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Can Twitter Take Down the Patent Giants?

The argument about patents used to center around medicine. Patents kept the price of lifesaving medicine high, but they encouraged research by ensuring profits for those that discovered them.

Reasonable people could fall on either side of the argument.

But when it comes to technology, there is no argument. Patents are stifling innovation and hurting economic growth.

Patent lawsuits circulate through Silicon Valley more regularly than hybrid cars. Yahoo! (Nasdaq: YHOO) has sued Facebook. Microsoft (Nasdaq: MSFT) has sued Google (Nasdaq: GOOG). Apple (Nasdaq: AAPL) has sued Samsung. Motorola (NYSE: MMI) has sued Apple. I could go on.

This bickering serves only to kill innovation rather than protect advantages for inventors. The patents in question don’t protect brilliant ideas. They cover trivial and obvious ingredients in every piece of software. Yahoo!’s suit against Facebook claims that it invented the concept of “dynamic web pages,” meaning pages that change for you depending on your preferences or user account.

If every company with dynamic pages had to pay a royalty to Yahoo!, no startups would have succeeded since 2000.

In defense, companies have taken to stockpiling patents just for protective purposes, to shield against future suits from competitors. A group of companies, led by Apple and Microsoft, paid $4.5 billion to buy up old Nortel patents. Google countered by paying $12 billion for Motorola and its valuable patents. Wouldn’t you rather those companies spend their billions to chase new ideas?

It’s gotten so bad, that patents are considered a major asset class, worthy of being a first indicator for stock selection.

Suggestions for patent reform exist. Some ideas are quite good. Alex Tabarrok proposes many of the best, including varying the lifespan of a patent in relation to the development cost. But as with many government institutions, change will come slowly. And the bureaucracy will always struggle to keep pace with the technology.

But now there’s an attempt by Twitter to jumpstart patent reform, on its own, without waiting for the patent office to change the rules.

Twitter has announced an “Innovators Patent Agreement,” or IPA, a sort of contractual rider that will be attached to the patents it receives.

Under the agreement, the holder of the patent promises it will not use the patent to attack other companies, but only to protect itself against patent suits.

In other words, Twitter won’t sue someone for making a Twitter rip-off, but if anyone else claims Twitter was their idea, Twitter can prove it wasn’t.

When the inventor of new software works for a large company, it’s usually the company that gets to file the patent and be the owner of that intellectual property. But the IPA enlists the actual inventor as the sort of custodian of the agreement.

Software engineers have complained about having their ideas used for purposes they abhorred in the past. Most notably in Wired, Andy Baio, a former Yahoo! programmer complained that Yahoo! encouraged him to patent his work, promised it would be just for defense and now uses it to battle the web ingenuity that Baio loves to foster.

The Yahoo! executives that promised Baio the patents would only be used for defense have long since left the company, and it was their replacements that violated the earlier promise.

The IPA would prevent this, too. A legal addendum attached to the patent would stipulate that the original inventor would have the right to prevent aggressive patent trolling, no matter who it’s transferred to.

It’s a great idea, but the IPA faces a number of challenges before it revitalizes the technology industry.

First, the biggest trouble with the current patent situation is that the patents in question cover basic technologies. Those patents already exist without the IPA. Even if every software company adopted the policy today, it would take decades before today’s innovations were considered basic enough to solve this problem.

That’s the other trouble: Every company isn’t going adopt the IPA today.

Even if patent giants like Google or Microsoft agree with the spirit of the new agreement, you can be sure their legal teams will raise a stink before letting them participate. There’s just too many unknowns.

And Twitter’s not exactly a patent giant. As far as I could find, it only has one patent to its name, (but it could be a valuable one).

Twitter has such a small patent footprint that a cynic might suggest the company released this agreement as a way to lure talented engineers away from other competitors.

There’s no doubt that an agreement like the one Twitter has proposed would free up software startups to innovate at a much faster pace, with much less concern for the legal red tape that can slow them down.

As consumers of technology, let’s hope that the coders can win out over the executives just this once.

Ahead of the tape,

Matthew Weinschenk

Matthew Weinschenk