Piecemeal Patent Reform

Patent trolls are one of the biggest scourges on the startup ecosystem in the US. The ideal solution, which was recently taken by the country of New Zealand, would be to ban software patents outright. But try as we might, it seems unlikely to happen in the US in the near term.

But that doesn't mean we aren't making headway against the trolls. A couple years ago, we got the America Invents Act which made some substantial changes to the way patents are reviewed and litigated. That bill had a provision (section 18) that allows financial services firms to take litigation over "covered business method patents" out of court and put them through a fast track USPTO process.

Last week Senator Chuck Schumer proposed to amend that bill with a one line amendment that extends the fast track USPTO review process for "covered business method patents" to everyone, not just financial service firms.

That seems like good policy for many reasons and I hope Senator Schumer's colleagues in the Senate and House jump onto this idea and help it become law.

My colleague Nick has a post on the USV blog about all of this and some suggestions for additional piecemeal patent reform that would help deal with this problem.


Comments (Archived):

  1. Cam MacRae

    Our Kiwi cousins haven’t banned software patents (which incidentally, have never explicitly been allowed) because they’re a party to the TRIPS agreement and don’t want to spend the next decade ‘splaining themselves to the WTO.Instead they have declared software is not an invention. Clever buggers.

    1. ShanaC

      Thank you Cam for explaining the difference.Is it right to say that software ipso facto is not an invention?

      1. Jorge M. Torres

        In the U.S., not all inventions are patentable. So, you can invent something, and it’s an invention in the every day and statutory senses, but it might not be patentable if it fails to satisfy any of the statutory conditions for patentability (novelty, utility, nonobviousness, etc.). If Congres passed a law outlawing software patents, software would still be an invention but not patentable under US law. Not sure if this would violate TRIPS, but it would seem like mere wordplay to me.

  2. mattb2518

    I don’t know that we need to ban all software patents. But banning business process patents would be better than just allowing for more post-grant review. That said, I’m happy Schumer and others are focusing on this issue. Piecemeal is ok as long as the meal tastes good in the end.

    1. awaldstein

      I’ll take practical pieces, rather than absolute ideas that don’t have steps to action.Perfection is the enemy. Compromise iterates change. It’s all a process.

  3. awaldstein

    Super post by Nick that clarifies the issues and the tradeoffs.A big thanks to USV for lending his perceptions to us by having him on staff and blogging on these issues. Honestly, no where else to get this encapsulated.

    1. pointsnfigures

      I thought the USV post clearly delineated the cost/benefit of patent reform. Better than most. Unfortunately, no matter what it is, it gets wrapped up into special interests and politics. I blogged about immigration today. Gary Becker’s solution much more elegant and simple than the bills pending today. My guess is if some classical economists steeped in Coase designed a patent law, we’d all be better off.

      1. awaldstein

        There is nothing that isn’t tied to special interests and politics. Personal or national.Everything is a matter of the greater good, not the individual reasons.Link to your post please…

        1. pointsnfigures

          pointsandfigures.com/2013/0…I don’t want to use Fred’s blog as a canvas for mine-which is why I didn’t link. I also have trouble cutting and pasting links into Disqus on this blog. No idea why.I will assuage my sorrows with a bottle of 1995 Mouton and a few old friends this evening……

          1. awaldstein

            Found your blog.Enjoy the 95. Lucky you and your friends both!I’m drinking a 2010 Domaine de La Tournelle Trousseau tonight. Just plucked it from the rack to lightly chill for an early end of the work day today. Young, a bit wacky and responds well to some decanting.

    2. Nick Grossman

      thanks arnold!

  4. William Mougayar

    A “one line amendment”. Hurray for keeping it simple.Btw- Nick’s post is a must read. He’s done a great job framing the issues & potential solutions.I was surprised to learn that patents are given for describing the “problem”, not the “solution.” And the Quora link on the most ridiculous patents is an eye-opener, especially seeing companies like Amazon, Google, Twitter & Apple on it. http://www.quora.com/Patent…Amazon’s “one-click buying” patent must be one of the most ridiculous one that probably set a precedent back in 96 or 97 & made some people start to think along the same wavelengths.

    1. andyidsinga

      agreed re amazons patent ..i still remember being baffled and naively thinking patents were supposed be more substantial than that.

      1. William Mougayar

        Yup. That may have started the ridiculous patents list.

    2. Nick Grossman

      thanks william.here is a great post from a few years ago – chronicles how Sun Microsystems held an internal contest to see who could get the most ludicrious patents through the PTO process: http://www.zdnet.com/blog/b

  5. Ryan Laubscher

    Here in South Africa, the sport Rugby Union is basically religion.Rugby has a law of play that is called “Use it or Lose it” – what this does essentially is tell a team that if they have the ball they have to make use of it within 5 seconds of it being available to be played. It ensures that they sport is played within the spirit of the game and that players are always having to look at ways to keep moving.I am a big fan of this “Use it or Lose it” approach when it comes to looking at things like patent trolls, or people who buy domains just to sit on them (my personal pet peeve). IMHO – there are only efficiences to be gained from assets being properly utilized.

    1. LE

      “I am a big fan of this “Use it or Lose it” approach when it comes to looking at things like patent trolls, or people who buy domains just to sit on them (my personal pet peeve)”Hah. Before I even saw the domain part of the sentence I was ready to reply to this comment that it’s fairly easy to get by any “use it” requirement in any thing.Who is going to determine what “use it” means anyway? You know it when you see it? What if I invent something and simply start to sell some of it somewhere? Are you going to need to have a certain amount of employees or sales or? (This is the classic scotus “porn” problem).As far as domains nothing wrong with buying and selling domains. Nothing special about domains vs. anything that people buy and sell. It’s a business. Everyone assumes that the domain they want would be sitting there waiting for them right at the point they decided they need it for what they want to do that is important. Not somebody else who got there first to sell their widget.”IMHO – there are only efficiences to be gained from assets being properly utilized.”People who bought domains either got there first and recognized the value or bought them in the aftermarket deciding there would be greater future value. Same thing that someone that buys gold, real estate or anything else.In the case of people who are registering domains trading off true trademarks there are procedures in place that are rather cost effective to take care of that. And that system works. (To the benefit of the person making the claim by the way.)

  6. kidmercury

    here is a comment i left on the USV blog that i’m pasting over here:sounds good, though increasingly the battlefield will shift to WIPO, assuming status quo power structure remains.

  7. Aaron Klein

    I was reading an issue of WIRED yesterday about the microparticle “spray-on” antenna that 3Xed the signal strength of a smartphone when sprayed on.That’s a great example of what we should definitely give patent protection to. It’s going to be a game changer, it was completely non-obvious and required real work to develop and perfect.Patents on newsfeeds, one-click shopping and holes in clothing? I just don’t understand how these patents even get granted. They don’t even come close to passing the smell test.Maybe we need legislation to require a minimum IQ for patent examiners.

    1. andyswan

      It’s just a slippery slope. Their job is literally impossible.The patent process should be as intense as the FDA approval process. Round 1– come demonstrate a working version of your patent. Round 2 — get 50 people in an independent controlled study to use your product and report the results. Etc Etc.

      1. awaldstein

        We don’t agree on social and political issues much Andy but this idea I like.

        1. andyswan

          I’m glad you agree on this idea, and I’m sorry you’re wrong on the rest. 🙂

          1. William Mougayar

            Ya had to rub it in. Not every punch wins points 🙂

          2. Aaron Klein

            I took that as a joke. We seem to be a lighthearted bar, for the most part… 😉

          3. kidmercury


          4. Matt A. Myers


        2. Matt A. Myers

          I thought it was a good idea too. I imagine government wouldn’t be funding this in Andy’s eyes? 😉

      2. Aaron Klein


      3. tony

        the wrinkle here, of course, is that the thing the FDA is approving is generally already protected by a patent.

    2. Matt A. Myers

      But why is that non-obvious? It’s non-obvious to you. It was obvious to the inventor (or perhaps many people who thought of it, but never pursued to monetize it).One-click shopping might be obvious to you – but it’s not to others.The only difference between your examples of software and hardware – is one is a physical tangible product, the other is not.

      1. Aaron Klein

        I don’t think it was obvious to the inventor that you could use a particular material with microparticles to make an antenna, turn it into an aerosol and make it work. It likely required thousands of hours of tweaking, testing and iterating to make it work.Frankly, there are software feats that likely apply as well. This is an unpopular position to take here, but I can support software patents that actually involve solving non-obvious, non-trivial problems in unique and never-before-done ways.One-click shopping? The idea is simply reducing the number of steps it takes to shop. That’s gotta be the biggest “duh” of an idea in the history of mankind.If you look closely, it’s not too difficult to figure out which innovations deserve limited patent protection and which don’t. The challenge is trying to draft a law that can articulate that.It’s a bit like Justice Potter Stewart’s statement on pornography: “You can’t define it, but you know it when you see it.”

        1. Matt A. Myers

          Who put those 1000s of hours in? I imagine it was accumulated from many people doing the research, and then someone getting access or observing all of that knowledge started piecing it together into something specific – made from the parts.I agree with that it can fit into some software patents, perhaps not specific actions though, like one-click shopping.Hilarious statement on pornography. 🙂

    3. ShanaC

      most patent examiners should be pretty smart – most have engineering degrees

  8. andyswan

    Nothing here a #facepunch or two can’t solve.

    1. Elia Freedman

      Do you listen to Roderick on the Line podcast? John Roderick always says that our society has gone downhill since the threat of being punched in the face has diminished.

      1. andyswan

        I don’t, but I agree immensely.

      2. LE

        Not a tool and if it was it would be a tool of last resort anyway. Look at how the “mythical” mafia handles things. Violence is not the tool of first choice. Neither is fear or intimidation. It’s finding something that benefits someone (hot buttons) and getting them what they need.

        1. Elia Freedman

          I didn’t say I agreed with the sentiment (nor andy’s at the end of the day), just that it reminded me of his comment. (I’ve never thrown a punch in my life.)

          1. LE

            Teleologically, it makes sense that people who were less likely to be able to win by throwing a punch needed to develop other skills (mental) in order to survive and outwit the opponent. Or maybe people who didn’t need to use logic, and could just use brawn, lack that “exercise” of the mental function.Same with child raising if you make a child think in order to get what they want rather than just allowing them to act emotionally and give in you will develop that part of the brain. After all they have always been able to figure out how to use the remote control to the TV.

          2. Elia Freedman

            That’s an interesting thought.I have to admit that there were times in my life when I wished I could have just thrown a punch. Using logic felt like a handicap. Thinking too much hurt me in sports, too.

  9. JLM

    .While this blog post is all about patents perhaps the bigger story is the ability to create legislation in small chewable doses.We suffer from a form of gridlock — well deserved IMHO — in which the well deserved mistrust of the Congress toward extensive and “comprehensive” legislation prevents the good aspects from being enacted.This smaller incremental approach — legislative Small Ball — is a way to get things done.This is the approach that should be applied to immigration (build the damn fence), health care, gun regulation (create the list of crazies) and entitlement reform.It is the only way that mistrust can be overcome in the current environment.JLM.

    1. Elia Freedman

      Well said. Sometimes I picture progress like running water. If it has wide open spaces we get a river, but if it runs into a wall, it keeps pounding in the cracks until leaks occur.

      1. JLM

        .That was, of course, how civil rights got passed.JLM.

        1. Elia Freedman

          Actually, that’s how our entire country was formed.

    2. fredwilson

      Great point. Legislative Small Ball. Nice turn of phrase

    3. kidmercury

      i disagree, i think the opposite is advantageous. it is like yahoo, trying to turn it around piece by piece isn’t going to work. rip the band aid off and build a new foundation. i’m reminded of the eisenhower quote: “if you cannot solve a problem, expand it.”

      1. JLM

        .The problem really is that the Big Ball solution is not going to happen and in the political spoils system we have a chance to make BIG mistakes with Big Ball — Obamacare.I think the only thing we can get done is Small Ball.Unless, of course, you were to become President and I got the VP/Sec of Offenses offices.Hey, it could happen.JLM.

        1. pointsnfigures

          Where do I send my campaign check?

    4. Anthony Ortenzi

      While it may be a way to evolve the law to something better, it’s also how the law devolves. The US tax code is an example of what happens when incremental changes happen all the time.

      1. JLM

        .I get your point and it is a good one.The tax law analogy may be a bit different in that it is something that changes with the economic fortunes of the US rather than simply policy initiatives.Once we get immigration policy figured out and we have the right hooks in place, the moving pieces should stop moving. If we had built a secure border after the Reagan era immigration amnesty then we would not have had 20MM folks sneak into the country.JLM.

        1. thom

          the majority of those 20mm did not sneak into the country. they came in under perfectly legit visas and simply never left, even after the visa expired. concrete and barbwire doesn’t solve the issue.

          1. JLM

            .Yes and no. Approximately 30% of the illegals in the country today originally came as a result of having been granted a legitimate visa — many student visas indeed but many tourist visas also.The percentage is smaller than folks think because the number of actual illegal aliens is much larger than the government is willing to admit.Many of these folks having overstayed their welcome are still eligible for some form of legitimate visa extension or renewal.The folks who have come across the border include amongst their ranks dangerous people. The folks granted political asylum include a high number of dangerous folks — witness the Boston Marathon Massacre brothers and family.The enforcement issue is not a one trick pony — we have to enforce our borders both from the perspective of a passive physical barrier but also an active barrier that may be at international airports. Customs.JLM.

          2. thom

            it’s closer to 85%.

          3. JLM

            “In 2006, over 46% of illegal immigrants within the United States were persons overstaying their visas according to the US-VISIT immigrant tracking program.”Grossing up 11MM — the base used in the calculation above — to 18MM, results in 28%.It’s just numbers and they are still big numbers.JLM.

          4. thom

            US-VISIT numbers verge on the meaningless. US-VISIT only tracks people suspected of being a threat to the country in deciding whether to allow entry. The numbers don’t track those overstaying visas.

          5. JLM

            .You will have to argue that point w/ the DHS. Since 2004, US-VISIT has been “the” entry-exit record keeping system.When someone enters the US, they are recorded (sometimes including biometrics) with their departure date entered.When the departure date arrives and there is no record of their having departed, they are entered as having overstayed.This accounts for about half of the 28% indicated above. The balance of the number is derived from statistical sampling.JLM.

          6. thom

            The database does not track those who overstay. People attempt to apply statistic processes to the database. But the system does not, nor is it intended, to track those who overstay their visa.Of course, DHS would point out that US-VISIT isn’t a thing anymore, but that’s another issue 🙂

          7. ShanaC

            i never knew we even kept the record

          8. pointsnfigures

            JLM keeps them for Texas.

          9. Nancy Roberson

            Dumbo ..jk

          10. Aaron Fyke

            I thought it was interesting that the US has no exit visa (unlike Australia and a number of places). Yes, DHS could get that data from airplane tickets, but it doesn’t eliminate the possibility of someone driving away to Mexico/Canada (or sailing?). Maybe the percent who do that is so small, that DHS has a defacto exit visa with airline data. Don’t know.

          11. Cam MacRae

            You are meant to surrender the tear-off from your I-94W when you depart. At a land border the customs officer usually retains it, otherwise the airline collects them on check-in.

      2. kidmercury


    5. LE

      “legislative Small Ball”Agree. Kind of like legislative tapas.

  10. Mac

    If one of the problems is that the USPTO grants too many software patents, or grants absurd software patents, how does it help to put litigation on a fast track USPTO process?

    1. Nick Grossman

      Good point and fair question.The re-exam process takes a somewhat more critical look, as there is an actual challenge. And, it’s (in theory) cheaper and faster than a court decision.But no doubt you are right.Also: since the America Invents Act passed (including this provision applied to financial patents), only 20 patents have gone through this expedited review (I don’t know the results of those reviews offhand). So this has not yet proven to affect a large volume of patents — though theoretically this change should open it up a lot.

      1. Mac

        Two other things jump out. 1) What happens if “trolls” win in this fast track world? Doesn’t that cement the problem while also creating a large incentive for the losing party to seek review by a federal court (thus leading us back to square one)? 2) The “cheaper” part is almost certainly in theory 🙂 especially if reform is coupled with, as your blog post suggests, liberalizing the discovery process, which is always a very expensive process, but can be difficult to attain in a regular court proceeding.

        1. Nick Grossman

          1) that’s a fair question. I have heard others voice a similar criticism against http://askpatents.com — that finding prior art prior to issuance could actually strengthen some bad applications in the case of re-exam.One thing that we need to do here is look at the 20 or so cases stemming from the AIA that have been kicked back to PTO to see what has happened there so far.2) Right. I am not sure which of these will actually make the process faster, or what will happen in the case that a combination of them happen. But it does seem right to me to at least be shooting in that direction.

  11. Lee Blaylock

    Keep fighting the good fight USV. I hope the time Nick, Brad and I spent with Cornyn’s office was productive. Happy to facilitate others if requested. After some wrangling, we were able to get the troll going after us to drop their case which was a blessing. I’m sure there will be others in the future, but they picked the wrong person to go after. It just riled me up and got me involved in the bigger picture to change the rules of their sandbox. 😉

    1. Nick Grossman

      nice!what was it that got them to back off? (if you can say)

      1. Lee Blaylock

        Wish I could shout on the mountaintop, but it has the std confidentiality agreement. We have a full release with no impact to our business so mission accomplished though.

  12. takingpitches

    Over the last couple of years, there has been exploration among the FTC and DOJ (and private companies) on how one might use the antitrust laws to combat patent trolls on the premise that they sap innovation.Recently, one of the newer FTC Commissioners threw a speed bump into this line of thinking:”Without better empirical data, there is no basis on which to discriminate among dueling theories that describe the effects of PAEs. Are PAEs a tax on innovation as practicing entities assert, promoters of innovation as PAEs assert, or does the answer depend on the specific circumstances? At this point, the available evidence does not allow us to draw a confident conclusion…”It seems to me there is plenty of evidence that they tax rather than promote innovation, and testimony of the type from the USV portfolio mentioned in Nick’s post would help put the debate back on track.

    1. Nick Grossman

      Yeah — part of the problem with this is that settlements are often wrapped in confidentiality agreements, which makes this difficult to talk about.But totally agree we need to get better at bringing our own data and stories where we can.

      1. takingpitches

        in my opinion, having worked in this area a bit, it’s a ruse cloaked in a concern about evidence. they are looking for macro-econometric data that does not and will not exist. the anecdotes from folks who fund and work on innovation are pretty overwhelming both from folks funding startups like USV and the big technology firms are what should matter (although part of the problem with the latter is that over the last couple of years they have all become PAEs as well as they have armed up for the wars with each other and the PAEs, but inevitably realize they can wield those patents offensively as well).

  13. Brandon Burns

    Should this issue go to court, when the judge asks, “If we do away with software patents, shouldn’t we do away with all patents? If we get rid of all patents, does that fundamentally erase a part of the bedrock of American culture and source of its wealth?” How do you answer that question?

    1. kidmercury

      too much of a stretch to say get rid of software patents = get rid of all patents. that’s like if the restaurant governing board says “don’t sell expired food” and someone tries to extrapolate that to meaning don’t sell any food.

      1. Brandon Burns

        Our friends the SCOTUS justices are fond of slippery slope lines of questioning, and this fight may one day go their court. If Fred’s going to argue the best solution is getting rid of software patents altogether, I think he should be able to defend the aforementioned question.Expired food isn’t quite a software patent — one is universally recognized as bad and is completely objective, the other is frequently argued as good as is more subjective. I’m not sure there’s a winning defense here.

        1. kidmercury

          people eat expired food all the time. some people eat their own crap. that is completely disgusting to those of us fortunate enough to live in more opulence, but for those who lack other options, it is a part of life.personally, i’m skeptical of patents applied to digital, non-physical, non-scarce things. i.e. music, languages, and software.

          1. Brandon Burns

            I’m skeptical of software patents when it comes to interface items, such as patenting a like button, but less so for complex algorithms. Maybe copyrights would be better?Either way, as of today, kids grow up in this country with the seed in their head that they can create something uniquely amazing, and the government will protect that thing so they can use it to create wealth, opportunity, and their very own rags to riches story. This has given birth to a disproportionately large pool of grand entrepreneurs in this country. This has been made possible by patents.Some, actually a lot of things that are patented don’t deserve patents. And patentent trolling is pretty low. But I’m not sure I’d throw the baby out with the bath water.I have mixed feelings on the issue.

  14. LE

    You: “Patent trolls are one of the biggest scourges on the startup ecosystem in the US” (sentence one of this post).Nick: “For those who are new to this problem: patent trolls are eating internet startups.”All true of course. But I think it’s really important for the talking points on this to include wording that includes startups but, and this is important, talks about how this is bad for everyone.Otherwise it sounds self serving. I mean I’m not into sports so if you are going want to spend tax dollars to build a new stadium you’d better tell me why I should care about the issue and how it will benefit me.

  15. LE

    Nick: “and target their settlement fees at just under the cost of litigating.”No doubt anyone targeting the cost of settlement at “just under the cost of litigating” is also willing to negotiate down from that point. I’d love to get in the middle of one of those transactions (note the emphasis).This has nothing to do with the merits of patent reform which I obviously support. But I think you are probably better off when you remove emotion and right fighting from business or life decisions if you can. To be sure it’s very hard to do that. But sometimes it’s the practical thing to do. And in the end you forget the person who cut you off in traffic 3 days later anyway.Once again not saying there shouldn’t be patent reform or that there isn’t a problem here.

  16. Ana Milicevic

    What if we re-classified all software as art? Then no patents, no cry.

    1. ned

      patent litigation would simply becomes copyright litigation.

      1. Ana Milicevic

        Not necessarily. A copyright doesn’t prevent others from innovating along the same copyrighted concept.

  17. Jorge M. Torres

    Just a heads up: The U.S. Court of Appeals for the Federal Circuit, which hears all appeals in patent cases and is often the last word on patent law and policy, is revisiting software patents this term. The court is trying to formulate the precise legal framework for testing whether a computer implemented invention (i.e., software invention) is an abstract idea or whether it’s tangible enough in its implementation to be patentable. The case is CLS Bank v. Alice Corp for the patent nerds among you. (Note: The abstract idea test is the test the US Supreme Court gave us when it decided the Bilski case.)Sen. Shumer’s bill and the SHIELD ACT are not likely to become law any time soon because Congress has bigger priorities (immigration, fiscal issues) and because there are too many entrenched interests who cannot agree on a common way forward. Legislative small ball doesn’t work when it comes to patents.All of this means that the outcome in the CLS Bank case is going to have a bigger impact on startups, at least in the short term, than any of the pending legislation will. I expect a decision from the court no later than August 2013 but we’ll probably get it earlier than that.

    1. ShanaC

      what are your expectations, given that the US court of appeals is often taken very seriously by the Supremes

      1. Jorge M. Torres

        I’m expecting multiple opinions (majority, concurring, and dissenting) since software patentability is as contested at the FedCir as it is controversial in the court of public opinion. I’m not following the case closely enough to publicly make a very specific prediction on outcome. One thing I will say is that the decision will probably darken the cloud of uncertainty that already hangs over software patentability. This is good if we want to close the Patent Office and the courts to people who are trying to patent business methods or abstract ideas that really shouldn’t be patented. If your startup is into crypto, bioinformatics, or some other new and socially useful hack, not so much.

  18. paul quickenden

    Lawrence Lessig was in NZ las year, said two important things. 1) NZ needs to protect itself from US corruption http://computerworld.co.nz/… and2) that the US has a low functioning democracy – too much business influence in politics, which leads me to believe it will be a cold day in hell before the patent law is reformed….so my question to Fred , IYHO could this drive a NZ start up ecosystem? Ie would US startups flee the tyranny of US patent law to start up NZ?

    1. fredwilson

      it’s a long way from everywhere (except possibly australia). i think that is its major problem