RE: Software patent debate needs to be frank, fair and, above all else, honest

OK, we've changed to use Bessen and Meurer's estimates. As per your notes, we've taken care to use only numbers based on filings, not trials, throughout.

Thanks,

Bk

RE: Software patent debate needs to be frank, fair and, above all else, honest

The main critique I've gotten for this number (from others) is that the result is too small.

First, this matter of using an average, $4 million per suit. There are indeed many cases that are settled for on the order of tens of thousands, but there are others that drag on to cost on the order of a hundred million, all told. Your statement that many suits filed settle for cheap and the AIPLA's statement that the average cost of litigation over the entire range is $4 million are not inconsistent, especially since AIPLA's figures are (as far as I can tell) about lawsuits, not lawsuits drawn out to final decision.

But if you really don't like my using the AIPLA's number, Bessen and Meurer use a much more inclusive measure of the costs due to softpatent litigation, and find a "mean cost of $28.7 million", in 1992 dollars, equals $43 million in 2008 dollars. They are clear that they are looking at suits filed. The median is $2.9 million (1992 dollars), which verifies your point that most suits incur relatively small costs, but a couple are blockbusters. [Bessen and Meurer: The Private Costs of Patent Litigation; download and critique at: http://papers.ssrn.com/sol3/papers.cfm?abstract_id=983736]

You're right: I was working off the slides and Dan's failure to veto my numbers, but the `small percentage' is just Dan being polite. In Bessen and Meurer's new book, they estimate that as of 2002, 25% of patent infringement suits are over software; all signs indicate that the current number is much higher.

So perhaps you'd like to use those numbers. Multiplying these numbers together (55 x 52 x .25 x 43m) gives us a value of $30.8 billion per year in costs due to softpatent litigation, probably more. Thank you for your corrections.

Finally, your seeming critique that multiplication is too simplistic touches on an interesting question about numbers in headlines. Let me assure you, being that my textbook on statistical computing is forthcoming from Princeton U Press, that I know another method or two for estimating the costs to patent litigation. But if I'd posted twenty pages of methods behind the headline figure instead of a single line of multiplication, none of us would be better off.

In an ideal world, every article would give a confidence distribution instead of a single number, to indicate the extent to which the authors know that the input data is inaccurately measured, that real-world definitions are never truly precise, and the fundamental fact that we make mistakes. In such a world, more sophisticated techniques could come up with much tighter confidence intervals, so I'd want to do better than the basic order-of-magnitude calculation here.

But in the world in which we live, the headline is a single sentence fragment in all caps. I'd love to have run a headline that more precisely describes the confidence interval: "Software patents cost businesses billions of dollars, probably around $10 bilion, but maybe more, maybe less, depending on your sources, definitions, and methods." Clearly, no editor would let it run like that. A smart reader reads it like that anyway.

By offering the derivation, sources, and discussion for your to poke at, we chose to invite critique such as this. You're right that there are other ways to run the data, and I did work off of Dan's slides instead of the transcript, but there's little benefit in calling a rough estimate "rubbish". Just call it the rough estimate that it is, just like every other headline in the newspaper today. You get bonus points, when calling somebody's numbers rubbish, by presenting your own. You're welcome to adopt the alternative numbers above which address both of your critiques, or you can present your own numbers. But whatever your definitions and methods, I'm confident that your numbers will fall in the same confidence interval as above: billions of dollars, probably around $10 billion, maybe more.

Again, thank you for checking up on the numbers.

Ben Klemens

Executive Director

End Software Patents

RE: Software patent debate needs to be frank, fair and, above all else, honest

Ben,

You are being disingenuous. Your own report did not link to slides, it linked to the transcript of the discussion. Are you really saying you did not read this? If so, what else haven't you read?

On your main point, even if 25% of all suits filed in the US related to software (and you have not shown they do, you have merely claimed it), that does not mean that they all go to court. If software cases are as likely to settle as other types of cases, only 14% of that 25% is likely to end up with a trial. In effect that means 75 to 100 each year - a far less compelling headline than 55 cases every day. Some of these will end up costing tens of millions of dollars, maybe even hundreds of millions, the vast majority will not.

Finally, the very nature of patents means that most people are not "smart readers" when they go through articles about them. Patents are technical, they are complicatd and they are difficult. People will not know what is right and what is wrong - they are very dependent on how the debate is reported. That's why figures and claims have to be accurate and not guessetimates based on prejudice.

I am not an advocate of software patents, I am a journalist who reports on IP. I have no responsibility to provide alternative figures to make my case, my only responsibility is to point out that your figures do not stand up to scrutiny and that, therefore, they are rubbish. That does not mean that software related litigation is not incredibly expensive. It just means that your claims, based on the data and references you have supplied, are demonstrably wrong. As we both agree that you have misquoted Dan Ravicher to get to the figure you did and that, even if you did not, you failed to take into account that most cases are settled and do not proceed to trial, it is surely incumbent on you to withdraw the claims and the press release. I hope that you do this.

Kind regards,

Joff