Marketing blog for Houston web marketing. Strategic marketing and sales promotions.

Sunday, October 11, 2009

response to noisychannel on patents

I’m taking too long to get to the point I’m trying to get to, so I’ll say it now briefly.

The practice of law in the United States is capitalistic; that is, whoever has more capital has more advantages. Legislation tends to be eventually distorted toward whoever can influence the legislators the most—so frequently it tends to be more capitalistic as well. Patent laws are less capitalistic than many if not most other commerce laws. The same startup person who complains about some laws suppressing him will be the suppressor when he ages and acquires capital. To change software patent laws “in practice”, ultimately means changing these societal characteristics, as I was eventually going to lead to with the examples on copyrights and trademarks.

A patent doesn’t stop anyone from making a product or service. A programmer can program all he wants. What the patent does is to stop the programmer from making money on the programming. The art of making money is the art of business. Just because someone has programming or inventing skills doesn’t mean he should “deserve” money. As you can see, the inventor has less than a 2% chance of making money.

Having said these, simply recognize that your friend is faced with a business problem, not a legislative or legalistic problem. The business problem is simply that a bully wants to use the law to beat him up. Assuming you are correct in the assessment that the bully-bluffer’s claims are overbroad or had prior-art—and neither you or I are lawyers--the solution is to stand up to the bully somehow. Of course, we need to be fair to both parties. Maybe the bully does have a point of view and of his numerous claims, some have merit.

The point is that he remains a business bully—and needs to dealt with in a business bully response way--in order that your friend becomes a better business person in order to reap the business benefits of money. The answers here are all kinds of non-obvious negotiations methods in dealing with bullies (maybe we can patent these? :) ). If your friend’s team can’t come up with solutions here, his startup won’t be a “kickass” anyhow, because there will be much tougher business problems coming up.

It’s unfortunate he’s a little unlucky and ran into an unusual business problem. But to be a successful business person, he should come up with a successful business answer. Additionally, did he do any prior art research before venturing?


Friday, October 9, 2009

response to noisychannel on patents

Before returning to patents, let’s talk about intellectual property rights.

Let’s talk about My knowledge is that a couple of Harvard guys came up with the idea, didn’t protect it with patents or non-disclosure, revealed it to the founder of Facebook who took it. The rest is history.

Now, let me ask, do the initial Harvard guys deserve anything?

Let’s talk about Scabulous (sp). The copyright owner of Scrabble didn’t even have a single line of code, when a couple of Indian programmers came out with this hit.

The question is… does Scrabble have copyright and trademark rights, when it hadn’t written a single line of online code, and actually deterred those who did?

Thursday, October 8, 2009

response to noisychannel on patents

Since few are objecting to that patents are DESIGNED to help individuals and small firms, I’d like to present some facts. Studies have shown that only 2% of patents issued recover their investment, and only 1% make significant returns. Yes indeed, 98% of all patents lose money.

I have no idea why people here are so concerned about software patents. Hundreds of years of patent laws cover a lot of judicial principles.

1. A user can license.
2. A software developer can write around the patent (smart!)
3. A user can ask the judge to set a license fee.
4. As patent fight costs start at $1 million each side, in the unlikely event it sues, the patent holder will likely lose money (98% do!)
5. The award in the event of a judgment against is generally related to the revenue the infringer made as a result of using the patent. It’s the attorneys’ fees that are costly—the rest is unearned profits anyhow.
6. A user should do a patent search prior to avoid these problems.

Yes indeed hundreds of years of patent laws cover a lot of principles. In understanding that it is very costly and money-losing for the patent holder to sue, your friend should realize it is mostly likely a threat first—more likely even a bluff. This article describes patent litigation, but notice… “Firstborn (the ad agency) escaped unscathed after hiring a law firm that threatened to fight the suit, which subsequently did not materialize.”

Tuesday, October 6, 2009


Again, these are just my non-lawyer views.

Copyrights and patents are both forms of intellectual property—the result of someone making an investment to create something. I guess people here still believe in hard work and contribution should result in reward? Whether one puts one’s work effort down in craft and then on paper, as in a patent, or on code, as in a software copyrights, both are work efforts.

Most if not all ownerships are actually rights—a right to possess something. A person doesn’t really own a car until the State grants the right from others infringing on the car’s possession. Copyrights, trademarks, and patents all belong to intellectual property rights. They are very similar in that the ethical underpinnings are that these are the result of intellectual work efforts. The State is basically saying—to motivate your work efforts, we’ll give you certain rights. Very similar work-ethics-reward rights.

Hence, if the argument is made that patent work efforts are worthless, by fair-effort-reward logic, it follows that copyright work efforts should also be worthless. Both are simply abstract rights of intellectual property efforts. There is no more tangible “theft” involved in copying code (no one took anything) than in copying idea (no one took anything).

Patents have extended power of the idea; but so do copyrights. For example, a movie script based on a book doesn’t use the same words (and indeed a silent movie can use no words), yet must pay royalties to the author. And copyrights do restrict innovations. For example, my recollection is that Gone with the Wind has never had a sequel, because the copyright holder refuses; and even printings of sequels were suppressed, if I recall. Also, it’s my understanding that copyrights are used in look-touch-and-feel litigation, even though codes may be quite different.

Fundamentally, both copyrights and patents are State’s motivation rewards for intellectual efforts and both have extended rights. So, if banish patents, it follows logically from ethics of work efforts and rewards, why not also banish copyrights?

Regarding the core of the argument here—do patents harm or help individuals and small companies, in practice….

Let’s first decide whether patents are DESIGNED to help individuals and small companies or not. Greg and I think they are designed this way. If we agree on this point, we can then discuss how and why in practice they work for or against small companies.

P.S. I won’t be able to post as frequently because of pressing projects.

Monday, October 5, 2009

Further marketing responses on intellectual property rights

Speaking of 20 year patents, let’s also talk about 99 year copyrights and unlimited time trademarks. I’m really disappointed at that there are individuals here who want to remove patents that protect individuals and small companies.

If a developer doesn’t like software patents, the best thing he can do is to upload all his code with complete explanations to the web. This way, anyone trying to patent will run into an enormous wall of software developers’ prior art.

And, it seems only fair, if inventors can’t have software patent rights, developers shouldn’t have software copyrights either. And no trademark rights, which means, anyone downloading the code should be able to put his name on it, and sell it. And no open source licensing copyright. I should be able to copy your code, call it my own. I guarantee I can always sell your code for a lower price such that it better benefits the public and other coders at a lower price. If the developer has employees, as for example Google, and the employee makes a copy of their code, I guess he owns another Google. (Goldman-Sachs just caught a developer stealing their financial market timing code—I guess that’s OK, according to postings here, because they shouldn’t have any copyrights either.)

Programming skills are becoming cheaper, especially with international outsourcing. Your ideas, patents, copyrights, and trademarks may benefit you someday. Patents, copyrights, and trademarks are usually designed to help the smaller guys. Because they are rights, they can be used by larger firms too.

But, the way some developers talk about them, they want to destroy the very few rights that individuals and smaller firms can use to fight against the larger firms.

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Sunday, October 4, 2009

Patents and Marketing

The initial example somewhat distorts what patents are about. Patents were historically developed to protect inventors and to encourage them to publicly publish an invention for copycats to license to produce more of, so that society as a whole benefit.

The people wanting patent protection were the small guys, because, for thousands of years, large, well-funded companies would copy the small guy's invention, and trash the small guy's new company. After then a couple hundred years of legislations and judicial reviews, patent rights were created--to protect the small inventors.

At start of the invention protection laws, most inventions were mechanical, and nowadays, there are complaints about software patents. But, the business situation remains same in software as in mechanical. Without the software patents, the big companies would simply take the small startups invention and completely wipe them out, very quickly. This still happens all the time.

So, the initial example of the patent as a bully club against startups, should be reversed-- it is also the same, and sometimes the only possible, club the startup uses against the bullies.

Doesn’t sound like a very impressive startup if the only thing it could come up with is a copycat idea. There are unlimited numbers of ideas—let the startup work on something more productive or license the invention.

So the “bully” here wants to use the legal system. There’s a couple of other options the startup can do. It could ask to pay a license, which sounds very fair. Or it could simply breach the patent and see what the legal “bully” would do. The “bully” now has a problem. It costs starting a million dollars to launch a patent suit, and, if its patent is weak, it can easily lose the suit and pay the opposing sides attorney as well.

If it wins the suit against the startup, it still will likely lose millions due to that it can’t collect. So, most likely, the “bully” is threatening rather than fully intending to go through with this.

Suppose the patent is justified or the bully’s legal actions win, and subsequently, the startup is successful….

Microsoft lost a few patent lawsuits recently. One, it clearly infringed on a University of California patent and paid $700 million plus. The second, it infringed on some kind of calendar function in Outlook, which Microsoft acknowledges. The judgment was initially as a percentage of Outlook, but this was overturned, as Microsoft pointed out that the calendar function was only a small part of Outlook. Even Microsoft as the infringer appreciates that the patent doesn’t destroy the product, and that Microsoft is willing to pay a “license-penalty” fee for the patent’s direct contribution.

Microsoft is a good example of a bully who ran over small companies, subsequently got sued by those with patents, lost a few big ones and got tied up in the courts too long, and subsequently, Microsoft is a lot easier to deal with by the small companies with patents.

So, as I see it, another option is to counter-threat with trying to invalidate the patent, and if the “bully” proceeds with legal action, then minimize legal costs (e.g. plead no contest), and ask the Judge to quickly decide and set a license fee.

In summary, patents are legal clubs either way, and actually protect the smaller companies and startups better than harm them.

Additional information,

My recollection is that court-ordered patent royalties are typically 2 to 5% of their contribution to sales. This means, if a software feature contributed $100,000 in sales, the royalty is $2,000 to $5,000, not significant enough to destroy a product.

I'm not a lawyer and am writing based on what I recall.

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Saturday, September 26, 2009

Branding and web change or reinforcement

Additionally, to answer the first question more directly--the web is simply a new media, and a very powerful one with usually the highest ROI ratio. So, the messaging of the brand and the website should be mutually influenced, because each utilized media type influences brand in a particular way.

For example, car companies’ major budget expenditures on TV probably drives their highest promotions returns, and their websites probably don’t affect the brand much. But, in companies that don’t have large TV budgets, the web “branding” experience may be far more valuable and can and should affect the “brand” itself.

In short, the website frequently can change the branding goals in addition to supporting the branding goals.

Chen Sun, President, USA