The patent system has gotten a (sometimes deservedly) bad rap in recent years, but yesterday’s Supreme Court decision in the Tivo v. Echostar case is a great reminder of what patents are SUPPOSED to do: reward real innovators and keep larger competitors from stealing their work.
By all accounts, Tivo is a revolutionary product built by a company that is dedicated to out innovating its competitors. Back in January of 2005, USA Today ran a story entitled "TiVo CEO Insists Innovation Can Win Loyal USers Willing to Pay Top Dollar." Writing about Tivo CEO Ramsay, Kevin Maney said:
Ramsay believes that innovation and killer products can win the day over price wars and the clout of big cable companies — a stand that some say could kill the company.
Ramsay brought to market a beloved device that has had the greatest impact on the way people use TV since Zenith introduced the Space Command 400 remote control in 1956.
Users adore TiVo in a way that rarely happens in technology. Federal Communications Commission Chairman Michael Powell, a devoted user, has called TiVo "God’s machine."
Tivo created an entirely new category of technology – one that proved incredibly popular. It was only a matter of time before the big boys (cable companies, satellite companies, Microsoft) and former partners (DirecTV) tried to jump in, ‘borrow’ some of Tivo’s innovations, and nudge the little startup out of the market. Rather than simply give up or sell out, Tivo focused on trying to "out innovate" its competitors. Anyone who has ever used a Tivo can appreciate the incredible attention to detail and the investment in the kind of innovation that inspires its users to become unpaid, yet devoted sales people.
The "out innovate" strategy is neither cheap nor easy. Based on some back of the napkin calculations, Tivo is spending about 25% of its revenues on R&D. To put that in perspective, the world’s most respected innovator, Apple, is currently spending only about 3.3% of its revenues on R&D. Yet, one of the commentards over at CNET story argued that "They [Tivo] are loosing [sic] popularity quickly and their only business model is to sue anything similar."
There may be a lot of people taking advantage of bad patents today, but Tivo is certainly not one of them. Not only did it invent something truly revolutionary in technology, but it continues to sink an incredible 25% of its revenues every year into making its technology better than everyone else’s. However, when a small company bets the farm on innovation, it needs to shift resources away from things like marketing and advertising. This opens up the market for larger competitors to jump in with me-too products and leverage their massive advantages in marketing and distribution (If a DVR comes with your cable box, you need to make a very proactive decision to buy Tivo instead).
In this instance, the only defense a small innovator has is her intellectual property. Without the ability to protect its innovations, it would be insane for a company like Tivo to spend $60 million a year innovating. With inexpensive programming talent available throughout the world, it is relatively simple for large competitors to simple copy and reverse engineer successful technologies and then use their inherent advantages to bully smaller competitors out of the market.
The patent system is in desperate need of reform, but the case of Tivo reminds us why we still need it so desperately. Without it, all true innovators might be resigned to the fate of MITS/Altair and Atari.
Do we really want to be telling the world’s innovative startups that they would be better served by focusing their resources on marketing, advertising and distribution, than creating something new, innovative, and wonderful? Do we really want to create a world where it is insane for small company, and the venture capitalists that fund them, to seriously invest in innovation?
We at ACT certainly hope not.
Tags: echostar, Patents, supreme court, tivo
“With inexpensive programming talent available throughout the world, it is relatively simple for large competitors to simple copy and reverse engineer successful technologies and then use their inherent advantages to bully smaller competitors out of the market.”
Reverse engineer is too slow, better rewrite applications from scratch.
And Tivo patents are pure software patents, I own a box, there is no new piece of hardware in there.
If it’s the infamous US 6,233,389 at issue here (or one like it), it’s not even a software patent. Tivo ‘reverse engineered’ an ‘invention’ that came naturally to any self-respecting geek with a computer and a TV tuner or two and the idea that they “created an entirely new category of technology” is absurd. The only way to ‘steal’ ‘inventions’ like these is to patent them.
This blinkered and economically illiterate patent mania has gotten completely out of hand. I don’t expect everyone to have read the literature on the subject but I do find it astonishing that the liability in third-party patents never seems to appear on those napkin calculations. Tivo uses a Linux kernel in its devices does it not? Well that’s ~300 software patents Tivo is infringing and it would be poetic justice indeed if the owners of some of those patents took exception to Tivo stealing /their/ work.
“If it’s the infamous US 6,233,389 at issue here (or one like it), it’s not even a software patent.”
Well, look at the color of claim 1 and 2:
“2. The process of claim 1, wherein said Input Section directs said MPEG stream to the destination indicated by said control commands.”
Data streams are usually processed in software.
Look also at claim 9:
“placing said audio component into a circular audio buffer;”
I wonder how you do that in hardware.
It is definitely a pure software patent, no doubt about that.
You can also have a look in other claims, like this one, where it is for sure implemented in software:
“scanning the words contained within the closed caption (CC) fields to determine program starting and ending times”
Yes, yes it is a software patent. But, most real innovation today is happening at the software level rather than at the hardware level. My favorite example these days is our member, Astron Clinica, out of the UK. They have developed highly sophisticated software that uses OTS high res digital cameras to do skin scans that are as accurate as a biopsy in determining the presence of skin cancer. Just because the hardware isn’t new, doesn’t mean there isn’t innovation in there that deserves protection.
And, yes Jean, it is often easier to simply build something from scratch. However, you will agree that some things (like interop) often require a level of reverse engineering that posed a bigger challenge to me-too competitors back in the day.
I didn’t mean I thought it was a hardware patent. It is indeed a software patent in the implementation sense but I’m sure you’d agree that it is not a patent on an invention in the field of software engineering. Furthermore, because it doesn’t claim or disclose the invention of a specific technical method of doing something but really just (parachronistically) claims the doing of something, it has the character of a catch-all abstract patent.
Yes, yes it is a software patent. But, most real innovation today is happening at the software level rather than at the hardware level. My favorite example these days is our member, Astron Clinica, out of the UK. They have developed highly sophisticated software that uses OTS high res digital cameras to do skin scans that are as accurate as a biopsy in determining the presence of skin cancer. Just because the hardware isn’t new, doesn’t mean there isn’t innovation in there that deserves protection.