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Source link: http://archive.mises.org/17901/more-ip-madness/

More IP Madness

July 29, 2011 by

Only two weeks after the free streaming music service Spotify was launched in the United States, it is sued for patent infringement. The service, which has been immensely popular all over Europe since its inception in 2006, offers millions of songs and for a small monthly fee the whole music library is made available on mobile devices and at high(er) quality. Some predict Spotify may be the “iTunes killer.”

That is, if it survives the IP madness.

It lasted only two weeks after working for several years trying to get around laws and regulations to enter the US market. Now the online company will have to appear in court to defend their business from allegations by Packet Video, a company that claims to own a patent for online streaming. The “beauty” of this story is that Packet Video did not create anything to award them the patent. They gained it through acquiring another company in 2007 – a company that was awarded the patent already in 1995.

One has to wonder what kind of streaming technology was invented (and needed government protection) back in 1995, while most people were not even on the web – and the pioneers were just being introduced to the Netscape Navigator browser. This was the same year the Mises Institute created the first version of mises.org. Of course, anything “streaming” was far from attainable at the time.

If Packet Video “wins” in court, commentators believe this would be a serious blow to all streaming services online both today and in the future. Oh the glory of government privilege…


Artisan July 29, 2011 at 8:58 am

Is there any drawback for that company under US law for causing such trouble if the claim reveals itself as false? (Like paying the court fees etc…?)

nate-m July 29, 2011 at 9:47 am

Yes. Hundreds of thousand, if not millions of dollars, that is spent to prove that the claim is false. This is in addition to the hundreds of thousands, if not millions of dollars that is lost due to the damage of the business due to injunction and people withdrawing investment due to the fear of government punishment.

With the patent system you are guilty until you prove yourself innocent. The burden of proof, in practice, is absurdly low. The reason for this is that most people cave in with a lawyer’s letter since the vast majority of the time. They do this because it’s cheaper to pay licensing fees then to fight a patent claim and win. The total cost of the burden of the defense is on the person being sued. There is no recourse for compensation.

Smart lawyers who own patents (aka patent trolls) do not produce any produce or service, so it’s impossible for them to be sued back. If they do nothing but sue other people then they are completely free of any danger of being counter sued due to patent infringement. Accordingly they will price their licensing fees to be slightly cheaper then fighting them and winning against them. It’s stupid to fight them oftentimes because they know the cost of litigation and base their licensing fees on this.

If you do spend your money defeating the patents, then you just did your competitors a favor. Since they do not share your cost of defense and they are free from licensing fees due to you defeating the patent troll then they are given a significant competitive advantage. Many companies who have proof that the patents are invalid will often sit on this knowledge for this very reason.

nate-m July 29, 2011 at 9:49 am

oops misread your post.

No there is no problem against the patent troll for suing people. The person being sued has no recourse.

Giovanni P July 29, 2011 at 9:27 am

Someday everybody will be sued for infringement of the patent of walking, owned by some random business with more lawyers than others.

Jim July 29, 2011 at 7:55 pm

Sorry if already posted, but here’s an interesting “THis American Life” episode on patent trolls:

Jim July 29, 2011 at 7:57 pm

Wow, I’m an idiot; blog post below discusses

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