Linked by Thom Holwerda on Thu 14th Jul 2011 21:16 UTC
Legal I've been sitting on this item all day. Technically, it's about patents and the like, and even I understand I've been beating this dead horse so often it almost looks like it's alive. However, this is an interesting opinion piece by Craig Hockenberry, long-time employee at The Iconfactory, one of my favourite software development houses - these guys breath software and beautiful design, and employ one of my favourite artists, David Lanham. The gist of his story? Software patents are killing the independent developer scene.
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What is Intellectual Property?
by Lousewort on Sat 16th Jul 2011 20:37 UTC
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Reading the gist of the other comments led me to wondering....

Where it comes to inventions, it used to be pretty straightforward say a century ago; If I invented something, I could prototype it, and patent it, and that would stop people from taking my invention to market without paying me for the research & hard work.

These days, the above still applies, for example in pharmaceuticals manufacture, where the actual development money goes into the formula, and manufacture is relatively cheap.

The part that patents are supposed to protect, is the investment in research & development. The question is, does this apply to software development?

In cases such as the Lempel Zif compression algorithm, developed and patented (now expired) in around 1979, it's pretty clear that it does. In something like the "one click shopping", I would suggest that it does not. What is the difference?

Well, in the Lempel Zif case, considerable time, research and development resources went into it's formulation. In the "One Click" case, it could clearly have been thought up overnight, and is more a business method than an invention.

The problem is, that when it comes to valuing the first against the second, the "One Click" would attract the greater license fee, simply because you can make more money from using the method. In other words, something like the extended DOS file system is considered valuable not because it's particularly smart, but because it's more widely in use.

This is why some really simple and obvious patents can effectively shut down companies such as TomTom, or at least severely damage them. It does not matter how much actual intellect went into the patent; it matters only how much money is being made by it's use. So, patent value is being determined according to estimated risk rather than R&D costs.

Never mind the 99.9999% actual intellect behind the product, and the fact that an infringing patent comprises 0.0001% of the actual intellectual value of the complete product, you are going to have to pay whatever the patent holder demands for a license, which might be a substantial proportion of revenue.

This seems unfair to me, and this injustice is what makes patent trolling profitable.

So, the question is not so much whether we should protect intellectual property, including software innovations and inventions, but how in fact to place a value to this property.

If a company has say 30 000 patents, and has a net asset value of for argument sake 30 Million, then how much of the company asset value resides in patents?

If one were to examine the balance sheet of most companies, one would find a line item called "intangible assets", normally a fraction of net asset value. If one were to insist that each of a company's patents be pre-allocated a fixed value on registration, with a total value not exceeding the reported intangible asset value, you may find that individual patents are not always as valuable as are made out.

Patent trolls are companies with assets comprising entirely of intangible assets (patents, copyright, trademarks). Introduce a law stating that no company may have more than 1% of net asset value in intangible assets, and patent trolls are gone.

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