Patents and Unions: When Good Intentions Go Horribly Wrong

Watch me ruin your Sunday afternoon with one word. Ready? Here we go.


This week on NBC’s Press:Here we talked about the topic most of our readers equate with a long, slow, painful root canal. Or worse. Laura Sydell of NPR was also on the show, and if you haven’t listened to her episode on This American Life called “When Patents Attack,” go do it now. We’ll wait.

Nathan Myhrvold — who some call the Voldemort of tech– is a bit of a mystery to me. Sydell says she didn’t intend the piece to go so hard after Intellectual Ventures, and as you hear in the podcast, things they thought were innocuous questions were treated like “cross-examinations.”

My gut feeling is that Intellectual Ventures didn’t start out to enable trolls. That it was intended, as Myhrvold says, to give inventors who don’t want to start companies a way to monetize their inventions and to be an efficient mediator in a broken system.¬†That’s also the promise of RPX Corp., which recently went public, and is backed by¬†Izhar Amony of Charles River Ventures. Armony also invested in Intellectual Ventures, and we gave him the opportunity to defend against “patent troll” allegations here.

But even if you are willing to give Intellectual Ventures the benefit of the doubt, the NPR piece clearly exposes some pretty upsetting ripple affects that the Intellectual Ventures team doesn’t deny. The beauty of the radio program is you get to hear the reporters’ many attempts to give IV a way to explain itself, and they just dig a bigger hole.

When asked, IV couldn’t site a single example of the win-win they promise: An invention they’d bought from a brilliant tinkerer and sold to a company so they could bring it to market for him. The example they do give leads NPR down a rabbit hole that lands them in a hallway in East Texas full of offices of shell companies whose entire reason to exist is buying patents and suing companies actually building things, funneling some of those proceeds back to Intellectual Ventures.

This American Life ends by comparing the patent situation to an arms race, citing the recent patent portfolio battles of the big tech companies. While it’s an apt metaphor, I couldn’t help but think of another one: Unions.

I realize I’m inviting well-organized hate mail by writing this. Like patents, I see unions as incredibly well-intentioned and at one time vital to America’s development. But let’s face it: Mismanaged unions are also at the root of a lot of our capitalistic problems today. It’s hard to see what’s happened with the airline industry, the automobile industry, public education and feel that unions are a totally benign force in the corporate world.

Like patents– which also seek to protect the little guy– unions were started for all the right reasons. But like patents, they can be twisted into something that hurts innovation, competition and ultimately consumers and the country as a whole. Unions inherently create an “us versus them” dynamic that makes winning against a company’s management the top goal, not serving customers, innovating, or in the case of education, teaching kids.

It’s not too surprising that I feel this way, since I’ve spent most of my career covering businesses in Silicon Valley, where the lack of unions is as remarkable as the lack of bailouts. I’ve been reading a lot about Silicon Valley history recently and was struck by just how core the lack of unions has been to the American tech industry’s evolution. It’s enabled the constant creative¬†destruction¬†that keeps Silicon Valley relevant and thriving in a rapidly changing world.

Fairchild Semiconductor and Intel co-founder Robert Noyce famously brought midwestern values to SIlicon Valley, but he reportedly hated unions, regarding them as “a death threat to Intel and to the semiconductor industry generally,” according to Tom Wolfe’s 1983 Esquire profile of Noyce. Building a huge new manufacturing industry that was set up so that workers didn’t want to unionize may have been Noyce & Co.’s greatest legacy. It was one of many important lines in the sand they drew between the way business had been done in the US, and the way it should be done in the latter part of the 20th century. Wolfe writes:

“Labor-management battles were part of the ancient terrain of the East. If Intel were divided into workers and bosses, with the implication that each side had to squeeze its money out of the hides of the other, the enterprise would be finished. Motivation would no longer be internal; it would be objectified in the deadly form of work rules and grievance procedures. The one time it came down to a vote, the union lost out by the considerable margin of four to one. Intel’s employees agreed with Noyce. Unions were pat of the dead hand of the past‚ĶNoyce and Intel were on the road to El Dorado.”

This mentality is core to the now common stock option, we-work-hard-and-win-together culture of startups that has spidered through much of the corporate world. We don’t think about that as being “anti-union” now, because we don’t really manufacture anything in Silicon Valley anymore. But back then it was a clear fork in the road that dramatically changed Silicon Valley, making it able to evolve, change, and stay relevant as the world has changed around it, unlike Detroit.

It’s unfortunate that no one had the same ability or fortitude to make a similar stand when the well-intentioned but clearly dysfunctional rules around software patents were codified– something the patent office was against and much of the industry wishes had never happened. Of course, there’s a movement now to reform the patent system, but as we’ve seen over the last few weeks our government isn’t exactly functioning at its best now. It’s hard for me to be optimistic anything will change.

Still kudos to NPR and Sydell for breaking down the real-world implications of this broken system, and kudos to Chris Sacca for being one of the only investors willing to talk about it on the record. The more the conversation can move outside the geeky confines of Sand Hill Road, the better chance of solving it. Maybe.

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Intellectual Ventures is a private company founded in 2000 to invest in “pure invention.” Its goal is to develop a large patent portfolio rather than to actually develop new…

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Nathan Myhrvold founded Intellectual Ventures after retiring from his position as chief strategist and chief technology officer of Microsoft Corporation. He personally holds more than 18 U.S. patents and…

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