Tech Industry Leaders Appeal for Laxer Intellectual Property Laws

A panel of executives from various pockets of the tech industry late last week appealed to House lawmakers to relax intellectual property laws to better fit the open source ethos of their companies.

The witnesses suggested that any rewrite of copyright law provide for expanded safe harbor provisions established by the 1998 Digital Millennium Copyright Act, and a generous interpretation of the fair use doctrine that permits the repurposing of snippets of proprietary content.

In particular, however, the witnesses took issue with the patent system, notably the practice of companies that use their portfolio of often dubious and overly broad patents to sue other companies, rather than delivering products or services based on the described innovation.

“They use the cost of litigation as a club to extort settlements out of companies that actually do things,” Van Lindberg, vice president of intellectual property at the open source cloud provider Rackspace, told members of the Judiciary Committee’s subcommittee on IP and the Internet. “If there is something that you could do to encourage innovation in America, it is to stop the patent troll problem and to really help us with this litigation abuse.”

Thursday’s hearing comes amid a broader, if preliminary, effort to rewrite IP law, particularly the DMCA, to account for the quicksilver pace of innovation in tech, while at the same time considering new anti-piracy measures being sought by industries like software and Hollywood. Last week, the judiciary’s IP subcommittee held a hearing at which representatives of content-oriented industries, like music and photography, testified.

While members of those industries often present starkly different visions for how IP law should evolve, Rep. Mel Watt (N.C.), the ranking Democrat on the panel, suggested that the notion that the media and technology sectors are separate and distinct, even in conflict, “presents a false dichotomy.”

Similarly, Lindberg allowed that intellectual property protections are not a one-size-fits-all proposition, and that an appropriate policy framework would accommodate both the open source model while still affording copyright protections for industries like music in which revenue is firmly staked on strict controls.

“There are many different business models for innovation that rely on using copyrighted content in different ways,” Lindberg says. “There are some models, such as those of songwriters, that really do rely on exclusive control. But then there are models, such as that of Pandora, which rely on the ability to license and use that and to disseminate it as widely as possible. Both of these are important business models that we want to make sure that we encourage, because innovation doesn’t just come from control. It also can come from places and from people that you don’t expect.”

On the subject of patent trolls, a problem for which many leading voices in tech and other sectors have been seeking legislative remedies, Lindberg noted the spiraling costs of fending off legal challenges. Over the past three years, Rackspace has seen its expenses associated with dealing with patent litigation spike by 500 percent, he says.

With the legal bill for each case commonly running into the millions of dollars, many firms will give in and settle instead of going to court. Smaller businesses, in particular, are ill-equipped to engage in drawn-out litigation.

“Even if you’re right, getting there is so expensive it can kill your business,” Lindberg says. “The real problem is that there are so many of these patents out there that really aren’t on fundamental things. And in fact, many of them shouldn’t have been granted at all — they were granted in error.”

He suggested that lawmakers enact reforms to speed the process of litigating patent-infringement claims and to require greater disclosures about the individuals, groups or businesses behind the “shell companies” that function as patent-assertion entities. “Illuminating those relationships would be huge,” he says.

Stiffer penalties for plaintiffs whose infringement charges are rejected in court could also help curb frivolous litigation, he notes.

Asked whether Rackspace maintains its own portfolio of patents, Lindberg acknowledged that it does, though he notes that the open source company offers licensing for free, and that it only took the step of patenting its technology in the first place to guard against litigation.

“The only reason that we have patents is because we are concerned about patent assertion,” Lindberg says. “It’s a purely defensive portfolio.”

SparkFun Electronics takes a different approach. The decade-old ecommerce venture has produced more than 700 products, yet has not taken a single patent. CEO Nathan Seidle told the subcommittee that profits have risen steadily each year, despite the rampant copying of its designs by would-be competitors.

Seidle recounted one case when a Chinese firm began producing a nearly identical version of one of its electronic devices, only with some modifications that he admitted made the product better. Rather than sue, his company incorporated those iterations into the original, and managed to win out over the Chinese operation thanks to the offer of better customer support and cheaper shipping.

To Seidle, that incident offers a blueprint for innovation in today’s environment, where design files and other intellectual property are easy prey for a determined hacker, and he says patents and other conventional methods of defending an innovation are becoming an anachronism.

“In the Internet age, innovation moves faster than the shield of intellectual property,” he says. “Attempting to stop pirates is a waste of time. Show me an anti-piracy law or technology and I’ll show you a dozen 15-year-old girls and boys who can crack it. Provide better support and better quality at the best price, that’s how you sell a product. This is not a new business model. This is how business has been done for thousands of years. There is no need for us to waste time, energy and money suing infringers or pirates. Our time is better spent innovating.”

Kenneth Corbin is a Washington, D.C.-based writer who covers government and regulatory issues for CIO.com. Follow Kenneth on Twitter @kecorb. Follow everything from CIO.com on Twitter @CIOonline, Facebook, Google + and LinkedIn.

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