ACT - Protecting Small Business Innovation

One Step Closer to a Single European Patent System

After several rounds of negotiations, the Swedish Presidency announced last week that the EU Patent System was one step closer.

We are of course very pleased to see that the dossier is moving forward; and we have continuously praised the Swedish Presidency for their great efforts. A good patent protection is essential to achieving the levels of innovation that European SMEs deserve.  And it appears many agree:

 “The EU patent will make it much easier and cheaper to protect innovations in the EU. This will give European industry better opportunities to compete on the global market," said Minister for Trade Ewa Björling.

“Today's agreement cannot be overestimated. It comes at a moment when it is most needed," said the EU's industry commissioner, Gunter Verheugen, after the deal was struck. 

Creating an ideal environment for EU innovative SMEs, including a strong unified IP protection system, would help to improve the overall innovation performance of Europe, which still lags behind that of the US and Japan. But conversations about a one-stop shop for patent protection across Europe are almost as old as the European Union itself so we can’t help but wonder, are we really there? 

The Swedish Presidency and the European Commission considered Friday’s development a very positive breakthrough. And it is, but will the next EU Presidency to be led by Spain be willing to take to take over?  Will they leave language differences aside? What role will the European Court of Justice and the individual Member States play in shaping the agreement? 

Friday’s agreement was an important step, but there are still outstanding issues that shouldn’t be overlooked before we sing victory.

Thoughts on the CrunchPad Saga

Earlier this week, influential tech blogger and aspiring cool product entrepreneur Michael Arrington announced that the eagerly anticipated CrunchPad was stillborn.  Popular Mechanics prematurely heralded the planned low-cost tablet computer as one of the 10 Most Brilliant Products of 2009.  While we will have to wait for more information to know the real story behind the dispute behind Arrington's company TechCrunch and its partner in the venture, Fusion Garage, there are some interesting issues raised by what Arrington has so far revealed.  [Note: although Fusion Garage has removed much of the content from its website, for the time being, a cache of Fusion Garage's blog/PR announcements can be found here].

Arrington claims that because TechCrunch and Fusion Garage jointly own the intellectual property behind the CrunchPad, "it's legally impossible for [Fusion Garage] to simply build and sell the device without [TechCrunch's] agreement."  Now, we don't know what agreements there were between these two companies, but joint ownership of intellectual property would not by itself keep any joint owner from using that property.  The US Patent Office, for example says the following about joint ownership (emphasis added):

Patents may be owned jointly by two or more persons as in the case of a patent granted to joint inventors, or in the case of the assignment of a part interest in a patent. Any joint owner of a patent, no matter how small the part interest, may make, use, offer for sale and sell and import the invention for his or her own profit provided they do not infringe another’s patent rights, without regard to the other owners, and may sell the interest or any part of it, or grant licenses to others, without regard to the other joint owner, unless the joint owners have made a contract governing their relation to each other. It is accordingly dangerous to assign a part interest without a definite agreement between the parties as to the extent of their respective rights and their obligations to each other if the above result is to be avoided.

Under US Copyright law, the rights are a little different: a joint "copyright owner has the right to commercially exploit the copyright, provided that the other copyright owners get an equal share of the proceeds."  Stanford University Libraries, Copyright Ownership: Who Owns What?, Copyright FAQs. 

Therefore, unless there were some agreement between TechCrunch and Fusion Garage that requires both parties to agree on how their joint intellectual property is to be used or licensed, there is no restraint put on either party.  If Arrington sues Fusion Garage, as he has threatened, I will be interested to see the complaint - perhaps there was such an agreement.

Another issue raised is that by sending an email with the following message to Fusion Garage CEO Chandra Rathakrishnan, an unnamed investor may have provided some of the evidence needed to pierce the corporate veil to make the investor liable if a court ultimately finds Fusion Garage wronged Arrington or TechCrunch in this dispute:

"We still acknowledge that Arrington and TechCrunch bring some value to your business endeavor…If he agrees to our terms, we would have Arrington assume the role of visionary/evangelist/marketing head and Fusion Garage would acquire the rights to use the Crunchpad brand and name. Personally, I don’t think the name is all that important but you seem to be somewhat attached to the name."

If this dispute ends up in court, the email to Fusion Garage would probably have been disclosed in discovery anyway, but Rathakrishnan unnecessarily highlighted the investor's direct involvement with the dispute by forwarding it to Arrington.  The limited liability provided by the corporate form is not absolute - investors who have sufficient ownership and control a corporation to such an extent that a court finds the corporation is a "mere instrumentality" of the investors may be liable for the corporation's acts.  See, e.g., Institute of Veterinary Pathology, Inc. v. California Health Laboratories, Inc., 116 Cal.App.3d 111, 119 (1981); Standard Wire & Cable Co. v. AmeriTrust Corp., 697 F. Supp. 368, 374 (C. D. Cal. 1988).

Both issues should serve to remind entrepreneurs (and investors) to be careful about ownership of IP and to be careful about corporate control and the dangers of discussing sensitive issues over email.

In any event, I personally hope that TechCrunch and Fusion Garage resolve the situation, release an innovative product, and make scads of money. 

IP and Guilty Pleasures Collide, Part Deux

This is a follow-up to my post last week about IP rights and the "for me, but not for thee" attitude we often see when assertion of rights makes an appearance in pop culture. Last time it was a contestant on "Project Runway" having to change course after being informed that some pre-printed t-shirts she'd planned to use were trademarked. I'll try to refrain from making this an annoying multi-part series, but here's another example of IP irony:

Celebrity gossip website TMZ.com is poking fun at singer-songwriter-musician Taylor Swift for joining on to a BMI copyright infringement lawsuit that apparently goes after bars that haven't paid proper licensing fees for the music played in the establishment and during karoke. Someone like Taylor Swift couldn't possibly need the couple of bucks a month that would come in from such fees, TMZ intones.

Or maybe it's more about the principle of the matter. And maybe that's why the bottom of the post on TMZ has a fun little symbol of a "c" with a circle around it. And why their own Terms of Use page says, "This Site and all materials incorporated by TMZ.com on this Site ("Material") are protected by copyrights, patents, trade secrets or other proprietary rights ("Copyrights") ...TMZ.com respects the intellectual property rights of others and asks users of this Site to do the same."

Where IP and Guilty Pleasure TV Collide

Over the weekend I watched the latest installment of “Project Runway” that my DVR had so thoughtfully recorded and about halfway through the episode we got to the part where something goes terribly wrong for one of the designers. (Just like other “reality” shows, every episode of ProjRun follows a similar plot arc and seems to have pre-determined characters.) This week it was for designated mean girl Irina who was designing her clothes for the finale with a New York theme, including some graphic t-shirts that she found somewhere and planned to incorporate. She’s nearing completion when she gets a call from Tim “Make it Work” Gunn telling her that the t-shirts have to go since the images are trademarked and she doesn’t have the rights to use them.

Dun dun duuuuunnnnnn.

Irina has to find another way to finish the looks. She is stressed and freaking out a little bit.

And there, of course, is the irony. By trying out for and competing on ProjRun, Irina assumedly has ambitions to be a real, honest-to-goodness, not-just-making-fun-sweaters-for-your-friends fashion designer.  And if she were to make a name for herself, or design a new print, or have a distinguishable logo, or any of the other intellectual property things that are part of the fashion design world, I’m sure Irina would be angry if some up-and-comer were trying to copy it, or use it without her permission. Heck, even on the show she’s gotten ticked off and accused other contestants of ripping off her ideas.

And it’s the same IP problem that we see in other parts of the IP world—a tension between IP creators and IP users, and how the line of acceptability is blurred when user becomes creator.  It’s the clichéd “for me, but not for thee” scenario. And for as much money as networks and distributors and production companies and everybody else spends to fight counterfeiting, unauthorized use, and improper distribution of their work, you’d think they’d take this smart opportunity to work a little IP messaging—seriously, what would it take? Ten seconds?--in to the show.

Hmmm. Then again, maybe they were long on time and Irina’s passionate defense of trademarks is sitting on the cutting room floor (next to the unused t-shirts and that hideous fur concoction on which she was working).

"Hey, Pot... It's the Kettle."

This news story from last week just about speaks for itself, and little commentary is needed. (And no, it's not a leftover from April 1.) It feels like something that should be on SNL's "Really?!?!?! With Seth & Amy." I mean, China... Really?!

Chinese Group Says Google Violating Copyrights

No Patent Troll Here -- Rewarding Innovation Down Under Through Patents

Slashdot's recent discussion of how an Australian research/tech transfer agency enforced its patent rights against 14 of the world's largest tech companies has what everybody should view as a happy ending: reinvestment.

Australia's CSIRO has "injected $150 million from the proceeds of its wi-fi technology to the once-defunct science and industry endowment fund, originally established by parliament in 1926" according to the Aussie news article. The article also has a great quote:

It's very important that when you have a success like this, you re-invest it back into the wellspring," CSIRO boss Megan Clark said.

Exactly! This is what the patent system is supposed to be all about. Rewarding innovation creation and providing incentives for new research. Here, it's a government agency that benefits. But it could be a small IT company that uses patents to also invest back into the "wellspring." 

The Meaning of Innovation—And What's Coming Next

It’s a term that’s been thrown around a lot over the past couple of years, at times being more popular than at others.  Now seems to be one of those times when “innovation” is the hot word—but what the heck does it even mean?

I was at a Business of Innovation conference last week—there’s “innovation” right there in the title!—and defining “innovation” was a portion of several presentations. 

The dictionary says that innovation is simply “the introduction of something new.” But for people looking to make money from innovation, it’s got to be more than that.  “Something new” comes along all of the time, but does that mean it’s innovative?

One of the presenters said that a renewed interest in “innovation” is a result of the recession. He went on to say that 18 months or two years ago you would have been hard-pressed to find a conference on innovation, and now they’re everywhere. Since companies have laid off as many people as they could and cut expenses back as much as possible as a means to surviving the downturn, now they must concentrate on growth in order to survive. And how does that happen? Innovation.  And apparently history shows that recessions are a pretty good time to introduce and sustain innovation.

One definition of business innovation was the “successful outcome of bringing a novel product, service, or customer services to market in a way that creates significant new customer value.” And many innovations fitting that description have been introduced in recessions, including:

• Light bulbs (1876)
• Scotch tape (1930)
• Fluorescent lamps (1938)
• Disposable diapers (1961)
• Post-its (1974)
• World wide web (1991)
• iPod (2001)

These innovations weren’t just about novel products, or about the R&D behind them (there does not seem to be a correlation between R&D and innovation), their patents, the creativity of the team, or product improvements. These were about establishing positions of “ownable distinction”—things like their market positioning, being first-movers, branding, and the totality of their intellectual property rights (IPR).

Over at the Innovators Network, our Entrepreneurs in Residence have written about the role of intellectual property in economic downturns. Andre Carter wrote about how “Times like this support and encourage new ideas, methods, and channels; in turn, this makes the likelihood of increased small business activity, especially IP-based, high” and looking at the full scope of your intellectual property rights to find new opportunities. IP attorney Rob Cogan gave us this chart to help distinguish and define those various assets that comprise the totality of your IPR.

Thinking about all of these things combined has me sort of excited. Since most economists say that the recession is ending, that should mean that we’re also just about due for some ground-breaking, disruptive innovation.  I feel like a kid on Christmas Eve wondering if Santa’s going to come and, if so, what’s he going to BRING?? (Somebody at the conference suggested that the big innovation to come out of this recession is going to be LED lighting. I suppose that’s cool, but doesn’t seem life-changing. Unless, of course, all hotels and stores change from their horrid florescent lighting to the more flattering LED. In that case, I’m on board.)

A Strange Thing Happened on the Way to the Class Action Settlement...

The Google book search settlement seemed all but wrapped up in a bow, that is, until hundreds of objections were filed with the Court, the House Judiciary Committee held a hearing on September 10 examining the antitrust, privacy and copyright issues implicated by the deal, and then the Department of Justice filed a comment on September 18 urging the Court to reject the settlement.

In my opinion, the Court simply couldn't ignore the significant concerns raised about the deal and wouldn't approve the settlement without changes.  Apparently, neither Google nor the Authors Guild were confident about their chances because on September 22, they asked the Court to cancel the October 7 hearing to potentially finalize the deal. 

But, this delay is just that... a delay.  These parties have invested a lot of time and money.  It has the potential to be a huge commercial success and an enormous benefit to society in terms of access to information.  So there is still momentum to finalize a deal. 

Reaching a final agreement will be difficult.  There are many stakeholders who need to be at the table and many obstacles that need to be addressed, like orphan works.  Sure it is frustrating when the law seems to get in the way of rapid technological progress.  But, it isn't okay to privately negotiate around the rules to the exclusive benefit of a few.   We all have a stake in this deal, and we ought to do it right.

A discussion about Apple's choice of licenses used in open-sourcing Grand Central Dispatch

Caution: because I am talking about code libraries, this discussion will be technical - a combination of the worst of geek and lawyer-speak.  Sorry.

I had a discussion with a colleague yesterday about Apple’s choice of licenses used for open-sourcing of its Grand Central Dispatch (GCD) concurrency framework, which is a piece of software Apple credits with driving great Mac OS X performance improvements.  GCD comprises both a library component, called “libdispatch”, licensed under Apache 2.0, and a C language extension, called “blocks”, a runtime distributed under the LLVM license, a BSD derivative (someone has already begun porting blocks to iPhone and older versions of OS X, distributed under the MIT license). 

Where I had speculated that Apple had chosen the license mix that it had to facilitate incorporation into GCC (and avoid the problems Apple experienced with developing Objective C as a series of libraries and a front-end that was a derivative of gpl-licensed GCC code), it looks like in reality Apple is trying to wean itself from GCC entirely, by its support for, and use of LLVM (a compiler runtime that is an alternative to GCC’s runtime) and a compiler front end called clang.  The LLVM runtime still supports the goal of portability because of its availability on linux (some distributions use a GCC-llvm compilation method for the kernel).  David Chisnall, in a thoughtful article, claims that Apple's transition to LLVM (away from GCC) presents a perfect example of the principle that "you don't necessarily get good results from forcing people to do things."

Apple’s support for LLVM may not be entirely due to the licensing issue, because LLVM is considered to have significant performance improvements, and a reason for Snow Leopard’s improved performance.  The performance improvement, however, can be due to Apple’s development support for LLVM, which may be due to the licensing issue.  So we may have a chicken and egg issue.  I do think that Apple started supporting LLVM before it got really good (and most likely in order to be free from GCC), and then the performance improvements followed (with help from a large open-source community that arose to support the project).   John Siracusa at ars technica says:  “By committing to a Clang/LLVM-powered future, Apple has finally taken complete control of its development platform.” 

So what do the respective licenses  and distribution methods get Apple?

GCD and libdispatch – Apache 2.0.  As we have discussed, one distinguishing feature of Apache 2.0 is that it provides for automatic license termination if the licensee instigates patent litigation regarding the work (in clause 3).  This provides Apple with control over its own patents regarding the work, and is similar to how Apple released Mini DisplayPort, a standard that has been incorporated into VESA's DisplayPort standard.   Apache 2.0 also allows for “viral” licensing, although it is not “copyleft” per se; in clause 4, redistribution allows either source and/or code redistribution and derivatives as long as the distribution is also licensed under Apache 2.0.  For that reason, the FSF considers Apache 2.0 licensed code to be “one-way” compatible with GPLv3, meaning that a GPLv3 project can include Apache 2.0 code, but not the other way around.  

The Apache 2.0  license is not compatible with GPL2, because of the automatic patent license termination, but that does not automatically mean that the linux kernel project cannot use the new libdispatch library.  Ryan Paul at ars technica believes that the license incompatibility does prevent adoption by linux.  Remember that the linux kernel today will allow linkage to fully proprietary driver libraries, let alone alternatively licensed open-sourced libraries.  See http://blogs.techrepublic.com.com/opensource/?p=276&tag=rbxccnbtr1 for a discussion of the debate about allowing linkage to proprietary drivers.  So Apple can get adoption or use of libdispatch by linux, if that is its goal. 

Apple is promoting use of GCD as a standard by also releasing OpenCL, a standard it has been developing with nVidia, incorporating a set of libraries to take OpenGL a step further and provide parallel processing on graphics cards and core processors.  OpenCL has been set up under the “stewardship” of the Khronos group that controls OpenGL, but John Siracusa says to "make no mistake, OpenCL is Apple's baby."  OpenCL builds on GCD, (and LLVM, but does not incorporate blocks) and provides a higher level programming API, just as OpenGL did, as well as language extensions.   Just as OpenGL has been implemented on linux, there is no reason to believe that OpenCL will not also be implemented on linux, by nVidia, if no one else.

Blocks – released under LLVM license (a BSD derivative) and as part of LLVM project.  It may have just made sense to release blocks as part of the existing LLVM project and under the license already adopted for that project.   This license is compatible with the GPL Because it is a BSD derivative, it can be used in GPL projects; the llvm-gcc compiler front end is released under GPLv2, (no update since GPLv3), but there is a GCC link time optimizer released under GPLv3. .

Because blocks are a c language extension, and not just a library feature, there is extra benefit to Apple by encouraging adoption (language extensions that developers do not adopt are useless).  Of course, by inclusion in Apple development environments, there will be some level of adoption, but there are network effects in having more developers use this construct.  Ars technica explains that “It's Apple intention to submit blocks as an official extension to one or more of the C-based languages, though it's not yet clear which standards bodies are receptive to the proposal,” (further noting that blocks are supported by all of Apple’s compilers (including Apple’s GCC distribution).

Apple has many very smart IP lawyers guiding its choice in open source licenses; the fact that neither Grand Central Dispatch nor Blocks were released under the GPL is not an accident.  Ultimately, I don't agree that Apple's choice of a non-GPL license will prevent its adoption by anyone other than GPL evangelists, and I believe that Apple would not have open-sourced this work if its only alternative was to use the GPL.  I think Apple's example shows how careful companies need to be in open sourcing code, especially if such code is part of a larger whole.

Time for a Restart?

Entrepreneurial guru Guy Kawasaki pointed last week to Bill Meade's list of the ten things companies can to do re-start their IP program if it hasn't been paid much attention lately. (Not paying attention to your IP?! I won't shake a finger at you and say, "Tsk tsk"... Even if I'm thinking it.)

Meade's list--and the idea of re-starting an IP program--fits well with some of the things that our Entrepreneurs in Residence have written over at the Innovators Network in the past couple of months about how to survive in a down economy . Both Andre Carter and Raymond Millien wrote that IP, your company's core value, becomes particularly important in a downturn. Meade's first suggestion is to isolate your patent business model -- Carter and Millien both suggest looking at your IP through the prism and perhaps discovering something new 

With the economy maybe, possibly, perhaps on an upswing, it seems a great time to check Meade's list for ideas and give your IP program some much-needed love.