Eyes Above The Waves

The Problem

Innovation in software happens roughly like this:

1. Come up with some good ideas (perhaps 1% of the technical work).
   
2. Implement them in software, test the software, deploy the software (99% of the technical work).
   
3. Succeed in the marketplace (even harder than the technical work).
   

The US patent system offers anyone who completes step 1 a monopoly on the use of the ideas. Once other groups to complete step 3, the patent holder can extract a slice of their revenues. This system creates strong incentives to stop at step 1, obtain patents and extract money from others who pursue steps 2 and 3: you avoid the costs and risk of steps 2 and 3, and even more importantly you avoid the risk of being pursued by other patent holders. (The latter risk is particularly acute in software, where in step 2 you will routinely create and use many implementation ideas that have been patented by others.) Groups pursuing this strategy are called "non-practicing entities" or more colloquially, "patent trolls".

Currently most groups aren't following this strategy. One reason is tradition. Another reason is that most technically adept people desire to implement technology for people to use. But nevertheless "non-practicing entities" are proliferating and that will continue while this incentive structure persists. In fact, as NPEs grow, the risk of taking steps 2 and 3 grows, so more groups will choose to be NPEs --- a vicious cycle.

Obviously a patent system which discourages creation and deployment of software technology is failing its goals, but the problem is not obvious to everyone (many people deny it exists) and even if it's obvious, vested interests prevent it from being fixed.

The Solution

I think we need to make the problem obvious to everyone by following the incentives to the hilt, proving by demonstration that the system fails. I would like to see a more rapid increase in NPEs. I would like to see a huge jump in patent litigation. I would like to see most of the profits of practicing entities diverted to NPEs and litigation. This would encourage them to abandon their support for the current system.

Some of this is happening naturally, but there are a few things that should be done differently by NPEs that want to reform the system (let's call them "ethical NPEs"). Some wealthy PEs have bought cheap protection from larger NPEs such as Intellectual Ventures by investing in them. Ethical NPEs should not make such deals. Some NPEs sell their patents to other entites; obviously, ethical NPEs should not sell their patent assets to non-ethical entities. To focus effort on reforming the system and minimise collateral damage, ethical NPEs should focus on pursuing PEs who do not support appropriate reforms. I also suggest that ethical NPEs should focus exclusively on the US market. If the US reforms, other countries will follow, and while the US software industry is crippled we can hopefully keep advancing technology elsewhere. A nationalist sentiment may aid reform efforts too.

Possibly the legal system will be unable to cope with the load. If so, that will add to the pressure for reform. As I understand it, a logjam of litigation would mainly impact patent cases, so massive litigation by ethical NPEs would have a nice side effect: litigation against PEs who support patent reform would be crowded out and delayed by litigation against PEs who do not.

This strategy risks creating a large pool of NPEs and lawyers who act in their own vested interests to perpetuate the current system. But that's happening anyway; hopefully they can be stigmatised.

Addendum

I'm not currently in a position to practice what I preach here --- my employment agreement with Mozilla makes it impossible, and Mozilla is more important to me than ever. Hopefully other people will pick up the slack!

The ideas here are not new. Florian Mueller's "Fair Troll" model is closely related. I think I read that a while ago and forgot the source until "dave" reminded me in comments. Thanks!