Twitter's Innovator's Patent Agreement - Unlikely Adoption

Tech companies require employees assign inventions related to the company's business. It has been this way for many decades. Last month Twitter's innovator's patent agreement (the Twitter agreement) seeks to change all that by giving its employee-inventors control how their patent will be enforced. In short, a company adopting the Twitter agreement cannot enforce a patent unless: (1) the inventor gives permission; or (2) the company is acting defensively.

The Twitter agreement is welcomed as revolutionary, noble, a trend for software startups, and a way to reduce patent litigation, but I expect the Twitter agreement will not receive widespread adoption in Silicon Valley. Reasonable minds can differ and changes to the Twitter agreement may change my mind, but I see some problems with the Tweeter agreement:

1. The Twitter agreement subjects a patent to the wishes of the inventor or to defensive use. What if an inventor's interests don't align with management? What happens if an employee (e.g., departing to work at competitor) decides to withhold permission? Does this mean decisions about enforcement will be made by an inventor who may not even work at the company?

2. The Twitter agreement allows the company to "act defensively" but this definition is broad. It appears a company can argue any patent related contact by a defendant is a "threat" and claim it is "acting defensively." It allows one to "act defensively" in offensively asserting a patent if the defendant has offensively asserted a patent in the last ten years. That opens the door for filing a patent infringement suit against many major tech companies. Given this loop hole, an inventor may disagree with the company's assessment of "acting defensively." Will this create friction as the company appears to renege on its promise of inventor control?

3. Twitter's agreement permanently encumbers a patent to reduce patent litigation, to recruit engineers who hate the thought of patents being asserted in court, and to retain valued employees. But shareholders and investors may simply see the Twitter agreement as resulting in corporate waste. This may sound harsh, but investors may question: you had patents that could be used as the company saw fit, but now they are encumbered permanently to an inventor's control? When you have joint inventorship, the inventor can sublicense the patent to the defendant that was sued if the inventor views the company has breached the Twitter agreement.

4. Last month I read that Twitter has no US patents. If so, I expect companies with large patent portfolios in a patent intensive industry (e.g., mobile computing) won't have an adequate motive to encumber their patents. Twitter gives up little while those with large patent portfolios are asked to encumber hundreds and even thousands of patents.  

5. It is not that desirable when the parties cannot settle their differences and must turn to the courts. But the Twitter agreement will not reduce patent litigation much unless many companies agree it. To get a handfulof companies to disarm (drop offensive use of patents) means they have less "ammunition" than others in the industry. Twitter won't reduce patent litigation filed by trolls, because they won't sign the Twitter agreement, and have no exposure to patent infringement suits.

6. Investors may be reluctant to invest in startups with patents that have encumbrances on how they can be enforced. A patent may be a critical asset before profits are made and if the startup fails. Patent brokers may not want to buy encumbered patents, which reduces the investors' returns if the company fails.

I enjoy hearing from family and friends through Twitter, but think this current Twitter agreement will have problems in the implementation. Supporters hope this agreement is widely adopted and software developers can produce software without fear of patent infringement lawsuits, but I don't see it. It asks companies to set aside their patent rights and pass control for an asset to any name inventor whose interest may no longer align with that of the management. Shareholders and investors will not be happy to reduce the value of patents for little in return.

For details see Twitter Gambles on a Patent Plan - Wall Street Journal

Copyright © 2012 Robert Moll. All rights reserved.