Pirate Party founder warns 10pc of private equity gets wasted in patent defence

5 Apr 2013

Rick Falkvinge, founder of the Pirate Party movement

A considerable portion of business angel and private equity investment in promising young technology companies – as much as 10pc – often gets wasted on defending against patent actions and this threatens to stifle innovation, the founder and first party leader of the Swedish Pirate Party Rickard Falkvinge told Siliconrepublic.com.

Falkvinge, who will be in Dublin next week to speak about copyright and patent reform, is a technology entrepreneur who, aghast at the low level of understanding among politicians about technology, the internet and its relationship to civil liberties, established the Pirate Party in Sweden in 2006 to bring about change.

The Pirate Party International’s 2009 Uppsala Declaration commits it to reform of copyright regulations, patent law and the strengthening of civil rights and freedom of speech.

In 2009, the Pirate Party was to bring about a seismic shift in the political landscape in Sweden, achieving 7.1pc of the vote in the European Elections and securing two MEP seats.

Since that time, Pirate Parties have sprung up all over the world with members winning elected posts in Spain, Germany, Austria and Iceland. In 2011, the German Pirate Party won 8.9pc of the votes in the general election and in the Czech Republic a pirate candidate was elected in the 2012 senate election.

Protectionism and patent trolling is killing innovation

As a technologist who has worked in the IT industry, including a stint at Microsoft, Falkvinge said that there’s a systemic problem that pervades the technology industry: what he calls short-sighted industrial protectionism.

“The people who work in technology love the work they do, they just hate the industrial protectionism that goes with it – but the lawyers tend to love it.”

Evidence of the system going mad, he cites, is the recent high-profile patent cases between Apple and Samsung resulting in massive US$1bn judgment against Samsung.

“From a systemic standpoint, the patent wars are a huge drain on R&D resources and this protectionism is killing innovation.”

He said an entire industry of patent trolling has been allowed to flourish and that innovators and entrepreneurs are being stifled.

“It wouldn’t matter whether you have actually infringed on a patent monopoly or not, you will be sued instantly the minute you have money.

“This encourages a pattern of frivolous lawsuits that unabated has only created a system that works for the lawyers. If I’m an entrepreneur and I’m threatened rightly or wrongly, I’m unlikely to go court to defend myself.

“The correct business decision today is to just pay up. This is a problem because on the other side of the line is just somebody sending out frivolous patent threats. You don’t even have to have a valid patent to start threatening,” Falkvinge said.

A self-sustaining feedback loop

He pointed out that this patent trolling culture is impacting on firms’ ability to raise private equity.

“I work closely with venture capitalists and business angels and they are fed up with how the system works, most reckon that up to 10pc of the capital they inject into companies goes into feeding patent trolls. One said to me recently: ‘I can’t believe governments allow this s*** to go on.”

The truth is, Falkvinge points out, issues like copyright and patent reform are peripheral issues in most politicians’ eyes.

“Lawmakers are elected on their policies around education, defence, energy, healthcare and crime. Copyright and patent reform issues are so peripheral to them that they are just content to listen to the experts in their fields advise them. Unfortunately, the ‘experts’ have a vested interest in keeping their jobs.

“So it becomes a self-sustaining feedback loop. If you look at the US$1bn verdict against Samsung – that’s an insane amount of money.”

Ultimately, Falkvinge points out, the idealism of technology companies in their early days can become tainted by success and gives way to protectionism when many of the companies become stagnant and less innovative.

“Early stage industries do not want this kind of protectionism, they just want to build things and improve on things. It is stagnant industries that are asking for this kind of protection.

“This does not only cost innovation, it protects the kings of the hill.

“If you look at the patents system as it stands today, it is ludicrous to think that if you are a small player you can stand up against a Samsung, Apple or a Google if you are the innocent party,” Falkvinge points out.

Rick Falkvinge, founder of the Pirate Party movement will be in Dublin next Thursday, 11 April, to give a talk at the IIEA at 12.45pm about ‘How Copyright and Patent reform can make us all wealthier and safer’. Separate to that in the evening he will host a private seminar on the Pirate Party’s disposition to the politics and economics of Ireland’s economic situation, followed by a student/faculty debate at DCU.

John Kennedy is a journalist who served as editor of Silicon Republic for 17 years