal department.

4. A patent is NOT a product. I know many brilliant engineers who believe that if they patent all their ideas, that they will eventually become rich. In some sense, they treat their patents like lottery tickets; if they hold enough tickets, eventually their number will be called. Ultimately, the end game is to sell their ideas and corresponding IP for a huge lump sum and retire happy. I have found that many smart scientists use this strategy when they form start-up companies. Many of the tech start-ups I’ve dealt with in my career have a business plan that looks something like this: have a great idea, acquire funding either through venture capital or DOD, develop an IP portfolio, sell company to highest bidder and cash out. In other words, the product of the company is…the company! I don’t believe this is a good or bad thing, I simply believe that it is strategy with a low probability of success. Maybe I’m old fashioned, but a company makes money by providing goods and services to their customers, not by acquiring IP that may or may not be useful some day. There is a reason that tech start-up companies are so risky, and I think worshipping patents as false products adds to this risk. Of course, there are many famous companies who have successfully made the transition from start-up to juggernaut, but this tends to be the exception, not the rule. We can’t all be Google or Intuitive Surgical, so should we all try to be?

Google is an interesting example actually. The most valuable asset in all of Google is their search algorithm, and specifically the relevance calculator. While it is true that the “PageRank” concept is a licensed patent from Stanford, the actual weighting of the various search factors are secret. Marketing people make entire careers out of trying to optimize websites to fit Google’s algorithm, but no one knows with absolute certainty how it determines rank…this is a fantastic trade secret indeed! If someone could figure out how to decrypt the Google search algorithm with quantitative accuracy, I suspect they would be rich beyond words, maybe I should write a patent…

15 Responses to A Case Against Patents

  1. CD says:

    Word.
    http://www.newswise.com/articles/view/549822/?sc=dwhn
    IP has gone too far. Patenting natural occurrences like genes!?!?
    C’mon! That’s like Ben Franklin patenting electricity rather than its applications.

  2. Mancunian says:

    Ok, Mr Christopher. Lets say in 15 years time you decide to retire from your business,after having seen it grow from nothingness to a profitable company. One of your most trusted colleagues takes over and this bod, begins to throw his weight around. Subsequently he has some argument with a number of your other colleagues and they decide to break away. 6 years later they begin their own techie outfit, a lot similar to MarkiMicrowave, and take away some of your company’s marketshare, using the technology you perfected just before you retired, to build their products, which are undercutting yours. Can you honestly tell me that under US Law, you can impose an eternal obligation of trade secrecy on them, even after 6 years later?

  3. Mancunian,
    In your hypothetical scenario, I have no right to complain after I retire, in my opinion. Besides, even if I had patented something during the 15 years of my work (in your example), then it is likely that several of my patents would have expired around the time that the “techie outfit” went into business. Moreover, it is unlikely that the makeup of Marki Microwave would have been the same 6 years after the former employee left, so I would not be overly concerned with the competition. In my estimation, technology seems to reinvent itself every 5-10 years or so, as long as my team kept plugging away looking for opportunities, I wouldn’t be overly concerned with potential defectors, they would be playing a huge amount of catch-up.
    Actually, there are MANY MANY companies that have been started with this approach: Centellax (former HP), Amplitech (former Miteq), Marki Microwave (former WJ/Avantech/Western Microwave). Spinoffs are common place. By law, you cannot prevent someone from working in the field of their expertise, so the Patent isn’t really going to save you…especially because any talented scientist will find a loop-hole in the IP, assuming they are intimately familiar with the technology.

  4. Jan says:

    Dear Christopher,
    few years ago we had similar discussion in our company with very similar results. Pity, that we did not patent it :-).
    Thanks for perfect problem formulation.

  5. Christopher,
    Based on your article, it would seem you don’t understand what patents really are for, nor the advantages and limitations of trade secrets.
    1. Regarding your first point, there is no security associated with a patent, “A patent is merely a license to sue” anyone who violates the things claimed therein. As we all know, courts of law are at best unpredictable.
    2. A trade secret is merely something that is being kept from the rest of the world, as opposed to something that is easily revealed by inspection of a product. However, if SOMEONE ELSE patents what you have been keeping as a trade secret things get a little sticky… The advantage of trade secrets is that they do not expire, nor do they educate your competition.
    3. If you aren’t willing to sue over infringement, there are only two reasons to get a patent:
    A. To make sure someone else does not prevent you from using your own invention in your business. In this case a patent application that is not followed up will suffice as a published application will result and disclosure will prevent someone else from getting your patent.
    B. To “soup up your resume”. Yes, we both know what this means, but consider your PhD is proof you completed a sequence of requirements to demonstrate your abilities. Likewise, a patent is proof that you have an ability to come up inventive ideas.
    4. A patent is NOT a product, unless your customer is paying you to generate patents for him (and ours often do). However, a patent can extend the life of a product and actually enhance the sales value of a product. For some reason, for startups, patents are often good investor magnets as well.
    I do totally agree that not ALL ideas should be patented, but patents do have a time and a place. It is very important that anyone inventing, developing, designing, or manufacturing products understand exactly what that place is and the impacts of both applying for patents as well as NOT applying for patents.

  6. Mancunian says:

    Thanks for the reply.
    I know that spin-offs are common place, there are loads in technology fields here(And in many other sectors even the legal professions).
    But I agree with Roger, it seems you don’t fully understand what Patents are for. In my response above, I said a technology you developed “just before you retired”. So, assuming this was 6 years from the last year you spent at Marki, if you had decided to file a Patent, the Patent will not have expired, and will indeed probably just have been granted a couple of years before (I’m sure you know that lifetime is 20 years). So, although the breakaway faction will be at liberty to use “skills” they developed while working for your company, they will certainly be prevented by the Patent, from using this better technology in their products without a license from you (which is why IBM makes ~ $1billion in royalty revenues annually, while others who haven’t bothered to license their technology that far widespread don’t) Are you are saying that if IBM hadn’t Patented that technology they could use Trade secret Law to get the same level of royalties from their licensees?
    Of course not all inventions should be Patented, but the good ones certainly must. And if a new technology can be replicated, then the owner would do good to protect that technology as it could be a source of additional / essential revenue and other manufacturer would have no option but to get a license from the owner to use this better technology in their products.
    Who then should blame him from enforcing his rights and vigorously pursuing those who decide to use his invention without permission. Its not greed, its an incentive for disclosure. Thats not to say there aren’t others who abuse the process.
    And if you still hold some shares in the business, even after you retire, ofcourse if they grab your company’s market share virtually by making products using the same technology as yours without a license then your dividends could be affected.
    And you are saying that would be of no concern to you …?

  7. MaxDrei says:

    What I miss is any acknowledgement of the need a start-up has for a patent portfolio, simply as a comfort blanket for those contemplating investing in the flegling business. American sources assert that no VC will invest in any start-up unless that start-up has acquired a bulging portfolio of issued US patents.

  8. Excellent points my friends, we actually have a debate (I was wondering how controversial I would have to be until I got my readers to chime in)
    In my estimation, Roger and Mancunian, I think I very accurately understand why one should acquire a patent. In fact, your comments support that my viewpoints are well founded. Responding to Roger’s 4 points:
    1. Are you saying that a patent is NOT a license to sue? Your point is confusing. If anything, the pitfalls of litigation would tend to argue AGAINST a small company from getting a patent, not promote the idea. The expense and outcome are prohibitive. Big companies like IBM or Qualcomm are capable of handling litigation, Marki likely is not.
    2. Seems you agree that Trade Secret is very powerful, as I assert. Yes, if someone patents your trade secret, things can get complicated, but my understanding is that if you can prove that the trade secret is public domain and has been used by many people in the industry, then the patent is not valid. Is this not true? You sound well informed, I would love to understand the legal ramifications of this statement.
    3A. I addressed this point in my article, we both agree this is a meaningful reason to patent.
    3B. I understand your point, I just personally don’t give much credence to people with lots of patents. In the same way that I don’t assume people with PhD’s always know better than non-PhDs, I don’t assume that an engineer’s talents are somehow proportional to the number of patents they hold. Yes, most people are impressed if you hold a patent(s), but I’m not convinced it is as strong of a metric as, for example, holding an MSEE, a PhD, or REFEREED journal publications. Patents are not as closely refereed by the world’s leading experts, is this not true?
    4. I don’t disagree, I simply caution against scientists who think they will become rich by selling companies and not products. Obviously, Marki is a widget maker, so I am biased. But I have seen too many of my colleagues blow through MILLIONS in investment dollars only to close their doors and render their people unemployed. Yes, a patent can ENHANCE the business, but it should never be the end game.
    So ultimately I think we agree, mostly. Patents can be useful, but are to be used wisely. For my company, in its current incarnation and standing, I do not see an overwhelming argument FOR getting patents. While I am always an opportunist, I cannot argue with the time-tested strategy we have used for 20 years. That is something to ponder.

  9. Christopher,
    A couple of clarifications are needed based on your most recent set of comments.
    1. A patent is definitely a license to sue, no more, no less. My point is that a license to sue should not yield security or complacency. With regards to a large company vs. a small company, there have been mixed results here with good examples going both ways. Marki would likely go to a law firm hoping the law firm will take the case for a cut of the damages rather than for up-front money.
    2. We agree on trade secrets, mostly. The big difference here is that if it REALLY is a SECRET, it is intentionally kept from the public domain. As such, a USPTO re-examination with documentation as needed to invalidate claims would need to find something proving that it wasn’t really a trade secret.
    3B. We can shake hands and differ regarding the meanings of patents. A patent proves the inventor was thinking “outside the box” if he REALLY WAS THE INVENTOR. That last phrase is key, and rather than the number of patents, an understanding of the technologies and review of the other inventors listed is key to know what it means. I have known several engineers with advanced degrees who were well taught to solve specific types of problems in specific “plug-and-chug” manners, but who are lost if the problem facing them cannot be solved in a conventional (albeit with advanced techniques) manner.
    Also important is a discussion of “refereed”. Very often the refereeing of work stifles new and better because those in power do not want to admit prior mistakes or mis-judgements. There are innumerable examples of this problem and anyone who has presented a correct and new concept is well aware of what I am saying here. The key is who is considered an “expert” within a community. My definition of an expert, intended to poke a little fun and invoke thinking here, is that they are “someone who used to spurt”. The counter argument is anyone reviewing un-referreed written material must be very skeptical and read very carefully, my point being that this isn’t really a counter argument even for refereed results. I quit reading IEEE proceedings after about 10 years of going through a bunch of interesting titled articles with a stubby pencil and finding outrageous assumptions, errors in analysis, misapplications of techniques and statistics, etc., in all but a very few articles. The same happened for a few books I bought that were highly touted PhD theses in areas of interest.
    For additional clarification, there are two big arguments for getting patents, and two significant tempering factors:
    Argument 1 – The first person to the Patent Office gets a license to sue. This can prevent competitors from using the “art” disclosed and claimed in the patent. An first-there application, filed but not followed through, can prevent competitors from keeping YOU from using your OWN ideas.
    Argument 2 – An issued patent can be used as a tool to limit your competitors design scope, and possibly slow them down.
    Tempering Factor 1 – Patents are not free in dollars or time.
    Tempering Factor 2 – The payback for getting a patent is disclosing to the world (the USPTO granted patents and published applications are available on the internet to all) how to make something that previously might not have been understood.

  10. Roger, I cannot agree more about the need for engineers to have flexible minds, so that unconventional problems can solved appropriately. In the areas of business development and “hard-core” research, the hardest thing to do is simply to ask the “right question”. Answering questions is generally easy for engineers; it is what we are trained to do. To ask the right question…this is what can really spawns truly exceptional work (i.e. what I assume you’d call the “patent-worthy” stuff). I’ve been thinking about writing an article about the importance of unconventional thinking, perhaps it is time…

  11. Dewald de Lange says:

    A lot of people come up with the same ideas. It doesn’t seem fair that one person should have the exclusive right to an idea that thousands of other people could have thought of in due course. Even in the early days of electronics, a century ago, when their were only two people working in the same field, patents stifled developed. Today there many thousands of engineers researching the same subjects.
    Therefore, I suggested that a patent be granted for a period inversely proportional to the probability that some-one could have come up with the same idea, i.e. if an idea is a natural development of known technology, a patent should only be granted for a few years.

  12. James Long says:

    Most of the patents I have seen are on old public domain technology. There have been a slew of antenna patents for medical implants. All of them are the same as antennas used on aircraft in the 1930-1960 era. About twenty years ago a patent was issued for a method of broadcast audience surveying. The method was used around 1925 and described in broadcasting textbooks that were in print at the time of the recent patent.

  13. Lothar Baier says:

    Chris,
    I think you have a good point, the problem i see with patents especially if you are a small company is that documentation about your idea or product has to leave the controlled enviroment of your company and then on top of it gets published for all the world to see !
    Second factor is the cost of obtaining and maintaining a patent, agencies dont work for free and getting a idea patented involves a substatial ammount of money, all this to obtain a patent which then in turn may not be honored by competitors !

  14. Doug Jorgesen says:

    It is very common for young engineers to view entrepreneurship thusly:
    1)Come up with a killer idea
    2)Get some venture capital to patent it and start a company
    3)Build a prototype
    4)Sell the company a year later for $100 Million
    5)Tour the world on your yacht

    This has happened maybe a dozen times in history. What I’ve gathered from talking to lots of successful entrepreneurs, and people that have been involved in successful start up companies, is that the steps to a successful company are closer to:
    1)Come up with a decent idea.
    2)Sell your car.
    3)Beg your parents for money.
    4)Make a widget.
    5)Find ANY customer.
    6)Hone the widget to what the customer wants.
    7)Keep the widget design secret. If you absolutely must patent it, do as much research as you can and complete as much of the application yourself as possible. Buy as little lawyer time as possible.
    8)Sell the widget and return to step 5, repeating until satisfied.

    There are a handful of high profile patents that make lots of money, and lots of patents that are a waste of time.

  15. Jeff says:

    Dear Christopher,

    I agree with the bottom line of your argument: to be successful in the field one needs to _innovate_, sell products and services. Historically there are two person that embody the opposing line of thoughts you mentioned: Thomas Edison (the patent guy) vs. Nikola Tesla.

    In my opinion, there is a similar problem in sports (e.g. football/soccer). If you play the same strategy over and over again — however good the strategy may be — you will loose. Someone will eventually find a loop hole and use this against you. Innovate and then your competitor will continuously spend their resources on reverse engineering and tuning the production chain to meet your standards rather than riding the wave and develop good new ideas on their own.

    Personally, I would go even on step further and state that even trade secrets are probably not that necessary for high-tech components because there is a fundamental difference between ‘knowledge’, ‘understanding’ and being able to reproduce: there may be copy cats, but not those (or very very rate) that can consistently reverse-engineer and produce the same quality for less money. If they do this consistently, then one should take the hint and start innovating again.

    Thoroughly enjoyed reading your article and happy to increasingly see companies adopting the same innovation strategy.

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