Sunday, May 18, 2014

Google and Apple vs. the Patent Trolls

With Apple and Google settling their patent disputes, some have noted that the two companies are now teaming up to urge legal reforms directed at patent trolls. In simple terms, a patent troll is a company that does not produce anything, but instead builds a library of patents that it uses to make demands for compensation or to launch lawsuits, often strategically timed to coerce a quick settlement, against companies that they allege are violating their patents. Many start-ups end up having to choose between settlement or burning through hundreds of thousands of dollars in legal fees, often significantly more than the patent troll demands to settle the claim, instead of investing that money in their business. The patent troll may wait to file a lawsuit until a company is in merger or acquisition talks or announces an IPO, knowing that in those contexts companies will often want to quickly settle any litigation.

At the same time, large companies are notorious for being unwilling to license outside technology and, upon learning of an innovation, of trying to find a way to replicate its best features without running afoul of the existing patent. Also, absent a huge bankroll, it is a rare private inventor who can afford to litigate even an egregious patent violation. Although I am not claiming it to be at all typical, or at all common, it's not difficult to see why an inventor who lacks the resources to directly capitalize on a patent, who can't find a manufacturer willing to license or buy the patent, and who sees what appear to be violations of his patent by existing companies, might choose to license or sell a patent to a company that could reasonably be described as a "patent troll".

One reform that is sometimes proposed as a way to greatly reduce patent trolling is to eliminate software patents. However, we're now in an era in which traditionally patentable devices covered with switches, buttons and knobs can be replicated on a touch screen, purely through software. We're in an era in which the patentable elements of a breakthrough computer innovation may be entirely software-based, and where product development could involve the investment of millions, even tens or hundreds of millions of dollars, but where replication of the idea is comparatively cheap and easy. That's the context of the Samsung-Apple litigation, with Apple having spent $150 billion or more developing the iPhone and Samsung, displeased with its own efforts, choosing the much easier path of imitation.

If you deprive the innovator of any patent protection, it's highly unlikely that they're going to make the necessary investment to produce that type of innovative product as they would be concerned that immediate imitators would prevent them from obtaining a return on their investment -- or might turn that investment into a gargantuan loss. Also, given the $billions that major companies have spent building their patent portfolios, even if it would make sense in the long-term to narrow the protection available through software patents, it's difficult to imagine that those companies will support reforms that would significantly reduce the value of their patents. At the same time, it should be possible to get broad support to narrow eligibility for software patents, and perhaps even to significantly shorten their duration, reforms that would help keep dubious patents from being used coercively against manufacturers and service providers, and allow companies to recover their investments while limiting the amount of time in which competitors are reluctant to build upon a patent holder's breakthrough or essential technology.

Another reform that is often suggested, and which seems quite reasonable, is to provide that a patent holder can only obtain injunctive relief is if it actually manufactures a product covered by its patent. A reform along that line seems reasonable, although I think it would be appropriate to provide for injunctions if the patent holder can demonstrate that it is in the process of developing products or that the alleged violation is intentional. Otherwise, the coercive impact of an injunction could cause a company to settle a frivolous claim in order to keep a key product on the market or to reassure investors or its distribution network.

I've also seen it suggested that, if sued, a company should be permitted to ask a court to declare that the patent holder is a patent troll and, if the court agrees, that the company should be required to post a bond to cover the alleged violator's legal fees if its patent litigation is not successful. While the most noteworthy example I've seen, the proposed Shield Act, attempts to define "patent troll", its definitions remain problematic. For example, the requirement that a company seeking to protect an acquired patent "provide documentation to the court of substantial investment made by such party in the exploitation of the patent through production or sale of an item covered by the patent" would put a significant hurdle in front of a patent holder trying to sell a patent that is already being infringed, or in front of a company that acquires a patent that is infringed prior to its commencement of production and sale of a covered product.

The bond requirement imposed on a company determined to fall under the act would be oppressive to a company bringing a legitimate patent claim, but there's no reciprocal requirement -- either for a bond requirement or for an award of legal fees against a defendant company that loses its defense of a patent case -- that would discourage a company from defending a patent that it believes is, or probably is, valid. While there's something to be said for reducing a patent troll's ability to coerce a settlement from a company that might prevail if the case were litigated, the Shield Act seems to substitute one problem for another -- now a willful infringer can create a litigation environment in which a company that has acquired a valid patent could come under intense financial pressure to settle for far less than the claim is worth.

A more modest reform bill is pending in Congress, and it does include a reciprocal attorney fee provision, but it is not widely viewed as having a large chance of passing. The bill includes some interesting elements that attempt to limit the ability of a patent holder to coerce another company based upon nebulous claims of patent infringement, and potentially create a cause of action against a patent holder who violates those provisions.

Google and Apple are in a powerful position to push for meaningful patent reform. Let's hope that they push for balanced reforms, even at risk of devaluing their patent portfolios, and that more tech companies join their effort.

I Don't Remember President Rumsfeld

In a column that reminds me of David Brooks' efforts to put a nominally independent spin on right-wing talking points, Ross Douthat criticizes President Obama's second term foreign policy record. All sixteen months of it. Douthat isn't going to cut Obama any slack:
His foreign policy looked modestly successful when he was running for re-election. Now it stinks of failure....

But the absence of an Iraq-scale fiasco is not identical to success, and history shouldn’t grade this president on a curve set by Donald Rumsfeld.
Why should this President be graded "on a curve set by Donald Rumsfeld", as opposed to on a curve set by George W. Bush? The buck stops at the White House, unless you're a Republican in which case it stops with the Secretary of Defense?

Douthat's principal conceit is that, "balked by domestic opposition, turn to the world stage to secure their legacy". By "usually", he apparently means "recently", as his examples are Jimmy Carter ("the Camp David accords"), George W. Bush ("his AIDS-in-Africa initiative"), Bill Clinton ("chasing Middle Eastern peace") and Richard Nixon (opening doors to China) and... one-term President George H.W. Bush with something that's not really a foreign policy initiative as it is a matter of watching events unfold ("closing out the cold war"), although I suspect Douthat means to attribute that to Reagan. To the extent that you want to credit Reagan's foreign policy with helping to end the cold war, it's difficult to see how his second term policy was materially different from his first term policy. I can't help but notice, also, that Douthat makes no mention of the Clinton Administration's success facilitating the peace process in Northern Ireland, instead implying that Clinton is among those presidents who has no clear victory. He also makes no mention of Ronald Reagan's decision to intervene in Lebanon, or his rapid withdrawal after the barracks bombing, or of George W. Bush's inabilty to prevent Russia's invasion of Georgia, and its subsequent actions in South Ossetia and Abkhazia.

One big problem with Douthat's conceit is that he looks only at what he sees as the "big accomplishment", even if it relative terms it's a small one or a failure, while ignoring the lists of horribles that can be found in the choices of pretty much every president on his implied list. There's no reason to believe that, a decade or so from now, a pundit as generous as Douthat is toward Republican presidents won't be able to find a second term accomplishment by President Obama that's at least as impressive as Bush's AIDS initiative. Further, why is it a good thing that presidents, frustrated by their inability to achieve their domestic agenda, shift their focus to the international scene? If it's possible to attend to both the domestic and the international, go for it. But if it's not, or if focus on domestic issues is "too hard", a President should nonetheless buckle down and do his primary job before trying to build a legacy on foreign policy issues.

In listing what he describes as Obama's foreign policy failures, it's no surprise that Douthat wants to limit our consideration of G.W.'s fingerprints. Even granting that Douthat recites, "His predecessor’s invasion of Iraq still looms as the largest American blunder of the post-Vietnam era", and concedes that "many current problems can be traced back to errors made in 2003", to put it mildly that's a remarkable understatement.
  • Libya - Douthat implies that the so-called Benghazi scandal is a Republican confabulation, but complains, "The consuming Republican focus on Benghazi has tended to obscure the fact that post-Qaddafi Libya is generally a disaster area". That's not an unfair assessment, but the question becomes, "What should we do about it". The chaos is not considered a sufficient threat to U.S. or European foreign policy interests that any western nation is interested in intervening. Is Douthat arguing that Obama should have left Qaddafi in power, better to keep the humanitarian disaster we know than to risk one we don't know? He does not seem to be arguing that the U.S. should send enough troops to occupy and pacify the region, for however many years that would take. What's left? Also, how does Obama's Libya record and its fallout compare to that of Ronald Reagan, who unsuccessfully tried to kill Qaddafi, or George W. Bush, who along with Tony Blair spent years promoting Qaddafi as a poster child for the success of the "War on Terror"?

  • Syria - Douthat complains, again not without justification, that the Obama Administration has not kept its implied promise to use military force to remove Assad from power, upon it being established with reasonable certainty that he used chemical weapons. Except Douthat is not endorsing the prevarication that the world does not take the U.S. seriously any more because we didn't invade Syria, and goes on to state, "I’m glad we don’t have 50,000 troops occupying Syria" -- as if we could occupy Syria with only 50,000 troops. The military estimated a short-term need for 75,000 troops just to secure Libya's weapon stockpiles.

  • The Holy Land - Douthat complains that John Kerry's Israel/Palestine peace initiative has failed. I'm not sure that many people other than John Kerry expected the initiative to be a success. Douthat himself deems the failure "predictable" and... it was. George W. Bush had a number of peace initiatives directed at the Middle East that were far more ambitious than anything President Obama has endorsed. His father attempted a more coercive approach to advancing a peace accord. Clinton spent years hosting superficial peace talks before his last-minute effort to achieve agreement on the big issues helped contribute to a complete collapse of the peace process. But the fundamental problem is with the leaders of that region, and the last leader who seemed courageous enough to press for a bona fide peace deal was assassinated in 1995.

  • Iraq - Douthat complains that "the caldron is boiling and Iranian influence is growing", as if this is a new thing. Who would have thought, after all, that replacing a largely secular Sunni regime with a much more religious Shiite regime would lead Iraq to become friendlier with Iran... except for anybody who knows anything about the Middle East? The failure Douthat attributes to Obama? a suggestion that the "White House’s indecision undercut negotiations that might have left a small but stabilizing U.S. force in place." That's not actually what the article linked by Douthat states. The author indicates that U.S. officials did not receive guidance from the Obama Administration about how many troops they wanted to leave behind, but that's attributed to ambivalence, not indecision. The article also suggests that the Obama Administration was not in fact ambivalent, but that "The American attitude was: Let’s get out of here as quickly as possible". Iraqi Prime Minister Maliki, on the other hand, who was negotiating over troop levels, is explicitly described as indecisive. Douthat admits, "I sympathized with the decision to slip free of Iraq entirely", and he attempts no argument that the Middle East would be better off had the U.S. maintained a troop presence in Iraq.

  • Afghanistan - Douthat complains that "", never mind that he's speaking of a first term decision by the President, or that if he's followed the Iraq and Afghanistan wars at all he should know that there are enormous differences between the two nations and the nature and purpose of the respective "surges". Douthat seems to have little understanding of Afghanistan, complaining, "even with an American presence the Taliban are barely being held at bay". Let's imagine that the U.S. took a few holds barred approach to occupation and modernization of Afghanistan, as the Russians did during their years of occupation. Did that make the Taliban go away? And if we're bringing first term decisions into the discussion, here's a doozy. For that matter, was Ronald Reagan's effort to get the Soviet Union out of Afghanistan a foreign policy success, in that the USSR withdrew, or should we look at what subsequently happened in both Afghanistan and Pakistan and contemplate whether it was one of the biggest foreign policy blunders of all time?

  • Russia - Douthat complains that "the 'reset' with Russia — has ended in the shambles of the Ukraine crisis, as if there was something that the U.S. could reasonably have done to prevent Russia from invading Crimea. This is the same Putin who, as previously mentioned, invaded Georgia under G.W.'s watch. Expressing a willingness to start afresh with Putin is not something that can be achieved unilaterally.

  • Iran - Although Douthat suggests that the Obama Administration could still achieve a "paradigm-altering achievement" with Iran, he simultaneously complains that those efforts could "unsettle[] America’s existing alliances in the region to very little gain". So it's the same situation G.W. Bush failed to resolve, but with the added caveat that any promising effort, and perhaps even a breakthrough agreement, could simultaneously be a failure. Perhaps that's not such a bad perspective on significant foreign policy issues, as blowback from even well-intentioned efforts can be harsh, but it seems like an absurd standard to impose on the President, particularly in light of Douthat's failure to acknowledge that the presidents whose second term accomplishments he finds to be most impressive all made foreign policy decisions that resulted in severe, negative consequences for the country.

Douthat goes on to qualify the Obama Administration's successful operation that resulted in the killing of Osama bin Laden by asserting that the success of the mission "has to be qualified by Islamist terrorism’s resurgence". It's the sort of footnoting he's not willing to do for any other President, some of who can be credited with foreign policy failures that had much more profound and direct negative consequences for U.S. foreign policy interests. More than that, does Douthat believe that it's the killing of bin Laden that resulted in the "Islamist terrorism's resurgence"? That the Obama Administration shouldn't have pursued that mission? And, wait a minute, the blog post linked to support Douthat's allegation of the claimed "resurgence" doesn't even support his position, instead pointing out how difficult it is to hunt for terrorists and has resulted in U.S. security difficulties for government personnel in Yemen, that the U.S. issues regional security alerts when there is an "uptick in the fight against Al Qaeda in Yemen", and questioning the value of drone attacks.

From my reading, all Douthat's equivocation does is reaffirm that his goal is not to analyze Obama's foreign policy records, but to put a slightly centrist spin right-wing talking points. To be a "reasonable voice" by alluding to G.W. Bush's disastrous Iraq policy and distancing himself from the most ludicrous right-wing allegations directed at the President, and then to explain why none of that distance matters while hoping that his readers don't recognize his overt partisanship. If any lesson can be drawn from Douthat's analysis, it's that six years from now, no matter what larger consensus is drawn from the Obama Administration's foreign policy record, we can anticipate that some number of partisan pundits will offer tear-downs of the foreign policy records of the incumbent President and, if the President is a Republican, that they're apt to try to pick even the smallest of cherries from President Obama's record to try to paper over his acknowledged failures. Meanwhile, I would rather a second term President keep his eye on the domestic situation as even a small but significant foreign policy success does not overcome the rank incompetence of an administration that ignores or inflates an economic bubble that, upon bursting, almost takes down the world's economy.

Sunday, May 04, 2014

The WSJ Editorial Page Embarrasses Itself Again

It amazes me that newspapers like the Wall Street Journal remain wedded to the Peter Principle, insisting upon promoting the weakest of thinkers to manage their editorial pages. It's not that the board is full of complete idiots -- they're smart enough to recognize that when you write an editorial this stupid you publish it as an unsigned editorial so your name is only indirectly associated with your assertions. But still, they wrote it and they published it.
Readers may recall the original Buffett Rule that President Obama offered as part of his re-election campaign that essentially posited a minimum tax rate for the rich of about 30%. Mr. Buffett heartily endorsed the idea and Mr. Obama hauled out St. Warren as a soak-the-rich cudgel to beat up Mitt Romney in countless speeches.

So it was fascinating to hear Mr. Buffett explain that his real tax rule is to pay as little as possible, both personally and at the corporate level. "I will not pay a dime more of individual taxes than I owe, and I won't pay a dime more of corporate taxes than we owe.
If it needs to be explained, there is nothing wrong and nothing hypocritical about following current tax law, even as you advocate changes that would increase your tax burden. This type of silly accusation is made with some regularity, and in a variety of contexts, but never by a strong thinker.