Patent Trolls and the War on Innovation

On the front line of the costliest battle in the high-tech world.

Hockenberry has watched colleagues abandon projects for fear that they could end up getting "Lodsysed." "They know that if I'm vulnerable, they're vulnerable," he says, "which means we don't know what next great thing might never get made."


Turning Up the Heat

Around the time that Nathan Myhrvold was creating new problems for companies, Cheryl Milone was thinking of ways to solve them.

Milone was a patent attorney in New York City, watching from the front line as the number of lawsuits — especially those involving trolls — exploded. She knew that it could cost a million dollars or more just to do the research necessary to invalidate one patent, which is why so many big companies relied on the "ruler method" and so many small ones either settled or closed shop.

Suddenly, she was struck with an idea: What if she could turn millions of amateur researchers into patent sleuths?

Her idea turned out to be unoriginal. A Boston company named Bountyquest was already investigating how it could do the same thing.

But despite support from Amazon founder Jeff Bezos, Bountyquest was about to become another dot-com-bubble anecdote: One day in 2001, its founders boarded a flight to go meet with the company's backers. By the time their plane landed, their funding had disappeared.

In 2008, Milone decided to refashion the bones of Bountyquest into Article One. She believed that the power of large, like-minded crowds on sites like Facebook and LinkedIn could be unleashed on something even as wonky as patent law.

That power was in full bloom late last year, when the world started seeing something it had never seen before: ecstatic praise for a new thermostat. It was called Nest, and the fact that it looked like an Apple product wasn't a coincidence.

Nest was created by Tony Fadell, who helped make the iPod. He was building a home in Tahoe when he realized that nearly every feature in it could be as beautiful as the products he had once helped manufacture. Every one except the thermostat.

"They were ugly. They were confusing. They were incredibly expensive," Fadell told Wired last year. "I was like, 'Why is this?'"

Thermostats hadn't changed much in half a century. Honeywell was the market leader; its basic design had gone untouched since the Eisenhower administration. Programmable thermostats, which were supposed to save people money, actually did the opposite, because they were so hard to program that homeowners eventually gave up.

When Fadell realized the potential market — everyone needs a thermostat — he convinced a few former Apple colleagues to quit their jobs and join him in a garage he'd rented in Palo Alto. Nest solved the problem of programmable thermostats by not needing programming. The equipment itself learns how to set the temperature based on time of day, season and homeowner preference.

Last November, Nest sold out of its first batch in less than a week. The New York Times called it "elegant" and "very smart" and asked, "Can you imagine what the arrival of the Nest and its team of former Apple superstars must be doing to morale at [Honeywell]?"

It didn't take long to find out.

Shortly after Nest's launch, a Honeywell executive told tech site GigaOM that the company had the ability to make a learning thermostat 20 years ago but didn't because — despite all evidence to the contrary — they figured customers actually enjoyed programming their own.

In January, a writer for Fortune made the mistake of telling Honeywell CEO Dave Cote that Nest was selling really well. "Nest hasn't sold really well," Cote snapped back. "The New York Times has written about it really well."

A month later, Honeywell filed suit against Nest, claiming it infringed on seven patents.

Honeywell had used the same patents to stop two previous competitors. (The company declined to comment for this article, as did Fadell.) But Nest wasn't a typical startup. Along with its "former Apple superstars," it also had deep pockets. Fadell soon countersued, calling Honeywell "worse than a troll." He also got in touch with Article One.

It wouldn't be long before a still-sleepy-eyed Michael Risch would make nearly three grand from a few hours of Googling, which called into question Honeywell's patent claims.

The story might seem to point to a calmer future for the tech industry. Twitter just introduced a first-of-its-kind contract that says it will not sue a competitor for patent infringement unless the engineer who created the product signs off first, a plan that will hopefully subdue suits, given the live-and-let-live attitude of most developers.

Judges inundated by massive lawsuits seem to be losing their patience as well. One recently made news when she demanded that the CEOs of Apple and Samsung meet face-to-face to settle their differences. And last September, President Barack Obama signed into law the America Invents Act, which allows the patent office to hang on to more of its money — and to hire more examiners.

But Twitter is the exception, not the rule. The Apple-Samsung CEO sit-down solved nothing. And while the America Invents Act did make it harder for Congress to loot the patent office, it didn't make it impossible.

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2 comments
TheCredibleHulk
TheCredibleHulk topcommenter

"Ruler methodology" Incredible.

 

Who says size doesn't matter?

anonymous
anonymous

Surprising to see this article here.  Excellent work and informative.

 
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