Tag Archives: The New York Times
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Musicians want fairer streaming fees; inventors want patent licenses

In a digital world, fair compensation for creative expression or new ideas, like music and inventions, requires more determination than ever.

Intellectual property piracy has become an insidious problem, affecting a wide range of  individuals and industries, including recording and technology.

The effect of low payment – as opposed to no payment – has been particularly harsh on recording artists. They have had the challenge of policing the frequently unauthorized use of their work, getting their music taken down (and kept down), and being paid fairly by valuable streaming services who claim that they are not profitable.

Spotify, Pandora, YouTube and others have made it difficult for artists to permanently take down songs and videos that they are not being fairly paid for or that should not have been posted in the first place. While fans may enjoy the mostly free access, it has made it extremely difficult for less well-known artists to survive in the industry. For most of the big names, the possible loss in recording revenue can be made up in performances and merchandising.

Musicians: Update the Law

Napster was a turning point.  Shut down by court order in 2001 after just two years of operation, the online service enabled MP3 files to be easily shared. The recording industry and artists had little choice but to respond by surrendering preventing the digital distribution of their work or accepting the poor terms – if they were even offered. Streaming services legitimized file-sharing. It’s been more than a decade since Napster was shut down, and artists and labels are finally fighting back about the meager pay rates for their material. They are demanding, among other things, that the Digital Millennium Copyright Act (DMCA) a 1998 law, be updated.

They want to change the law so that music and video streaming services will be required to remove permanently material that they are not authorized to provide. It will be interesting to see if Congress complies.

YouTube claims that it has paid out over $3b in royalties, although that amount was initially attributed to all of Google, YouTube’s parent company. Bank of America values YouTube at $80b, more than all but 66 of the S&P 500 companies. (An article from Bloomberg News is worth reading, here.)

Don’t get me wrong. YouTube is a convenient, well-organized service that offers consumers an affordable alternative to network and cable TV and iTunes.  It claims to have paid some 15 million content providers. But the-1x-1 question is what amounts and to whom?

Angry Headliners, Too

In an article in the The New York Times, “Music World Bands Together Against YouTube, Seeking Change to Law,” it was reported that while YouTube is a vital platform for promoting song and discovering new talent, “it has never been a substantial source of revenue and is a vexing outlet for leaks and unauthorized materials.”

Now, even highly successful artists like Pharrell Williams, Katy Perry and Billy Joel have signed letters asking for United States copyright laws to be changed.

It is no accident that recording and visual artists face similar obstacles as other IP holders – notably inventors and patent holders. Since passage of the America Invents Act, it has been anything but easy for patent holders to stop the unauthorized use of their invention rights, or to get fairly paid for them.

Consumers are Complicit

“New services and platforms are great for consumers,” says Johathan Taplin, a music and film producer who has worked with Bob Dylan and Martin Scorsese, “but our weak laws have allowed them to siphon revenue away for the underlying music, leaving song-writers, performers and the he whole industry choking on their dust.”

Taplin is Director of the Annenberg Innovation Lab at the University of Southern California Annenberg School for Communication and Journalism. See Do you love music? Silicon Valley doesn’t.”

It Ain’t Over Until It’s Over

In 2015, after years of battling pirates, Prince, an innovator in controlling the distribution of his work, said in an interview that the Internet “was over for anyone who wants to get paid.”

Let’s hope that blatant disregard of the source of creative expression and new ideas will not continue unchallenged. For less well-known musicians and visual artists who depend on revenue from streaming and copyrighted songs as a means of survival the future may be a little less bleak. Young tech companies, inventors and universities, who are finding difficulty securing patent licenses have yet to turn the corner.

 

Image source: nytimes.com; bloomberg.com; BofA/Merrill Lynch Global Research

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Symantec acquires Blue Coat, a leading IPR filer with a $289M loss

Cybersecurity firm Blue Coat Systems has decided to opt-out of an initial public offering and sell itself to software security leader Symantec for $4.65 billion. 

What has not been widely reported in the press is that Blue Coat, a relatively small cybersecurity company with a loss of $289 million in 2015, is a leading filer of United States Patent and Trademark Office Inter Partes Reviews (IPRs) that are designed to invalidate patents that are being asserted by Non-Practicing Entities (NPEs) and others.

According to patent research firm Patexia, Blue Coat is a top-ten IPR filer for 2016, along with Apple, Samsung, Microsoft and GE. The firm filed ten IPRs, a higher numbers than H-P for the period.

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“Blue Coat has been at war with Finjan,” Gaston Kroub of Markman Advisors, LLC told IP CloseUp.  “Like Blue Coat, Symantec has been fighting with Finjan too, so these IPR’s may be of value to Symantec as well.”

Top 10 IPR Petitioners_2

Finjan (FNJN) is among the leading targets for IPRs. It could be that Symantec finds Blue Coat attractive not only for its cybersecurity products, but also for its adversarial position with regard to Finjan and others which could assert their patents against it or Blue Coat.

In a 2015 verdict in Finjan Inc. v Blue Coat Systems, a jury awarded Finjan more than $39.5 million in damages, reports IP Watchdog. The lawsuit alleged that claims from a series of Finjan patents were infringed by several Blue Coat products, including Malware Analysis Appliance (MAA), Content Analysis System (CAS), and WebPulse.

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To help finance the transaction, Blue Coat’s existing majority investor, Bain Capital, will invest an additional $750 million in the deal. The private equity firm Silver Lake, which invested $500 million in Symantec in February, will invest an additional $500 million.

Bain had acquired the company for $2.4B in 2015.

According to The New York Times, “The deal will create a big provider of security products, both the traditional antivirus kind that has long been Symantec’s focus and the newer online protection services in which Blue Coat has specialized. Executives see little overlap between the two businesses.”

“With this transaction, we will have the scale, portfolio and resources necessary to usher in a new era of innovation designed to help protect large customers and individual consumers against insider threats and sophisticated cybercriminals,” Dan Schulman, Symantec’s chairman stated.

In its I.P.O. prospectus, Blue Coat said that it lost $289 million on top of the $598 million in sales for the 12-month-period that ended on April 30. That compares to a $271 million loss on top of nearly $569 million in sales for the same period a year before.

Image source: twitter.com/symantec; patexia.com

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Silicon Valley Execs Collude to Steal from Engineers, says Pando Daily

Confidential internal Google and Apple memos, buried within piles of court dockets and reviewed by and reported in PandoDaily,

clearly show that what began as a secret cartel agreement between Apple’s Steve Jobs and Google’s Eric Schmidt to illegally fix the labor market for hi-tech workers, expanded within a few years to include companies Valleyjp1-videoSixteenByNine1050-v2ranging from Dell, IBM, eBay and Microsoft, to Comcast, Clear Channel, Dreamworks, and London-based public relations firm WPP. All told, the combined workforces of the companies involved totals well over a million employees.

The well cited and linked PandoDaily piece is worth reading. It sources a Department of Justice investigation. Pando, BTW, is owned by a group of Silicon Valley investors, mostly VCs, who may find it beneficial to spread the blame beyond the Bay Area.

International Business Times provided a chart showing some of the companies involved.

According to reports, damages in the case, which will be heard in San Jose starting May 27, could as high as $9 billion if the workers are able to prove that the Valley’s prominent technologies companies invoked an “overarching conspiracy” not to recruit or hire each others’ talent to hold down their mobility and pay. 

A lead story in The New York Times on February 28, “Engineers Allege Hiring Collusion in Silicon Valley,” took PandoDaily’s reporting a step further. The lead of the story could just as easily have been addressing the patent battles that have befallen patent holders and are currently being waged on Capitol Hill, where patent monetization is being characterized as a scourge that must be obliterated.

“SAN FRANCISCO — Tech companies love new ideas, unless they belong to someone else. Then any breakthroughs must be neutralized or bought. Silicon Valley executives know all too well that a competitor’s unchecked innovation can quickly topple the mightiest tech titan.”

The net-net: Most large tech players fear patents, and despite holding many, will do just about anything to weaken their impact. Hopefully, this will be a wake up call for lawmakers, the media and others.

The Times story goes on to report “Just how far Silicon Valley will go to remove competitive risks and how they are at the heart of a class-action lawsuit that accuses industry executives of agreeing between 2005 and 2009 not to poach one another’s employees… the case involves 64,000 programmers and seeks billions of dollars in damages. Its mastermind, court papers say, was the executive who was the most successful, most innovative and most concerned about competition of all — Steve Jobs.”

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Was it primarily Jobs or is it merely convenient to put the primary blame on him now that he is no longer present to defend himself?

“These guys have such an amazing sense of entitlement,” one prominent patent holder told me today. “Do you think they would have any problem stealing IP from inventors or NPE’s? Lawmakers who buy the patent ‘troll’ fairy tale are either naive or are afraid to lose campaign support.”

Image source: http://www.nyt.com

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The NY Times Says Streaming Sticks it to Musicians

Royalties from so-called legitimate Internet streaming sites, including Pandora and Spotify, pay most musicians less than a penny on a dollar of revenue generated.

In a page one article in today’s New York Times, “As Music Streaming Grows, Artists’ Royalties Slow to a Trickle,” the paper illustrates how cellist Zoe Keating received just $1,652.74 from Pandora over six months for her songs with they played more than 1.5 million times. On Spotify, wrote the Times, Keating netted just $547.71 for 131,000 plays or 0.42 per play.

The formula makes the old days of Tin Pan Alley look pretty good for struggling song writers and recording artists.  

zoeA post on Keating’s blog, “Internet Royalty Math Makes My Brain Hurt,” documents a similar experience with Soundexchange. Her post on Tumblr, More About Data vs. Royalties,” is worth a look from anyone interested in IP rights and business. (In case you had not noticed, inventors don’t fare any better.)  

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Fans need to remember that even streaming businesses like Pandora and Spotify, as opposed to Megaupload, which pays no royalties and was shut down by authorities, may be great for their personal library but not so good for musicians trying to make a living — and we’re not talking about the Adele and Rhianna.

Some say music streaming is merely a disruptive technology for delivering content people want in a manner they desire. With sufficient volume, it has been argued, royalty payments for top names will eventually catch up to where they were. Don’t bet on it.

Illustration source: concertlivewire.com; venturebeat.com

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Patents – The Rights We Love to Hate

A Misunderstood Symbol of Control, Patents are the Rodney Dangerfield of Assets: “They Can’t Get No Respect” –

Recent record prices for patent sales and shares of selected technology businesses (e.g. Nortel, Motorola, InterDigital) have turned up the volume on angry anti-patent rhetoric.

Patent owners of all shapes and sizes, including some operating companies, continue to be described in a variety of unfavorable terms, some of them unprintable.

On balance patents do much more good than harm, and the U.S. patent system, far from perfect, works well. It is responsible in part for spawning the most innovative companies in the world.

Many software developers, academic economists, CEOs and others, clinging to half-truths nurtured by myths and self-interest, believe that patents are anti-competitive, impede progress, tax consumers and line the pockets of lawyers.

“A Bull Market in Tech Patents, an article by Steve Lohr, veteran New York Times technology reporter, served to perpetuate the anti-IP myth. In it Lohr suggests that the patent gold rush has a darker side. “It is diverting money from innovation from industries crucial to the economic future of the United States.”

This is utter nonsense. Conclusions drawn in the article are likely based in part on what companies Lohr covers and analysts like Harvard professor Josh Lerner are telling him. Lerner is co-author of Innovation and Its Discontents, a strangely myopic book which I reviewed (skeptically) for Nature Biotechnology. It suggests that patents have become too strong and are destroying businesses, innovation and endangering lives.

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What is it with patents that raises the ire of otherwise intelligent people?

One reason is that patents are highly abstract, “exclusive” rights that on occasion can stop speeding products cold. 

Patents are complex to understand, difficult to validate, dangerous to monetize, frustrating to value, and expensive to acquire and enforce. 

Their performance is almost impossible to measure. Infringing a patent often is easier and much cheaper than licensing it or conducting costly R&D to design around. And then the infringer has to get caught and prosecuted. For some businesses patent infringement settlements are like a speeding ticket. They pay it if they have to and go on their merry way. They may still be ahead billions of dollars had they done the the right  thing.

I am not a particular fan of Intellectual Ventures, a NPE which has acquired more than 35,000 patents. A recent NPR broadcast, “When Patents Attack,” is dramatic radio entertainment but shoddy journalism. It was aimed at exposing the evil patent system as embodied by I.V. I am a big fan of This American Life, so their feeble expose hit home. What were they thinking?

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Often when a company believes it has the patents it needs to do business it does not. This can be painfully frustrating, and costly. It is the nature of business innovation, predating Alexander Graham Bell and Edison. Smart companies do their best prevent infringement by searching prior art and planning for the inevitable disputes. They also build a patent portfolio that can provide some leverage against operating companies. Frustration of this kind does not mean that invention rights are evil or counter to most Americans’ economic interests. The Founding Fathers thought IP rights served an important purpose, writing them into the U.S. Constitution before the right to raise and support a standing army and the right to declare war.

The fact that some companies are finally respecting patents is not only good for shareholder value, it can provide a boost to innovation. Now that the patent playing field is actually starting to level, some businesses are having trouble adapting A number of companies with abundant numbers of patents would still like to see them weakened, in general, and threats to their franchise diminished.

The pricing of the Nortel and Motorola patent portfolios got out of hand because some companies thought they could provide next generation mobile or 4G products and services without the necessary IP rights. They were wrong. Brand power is mighty, but it still is no match for the right patents. When businesses need to catch up quickly, the market extracts a pricing premium. Research in Motion paid for its IP mistakes in 2006 when it wrote a check for $612.5 million to settle an infringement suit. (Reportedly it could have settled for some $40m several years earlier.) Microsoft paid dearly in the 1990s for its mistakes, but had the luxury of time to catch up.

Google did not. Facebook, LinkedIn and Groupon with a dozen or fewer patents each, will not be far behind.

Costly as it may appear, IT companies are learning that it is often more efficient to pay a premium for proven rights that they must have than spend billions, plus years of time, on hundreds of speculative inventions and their questionable rights that may some day have value. The pharmaceutical industry is well acquainted with the need to conduct M&A along with its R&D.

Maybe there is a lesson here: A buyer really doesn’t know if it has overpaid until all of the accounting is in. For some cash-rich and credit-worthy companies, buying patents at a premium that will shape a market, slow competition or deflect litigation or a possible injunction is less lazy a decision than a prudent investment.

Those who encourage disdain for innovation rights because of some businesses’ lack planning or scruples (or both), or because independent patent holders today are better equipped to confront infringers, are doing innovation and commerce both a disservice.

Image source: businesstm.com, engadget.com

Nathan Myhrvold

Cook Book by Innovative IP Owner is No Recipe for Success

Myhrvold’s ‘Modernist Cuisine’ Inspires and Confounds –

Over the past ten years much has been written about Intellectual Ventures, the IP acquisition and licensing business, and its enigmatic founder, Nathan Myhrvold.

A recent cover story in The New York Times Dining Section, of all places, may provide the clearest insight yet into IV and its CEO.

The article, The Conjurer,” (sic) looks at Modernist Cuisine, $625 ($467.62 on line), Myhrvold’s epic, six-volume team project intended to deconstruct food and food preparation and discover why ingredients and techniques work the want they do. Strangely, some of food reporter Michael Ruhlman’s frustrations about the book could be directed at IV:

“For nearly two weeks I lived with this extensively hyped work — immersion circulators humming on my counters, a pressure cooker hissing, food sealer and grinder hot from use beside them — and I remain frustrated that I lack so many tools and ingredients required to actually use this behemoth.

“I was left wondering how a book could be mind-crushingly boring, eye-bulgingly riveting, edifying, infuriating, frustrating, fascinating, all in the same moment. Every time I tore myself away from these stunning pages to emerge for air, I had to shake my head so hard my cheeks made Looney Tunes noises.”

Sound familiar?

Modernist Cuisine, equal parts science, artistry and bold perspective could be a work of genius or maybe just a very comprehensive work.

Blending Ingredients for Maxium Effect

Ironically, Myhrvold’s book research team shared the same 18,000 square foot laboratory built to conduct IV’s invention experiments.

It’s difficult to know if Myhrvold is just two chess moves ahead of us or really twenty-five. Is he as good as a Grandmaster, playing several related games simultaneously, or just one big one involving lot of pieces?

Modernist Cuisine, like Intellectual Ventures, may prove to be part of the oeuvre of a restless visionary not easily comprehended, or the grand design of a canny investor with the passion to turn turnips into soup.

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Pictured above: The Modernist Cuisine team with Martha Stewart
Illustration source: ModernistCuisine.com

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Facebook Success Dissected in “Social Network” Movie

Flash of Anus –

The Social Network is currently the top grossing movie in the land. It’s the story of how Facebook, now with 500 million users, was founded, built and fought over.

The New York Times devoted no fewer than three articles to the movie today, and on Sunday it ran a long piece, “Mark Zuckerberg’s Most Valuable Friend,” focusing  FB’s Chief Operating Officer, Cheryl Sandberg, who assures readers that Mark is not a bad guy, just misunderstood.

WhetherZuckerberg is upstanding or not, or to what extent West Wing writer Adam Sorkin’s account is fictionalized, does not concern me.

What does is how innovation can survive genius and greed on its way to providing a sellable product and a reasonable return.

Twice Removed

Zuckerberg grew up suburban Westchester County, two towns over from where I once lived, and one from where screenwriter Sorkin grew up. It’s as competitive in the Ardsley public schools as it is in Palo Alto or Great Neck or Tokyo. But for people like Zuckerberg, it is too small a playing field.

He is portrayed as a kind of savant. A brilliant but nasty wild child destined to program and programmed to win. He has no patience for social conventions, such as small talk. He’s a sort of dyspeptic Leonard Hofstadter from The Big Bang Theory on steroids. Money doesn’t motivate him, mastery of the media (and meeting girls) does. The Internet in 2003 was a perfect foil for his mix of talents and anger.

Zuckerberg’s other motivation: Being accepted in spite of his arrogance, lack of good looks and annoying impatience with all organisms mortal. He is a man on a mission, concocted from equal parts raw intelligence, business instincts and ego-mania. He is simultaneously profound and profoundly pathetic.

An ex-girlfriend in the movie says that he will likely go through life believing that he is hated because he is a nerd, but it is because he is an asshole. A young female attorney on his defense team who has gotten to know him better declares, “You’re not an asshole; you’re just trying to act like one.”

Diluted Equity

Getting strategically diluted from 34% to .02% by VCs, what is done to FB’s original CFO in the film, is not something new to Silicon Valley. Whether Zuckerberg made it happen or allowed it to is unclear.  Seeing this behavior portrayed here casts the web’s favorite togetherness tool in a less than positive light. A more apt name for this film may have been the The (Anti) Social Network: The hustlers, the once loyal friends, the Brahmins and the groupies. TSN is a well-played by Sorkin and director David Fincher (Zodiac), even if much of it may be exaggerated.

In fairness to Zuckerberg, it could have been Gates, Jobs, Ellison or a dozen other megalomaniacs portrayed knocking down obstacles to their manifest destiny like bowling pins on a slippery silicon alley. Their reasons vary, and for Zuckerberg, at least, money, clearly, is only a part of it.

Up for Grabs

The “ah-ha” moment, or Flash of Genius, is probably the least accurate aspect of the innovation process portrayed in this movie and others, but it looks so impressive on film that even Sorkin, whose father was an IP lawyer cannot resist. Genius is typically not simple or kind. The most savvy technology folk know this and to negotiate the vortex it typically generates.

TSN suggests that good ideas are up for grabs, especially when they are works in progress. Had Zuckerberg not been able to take Facebook to a market value of $25 billion the various players would all be fighting over toothpicks instead of equity rights, and nothing much would matter. Pay the speeding ticket the young lawyer urges Zuckerberg, and then get on with your life.

The unfortunate reality is that to prosper business needs A.H.’s as much as the nice guys. They both need good lawyers.

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Illustration source: http://tratohechocom.blogspot.com/2010/04/cuatro-figuras-del-presente-siglo.html

Patent System Proposals Show Promise But

The Devil is in the Details

A plan to resolve significant numbers of patent disputes quickly and cheaply, and another to use patents to create more U.S. jobs are the subject of the October-November Intangible Investor.

In an article, “Is the U.S. Finally Ready for a Patent Small Claims Court?,” by Robert P. Greenspoon, a Chicago patent attorney, he suggests that a court be set up to resolve less auspicious disputes quickly and for less cost.

Greenspoon has great ideas but implementing them may be another matter. The complexity of patent disputes may not lend themselves to rapid-fire adjudication.

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In the column I also have a go at The New York Times op-ed, “Inventing Our Way Out of Joblessness.” It was written by Paul Michel, former Chief Judge for the Court of Appeals for the Federal Circuit, Henry Nothhaft, CEO of licensing company Tessera (NASDAQ: TRSA), and (un-credited) David Kline, co-author of “Rembrandts in the Attic” (with Kevin Rivette) and “The Burning of the Ships” (with Marshall Phelps).

These authors want the federal government to provide a $19,000 incentive for each patent an SME receives to defray the cost of obtaining them. They believe that more small company patents mean more innovation, and in turn, more jobs. Messrs. Michel, Nothhaft and Kline may be on to something. They point out that the U.S. was built on small company innovation.

But they are less clear on what might be done to prevent the inevitable feeding frenzy of patent filings that is likely to ensue or the timing of payments. If it’s upon issuance, filers could be waiting for five years or more.

“Patentomics” will run in the next issue of IAM, out next week.

Image source: climatechangecorp.com

Former Chief Judge Takes off Robes and Gloves

Anti-Patent Trash Talk Hurts Economy –

Hon. Paul Michel, Chief Judge for the Court of Appeals for the Federal Circuit (CAFC), who left the bench recently after serving for 22 years has no plans for a quiet retirement.  He has been lobbying congress as a private citizen for patents and patent holders rights, and has been encouraging others to.

The former Chief Judge of the highest patent court believes now is the time to speak out against patent bashing, which, he believes, is motivated primarily by self-interest.

In an interview with Judge Michel conducted by Joe Mullin that appears in the Fall issue of Intellectual Property, a supplement to the September Corporate Counsel, the 69-year old judicial veteran pulls no punches. The piece is called “There Goes the Judge,” no doubt a play on “Here Comes da Judge,” a cultural catch-phrase made popular by comedian Flip Wilson on the “Laugh-In” TV series.

“I think there has been a huge PR campaign against patents and a lot of myths have been created about what patents are and how they work.”

“There are some 30,000 companies in the United States that have at least 100 employees. And 15 of them — ten Silicon Valley-type companies, and a handful of Wall Street financial firms — have driven the entire patent reform debate. What about the other, 29,985?

“… They’re the companies that get sued a lot and lose a lot and have to pay substantial damages in some cases. From their narrow standpoint, maybe a much weaker patent system and low damages and no injunctions look really good. But from the standpoint of the overall economy, I think weakening the patent system looks like a very poor idea.”

My perspective on Judge’s Michel’s recent New York Times op-ed addressing how patents can be used to stimulate the economy by creating jobs will run in the next Intangible Investor, due out in a few weeks.

Image source: http://portraitsbylindy.com/gallery/ga_007.html


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