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In 1997, a guy named Jeffrey Bezos filed USpatent 5960411A, “a method for ordering items over the internet”.

Here’s what it is: Instead of adding anitem to your shopping cart and then clicking buy, you’d just click buy.

That’s the whole patent.

It’s so comically vague because that’swhat makes intellectual property so powerful.

The wider the description, the easier it isto enforce.

Just listen to this one: “An apparatus foruse as a toy by an animal, for example, a dog, to either fetch, carry, or chew.

Includes a main section with at least oneprotrusion extending therefrom that resembles a branch.

” That, my friend, is a stick.

Both of these are ridiculously broad, but, unfortunately, that’s not uncommon.

What is unique about Amazon’s One-ClickPatent is that they actually use it.

Usually these are filed by Non-PracticingEntities, companies that own intellectual property, but don’t do anything with it.

Instead, they make money by suing anyone andeveryone.

These two graphs tell the story.

First, this is the amount of patent-relatedlitigation from normal, practicing companies.

Year after year, the number stays pretty muchthe same.

And here are the trolls.

Not only are they way more common, but they’verapidly increased in just a few years time.

And second, roughly 87% of troll lawsuitssettle before trial.

In other words, patent trolls are very commonand very good at what they do.

Their strategy is fairly simple: File or buyas many and as broad of patents as possible, and then find people to sue.

Both they and the other company know the costof going to trial – hundreds of thousands, or usually, millions of dollars.

So, unless both parties are really confident, they make a deal.

The company pays the troll just to leave themalone, who, by the way, now has even more resources to threaten even more lawsuits.

You don’t need much intellectual propertyto see how this is a broken system.

But the problem is actually much worse thanthat.

Okay, so, you’ve got the next big idea, a zero-click, mind-reading buy now button.

Here’s what you need to know about patents.

To get one, your invention must be novel, useful, and non-obvious, ya know, like a buy now button which buys…now.

Totally not obvious.

Anyway, It also can’t be a law of nature, an abstractidea, or a nuclear bomb.

Sorry! I don’t write the rules.

They usually last 20 years, and unlike copyright, patents are not automatic.

In the United States, you must apply to thePatent and Trademark Office.

And so long as your application has a leftmargin of two and a half centimeters and its capital letters are at least 0.

3175 centimetershigh, it’ll be reviewed by an examiner… with all the speed of the DMV.

The process takes about 2 years, but the office does provide patent-themedHalloween and Valentines Day entertainment while you’re waiting.

Seriously.

Once your patent is granted, it prevents anyoneelse from making the same thing without a license.

In other words, it’s a two-decade, government-protectedmonopoly.

So, why do they exist? The answer you’ve probably heard is pharmaceuticals.

Researching and developing a new drug, is, well, gosh darn expensive.

Some say 648 million dollars, others, 2.

7billion.

Whatever the number, it’s a lot.

Without patents, they say, no company wouldspend so much when they could just wait for someone else to, and then steal their idea.

Someone could jump in and take all the profitfrom the person actually doing the work.

Sound familiar, maybe? So, patents are an incentive.

And not just to make things you and I want, but also to explain how they work.

Because sharing knowledge is kind of the basisfor civilization.

This way, when it expires, others can makeit at a lower cost.

Or, that’s the theory.

The issue is, patents aren’t always goodexplanations.

In fact, that’s by design.

Because, remember, companies keep them asvague as possible.

Technically patents should be so specificthat a person with “ordinary skill in the art” could reproduce it, but technicallythey should also be non-obvious, soo… yeah.

The other issue is that patents aren’t theonly option.

Google’s search algorithm, WD-40, and Coca-Colaall famously chose to just keep their mouths shut.

Trade secrets do run the risk of being discovered, but they don’t expire in 20 years and they’re still legally protected.

So a smart company asks itself: Can we keepthe secret for 20 years? If not, it should get a patent.

But otherwise, it’d be better off stayingquiet.

Because of this, patents may not discloseanything that wouldn’t already be discovered.

What isn’t really in question is that theycan be a good incentive.

Of course companies are more likely to createsomething if it grants them a monopoly.

The question is whether it’s worth it.

Because during that monopoly, we all pay aprice – the higher cost they can charge with no competition.

When your phone costs $100 more, this is annoying.

When the World Health Organization estimatesten million lives could’ve been saved with existing medicines and vaccines, it’s downrightawful.

And then there’s the problem of waste.

Patents, like any economic system, are a game.

And when you add seven billion players, thereare going to be some unintended consequences.

The obvious one are the trolls.

Their defense is that those who invent somethingmay not be the best people to sell it.

Universities, for example.

Lots of research, but Marketing, not so much.

So, they say, Non-Practicing Entities buythese inventions, from, say, a school, and sell them to those who can use it.

But ask those buyers and… they shake theirheads.

In this survey, 92% of respondents said theyadded new products or features from the license zero to ten percent of the time.

And they “rarely, if ever prompted the developmentof any new products”.

In other words, companies had already inventedsomething and bought the license only to not get sued.

Microsoft, for example, takes or took moneyfrom HTC, Samsung, and Apple for patents like scheduling meetings on smartphones.

Its phone was, to put it politely, a failure, but it still collects profit, and on a feature that nobody hardly uses.

You might be thinking “So what?”, Whocares that the world’s richest companies are losing some money? But all these billions of dollars spent onlawsuits is money not spent developing new products or hiring employees.

When Google bought Motorola, largely for itspatents, it spent 12 and a half billion dollars instead of who knows what.

This is what I call Patent Theater, In the same way that so much of airport securityis just acting out the motions for little or no benefit, Big companies often file and buy patents notbecause they actually need them, but because that’s the game they need to play.

It’s not about innovation, it’s aboutnot getting sued.

Chances are any one phone company will violateanother’s patents.

But file enough of its own, and it can threatena countersuit.

It’s mutually assured destruction.

It might be better if no-one had them, butsomeone does, so everyone has to.

While researching this video, I came acrossthis article titled “The world’s 50 most innovative companies”.

It’s just a list of who has the most patents.

Of course, number of patents doesn’t reallymeasure innovation, it measures the, well… number of patents.

That probably sounds obvious.

But, it shouldn’t be.

Their purpose is precisely to increase innovation.

This should be an accurate list.

It’s not because of all the unnecessarywaste.

Worse, there isn’t really anyone to blame.

Examiners have to review half a million applicationsa year and under pretty stressful circumstances.

Mistakes will be made.

And companies have to file patents or riskbeing targeted.

There is a solution to all of this, but that’sthe topic of the next video.

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