Twitter has a savvy new patent strategy
By Jason Schultz and Jennifer Urban, Daily Journal
Welcome to the Software Patent Wars. In recent months, the dormant and somewhat decaying intellectual property arsenals built by technology companies in the 1990s and 2000s for supposedly "defensive" reasons have been deployed. Yahoo! sued Facebook: Oracle sued Google; and Samsung sued Apple. Microsoft and Nokia have also been drawn into the fray. The result is millions of dollars in legal fees and years in court, raising concerns among Silicon Valley innovators that the software patent arms race is beginning to take a costly toll. Lawsuits between competitors and nothing new, but what stands out here is the fact that litigants on both sides question whether software patents should exist at all. They litigate, but wish they did not have to do so, leaving one to wonder if there could be another way.
Software engineers have long complained about the perceived overbreadth of software patents, their sometimes trivial or obvious nature, and the fact that software innovation often happens without any need for patent protection. Legal academics and advocates have also criticized software patents, on both doctrinal and empirical grounds. The Supreme Court's recent ambivalence on the scope of patentable subject matter in Bilski v. Kappos and Prometheus v. Mayo, however, indicates that these patents are here to stay, at least for now. The American Invents Act shows that Congress also has little appetite for this kind of patent reform.
This situation leaves companies to decide whether to participate in the system by getting patents that may stake out competitive territory and stave off offensive suits now but risk being "weaponized" in the future, or to opt out of patenting. Increasingly, this decision is made by virtue of the danger in which companies find themselves as patent suits increase. Defending against patents wielded by others often requires a company to have its own portfolio to use for defense.
This can put innovative companies in Internet – and software – related industries in a bind. Without patents to wield in response to claims by other patent-holders, they are vulnerable to aggressive claims against them. But by bulking up on patents of their own, they are both increasing the rights "thicket" that already exists, and adding to the overall number of patents that may eventually be used as weapons. If patents could be guaranteed to remain "defensive" over time, then this bind would be loosened significantly.
This is why we find Twitter's new "Innovator's Patent Agreement" (see github.com/twitter/innovators-patent-agreement), announced last month, to be an interesting move toward solving this dilemma. The IPA gives Twitter engineers some say over the use of patents on technology they invented. Twitter can always use the patents defensively, but it cannot go on the offense without the inventors' permission, even after they've left the company. The IPA is also crafted so that the inventors' rights continue with the patent; if Twitter sells the patent, the buyer must also get inventor permission before wielding the patent offensively. Accordingly, patents und the IPA remain defensive over time, unless the actual inventors agree otherwise. This represents a significant shift in the usual relationship between inventors and employers, in which assignment agreements usually give all decision-making rights to the employer, and could, over time, decrease the "weaponizing" of patents.
Twitter's move is also a savvy marketing move to attract engineers, who are often dubious of software patents and may resent having inventions they created used against other innovators. Former Yahoo! engineer Andy Baio, for example, took to the pages of Wired magazine to voice his frustration over Yahoo!'s suit against Facebook. Mr. Baio called the lawsuit "a deplorable move," an "attack on invention and the hacker ethic," and expressed his "dismay" that Yahoo! obtained four broad software patents on creations he co-invented. See "A Patent Lie: How Yahoo Weaponized My Work," Wired, Mar. 13, 2012. Mr. Baio is not alone. National Public Radio's "This American Life" recently reported that "[i]n polls, as many as 80 percent of software engineers say the patent system actually hinders innovation." See www.npr.org/blogs/money/2011/07/22/138576167/when-patents-attack.
Silicon Valley companies invest heavily in recruiting, and engineers who care about patent policy and open innovation are likely to see this as a signal that Twitter thinks differently about patents than other companies. If the IPA starts a trend, the technology labor market could become a testing ground for what policies truly "promote the progress of the useful arts" in America. See the U.S. Constitution, Article I, Section 8, clause 8.
Giving control back to inventors who believe in promoting innovation rather than litigation is an important step in curbing patent abuses. There are, of course, some limitations to the IPA model. Because it is based on the wishes of individual inventors, it is necessarily piecemeal in operation. It also leaves open the possibility of side deals with inventors or pressure on them to agree to an offensive use, especially if patents are sold or a company using the IPA changes hands.
Another approach is one that we have proposed - the Defensive Patent License. The DPL similarly keeps patents defensive over time, but also promotes multilateral disarmament through network effects. In this feature, it is similar to free software and free culture licenses, such as the General Public License and some Creative Commons licenses. Companies that use the DPL make two main promises: first, that anyone can take a royalty-free license to their patents in exchange for a promise that the licensee will also offer their own patents under the DPL; and second, not to use patents against any other DPL user except in a defensive situation.
This set of promises creates a network of patent holders who are publicly and legally committed to defensive uses of their portfolios vis-à-vis each other. DPL users are free to demand licensing fees or bring infringement suits against anyone outside of the DPL network, but they must remain defensive within it. Like the IPA, the DPL's obligations "travel with the patent": in the even that a patent is sold, its new owner also must abide by the DPL's terms.
The DPL also helps fix the patent system in two other ways. First, by encouraging those who have previously opted out of the patent system to participate in a manner consistent with their politics, it helps prevent overboard and obvious patents by giving the Patent Office evidence of who is inventing what – often called "prior art" – so that the Office can avoid granting weak patents in the future.
Second, because all DPL patents are permanently defensive as against other DPL users, DPL patents provide little ammunition for trolls, diminishing the number of suits that such entities can bring in the future. The IPA and DPL each represent a private response to a broken patent system. Both create mechanisms to keep patents defensive over time. They also create incentives to both innovate, and for those who are weary of the patent systems, to find a way to live more peaceably within it. And both methods, by "deweaponizing" patents, stymie patent trolls.
In many cases, innovators can no longer realistically ignore the patent system. The IPA and the DPL offer two new ways to participate in the system while creating a bulwark against some of its worst features. Over time, these methods and others may help adjust the patent system from within, leaving in place the value of strong patents in industries where they support innovation, and limiting their harm in industries where they operate to raise transaction costs and limit innovation. Unless and until Congress or the courts can improve things, such private solutions may be our best option to stem the rising tide of patent attacks.
For a further discussion of DPLs, see our forthcoming Harvard Journal of Law and Technology article, "Protecting Open Innovation: A New Approach to Patent Threats, Transaction Costs, and Tactical Disarmament," available at papers.ssrn.com/sol3/papers.cfm?abstract_id=2040945. 5/2/2012