Markets for Ideas and Patent Trolls

In Silicon Valley many people treat the concept that “ideas are worthless, it’s all about execution” as gospel. This thought is supported, among others, by Paul Graham [sorry, he’s an easy target because his essays have so much low-hanging fruit]. He says:

Actually, startup ideas are not million dollar ideas, and here’s an experiment you can try to prove it: just try to sell one. Nothing evolves faster than markets. The fact that there’s no market for startup ideas suggests there’s no demand. Which means, in the narrow sense of the word, that startup ideas are worthless.

 

This has always sounded illogical to me. It doesn’t follow that there is no demand. Some things just cannot be sold; there are no “previews” for ideas. To show how absurd the above is, replace startup ideas by brains, cities, reputation. All things that are not worthless but cannot be sold. You cannot sell your life, but you can insure it for a lot of money. Is love worthless because money can’t buy me love?

 

Wait a minute. There’s actually a preview for ideas, and ideas can be sold. Just listen to an episode of This American Life from last year, When Patents Attack. It’s about the US patent system and how it’s broken to an extent that’s ridiculous. That’s why Nathan Myhrvold, former Microsoft CTO and chef extraordinaire, was able to raise $5B to create a repository of ideas. The episode tracks one patent bought by his company, Intellectual Ventures.

 

Patent number 5771354. He got it in 1998, back in the relatively early days of the internet. And the way IV explained the patent to us, Chris Crawford invented something that we all do all the time now. He figured out a way to upgrade the software on your home computer over the internet. So in other words, when you turn on your computer and a little box pops up and says, click here to upgrade to the newest version of iTunes, that was Chris Crawford’s idea.

 

The show goes on to explain that the idea is so generic that 5,303 other patents that were granted by the USPTO cover the same material. It gets worse:

 

 

 Intellectual Ventures goes around to companies and says, hey, you want to protect yourself from lawsuits? We own tons of patents. Make a deal with us. Our patents will not only cover everything you’re doing in your business, no one will dare sue you.

So not only ideas are not worthless; they are indeed bought and sold (Sorry Paul). The way in which they are sold reminds Chris Sacca of: 

 

 A Mafia-style shakedown, where somebody comes in the front door of your building and says, it’d be a shame if this place burned down. I know the neighborhood really well and I can make sure that doesn’t happen. And saying, pay us up.

 

People like Myhrvold and companies like Intellectual Ventures are often referred to as Patent trolls. They make money by buying ideas (many of them obvious), only to sue people who are doing something with them. If you build a web application, it’s almost certain that you are violating many patents. If you become big enough, you will be sued eventually. This is why Google and Apple got into a bidding war for a collection of patents a few months ago, and Apple ended up buying them for 4.5 billion dollars.

 

Conclusion: ideas can be free, cheap, expensive, or worthless. Just like books, essays or blog posts 🙂

 

2 thoughts on “Markets for Ideas and Patent Trolls

  1. Idea patent is the mos important thing for a creative man who create many uniq idea. obviously it is a good post which i was looking for. it is very hard to patent an idea. but it is easy when it happen step by step. for know more about patent an idea click here.

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