Companies Must Work Together to Return Patents to Their Status as a Badge of Honor.
Jay Walker, self-described “serial entrepreneur” and inventor of the core technology behind the game-changing travel company Priceline.com, got his introduction to the patent system at around age 15, when he tried patenting an invention to help people sidestep wearing seatbelts. “It was a belt you could wear on your pants that looked like a seatbelt, so it seemed like you were wearing one when you got in the car,” explains Mr. Walker. “I didn’t like wearing them I guess.” Although not much came of that particular invention, the experience gave Mr. Walker his first peek into the complexities and difficulties of bringing a product to market—and the importance of having a patent to back it up.
Forty-five years later, Mr. Walker, who will be presented with the IPO Education Foundation’s Inventor of the Year Award in December, has founded three companies that, in total, have grown from zero to 50 million customers, and has launched a number of other companies over the course of his career. He is a named inventor on more than 650 patents and has numerous others pending, making him the world’s 11th most patented living inventor. “Since around age 10 or so, I was always the kid with the lemonade stand and the paper route and selling things door-to-door and shoveling driveways; I was very much the typical American entrepreneur. It’s undoubtedly in my genetic makeup.”
Today, Mr. Walker serves as Executive Chairman of Walker Innovation; Chairman of the research lab, Walker Digital; Curator and Chairman of TEDMED, the independently owned and operated health and medicine edition of the world-famous TED conference; and co-founder of multi-channel marketing company, Synapse Group, which was purchased by Time Warner. Earlier this year, Mr. Walker announced his United States Patent Utility service, now Haystack IQ, a “Big-Data-driven subscription service” meant to broaden patent owners’ access to the USPTO’s patent database and increase awareness of potential licensing revenue. The service was partly a response to what Mr. Walker feels is a damaged patent system. “The patent system as a whole is much like a giant iceberg—it’s melting slowly,” he says. “Still, the patent system is an enormous asset that can help all companies of all sizes if they can look at the patent database in smarter ways.”
Mr. Walker spoke with Innovator Insights more about his views on the changing U.S. patent system, how it is affecting entrepreneurs and small inventors in particular, and what steps patent leaders must take to bring the system back on track.
When did you first encounter patents during your career?
I came to patents fairly late, in the late 1980s, when it became clear to me that I could start a business that invented other business systems based on what I saw regarding the coming change in the technology of business. I built my first R&D lab as a business—that’s what Walker Digital is. I put together teams of what I thought were people smarter than me, and we worked together solving problems as principals, rather than as consultants. Priceline is an example of a solution to a problem that we invented in the Walker Digital laboratory. We have hundreds of other inventions as well now.
That’s where we came to IP. As we invented those solutions to businesses, we realized that, unless we could protect them, people would just copy us. We had invested a great deal of time and money in thinking out the design of these inventions; and it’s a whole lot easier to copy than it is to do the hard research and development work and to take the risks. We learned a lot about the U.S. patent system and did our research and we felt at the time that the patent system allowed for the patenting of software-based inventions, and clearly for business systems that were new and novel and based on software. So we began the process of building an IP portfolio and ultimately launched several businesses from that portfolio. I’m not an attorney, but I studied the patent law fairly deeply and then used that to build an IP team that could protect our inventions at a price we could afford to pay.
Can you describe what the Priceline patents cover exactly?
Without patents, I certainly would never have been able to launch Priceline, which is today a $60 billion market cap company employing thousands and thousands of people in the U.S.
The Priceline invention was really about the idea that you would buy something using a credit card without knowing what you had bought. In this case, you would buy an airline ticket, but you did not know the airline or the time of the flights, you didn’t know if it was nonstop or had a connection; you didn’t know key things about what you were buying. But because you got the price you wanted on the day of travel you wanted, you were willing to give Priceline the authority to commit you and to charge your card before you knew what you were getting.
Nobody had ever done that. It had real teeth in it. We invented what we called the “conditional purchase offer,” which said that, if certain conditions are met, the consumer agrees to buy something without knowing the other conditions. And once they buy it, they won’t be able to change or cancel it. You bought it by naming your own price, but the naming of the price was not the invention—people had been offering prices for things for years. What people hadn’t been doing is buying things half price unseen and allowing a seller to configure the product to meet their various general requirements without knowing the specifics—that was the invention.
How would your story have been different without patents?
I certainly would never have been able to launch Priceline, which is today a $60 billion market cap company employing thousands and thousands of people in the U.S. Without IP, what you have to do is hope that none of the big guys are going to take your invention and just run with it. It means they have to find new ways to innovate, or else buy, acquire, or license new innovations from others. Without IP, I would not have been able to launch several of the businesses that I have, and without IP I certainly wouldn’t have been able to spend years in a lab inventing businesses and systems that, ultimately, I think have benefited the U.S. and the global economy.
If you’re worried about people copying, why use patents over trade secrets, for example, to protect your technology?
Well, it used to be that a U.S. patent had real value to a small inventor. Unfortunately that’s no longer the case. Just 20 years ago, if you were a small inventor you could afford to get a patent and feel confident that, if your patent was well written, it would not only be respected by others, but you could get that patent enforced in the courts without spending millions of dollars. That’s no longer the case. The IP situation has deteriorated to the point that you no longer can enforce your patent rights in court unless you have several million dollars to spend, you’re willing to spend several years doing it, and the other side knows you can afford to spend several million, or they will just drag it out until you quit.
Therefore, what we have to do is either change the system again, or those inventors will follow a different strategy—a trade secrets strategy, where they just don’t tell anyone anything. Which might not sound like a bad strategy, but it’s a terrible strategy—only marginally better than filing a patent that’s worthless. A trade secrets strategy says, “Look, I have a secret and my advantage is going to be speed. I’m going to find someone who will sign a non-disclosure agreement [NDA] and get to work.” But that’s extremely hard to do, especially if you’re a SME [Small and Medium Enterprise]. Most people won’t sign NDAs for fear that they’re afraid you’re going to sue them or because they’re already working on something similar, which is all very reasonable.
We used to have a system where the small inventor had a bargain with society—in return for teaching society, inventors all read each other’s patents and they were always trying to improve upon them. If you look at the history of the patent system, it was filled with knowledge sharing and trying to be a little more innovative, and we’re about to lose all that. And you have even less protection internationally. The IP and patent game has become a sport of kings now, and America and the world are the losers. We’ve figured out how to pretty much kill the goose that laid the golden egg, and someone has to speak up and say that’s what happened.
Is your Patent Utility Service partly a response to this problem?
It’s a response, but not a solution by any measure. What I said with the Patent Utility, which now goes by the name “Haystack IQ,” is that there’s enough material in patents in adjacent and unexpected fields that by reading the patent literature, which is 5,000 to 10,000 new issuances per week, and by searching the patent database smarter, you can do your own R&D smarter, or you can find the people you should be looking for. But what I’m really saying there is that the patent system as a whole is much like a giant iceberg—it’s melting slowly, but make no mistake, it’s melting. Still, what’s there is an enormous asset that can help all companies of all sizes if they can look at the patent database in smarter ways. This really does not affect whether new patent owners should file patents, whether they can enforce their patents or whether it’s even a good idea to file patents. That’s a completely separate and much bigger, macro issue than the smaller issue of whether or not we can design smarter products and services that mine the U.S. patent database in ways that help companies and inventors solve problems, create jobs, and grow.
So in your view, legislation is needed to fix some of these problems?
We’re going to have to change the laws, and we’re going to have to ultimately change how the courts understand those laws. We’re going to have to make it much faster, much cheaper, and much more certain. Otherwise, we will lose the incentive to invent, which is the characteristic of our society that has provided for our global economic leadership.
What about the public’s perception of IP rights? Do you think the public values IP?
Well, we have a massive problem in the sense that powerful forces with a great deal of money have engaged in a sustained public relations campaign to undermine the legitimacy of a patent. They’ve turned it from a badge of honor to a badge that says you are essentially trying to take advantage of the system. It’s a bit like looking at any tool and finding some people who have abused and misused the tool and saying, “See, this tool is bad.” The more powerful the tool, the easier it is to use and abuse. On the other hand, this has always been the secret of Americans’ extraordinary innovation capacity. We unlocked a level playing field in our history so that anybody could invent. But these forces have gutted the ability to go to court and get a reasonable, fair, and speedy resolution in a patent dispute, and because you can’t get that, and because patent borders are inherently unclear and fuzzy and require expertise, we have a massive misunderstanding.
It’s very complex to teach a citizenry the value of property—the value of property rights, borders and dispute resolution. Until you’ve experienced it with your own property or somebody takes something you’ve done, until you’ve been arrested or unfairly charged, you don’t realize how important it is to have rights. We’ve got a long way to go before we teach a civics course in a sense that the population can both understand and embrace. For now, the best we’re going to do is to have our leaders understand that the future of American competitiveness comes not in our natural resources, not in our labor pool, not even in the fact that we have a lot of capital. It comes from the inventiveness of our society and our open structure for disruption and change. That’s what the world admires in us, and unfortunately, if we dismember intellectual property and if we tell people that software, which is the next greatest frontier in the world’s value creation, can’t be patentable, that’s crazy. That’s a disaster for the U.S. On the other hand, if we don’t create a simpler system to adjudicate the problems and if we tie everybody up in court all the time, that’s not a good system either. So clearly we have a long way to go to not only get the population to understand these benefits, but to get the business community behind them as well.
It’s very complex to teach a citizenry the value of property. Until you’ve experienced it with your own property or somebody takes something you’ve done, you don’t realize how important it is to have legal ownership rights.
What can IP stakeholders do to help create change?
Unfortunately, there’s very little entrepreneurs can do. They don’t have the kind of power or standing to really shape legislative or judicial understanding. That will fall to another group—the leadership of the IP stakeholder community. It’s organizations like IPO and thoughtful IP leaders, who like myself, have already made a career out of this, who are stepping up and saying, “Hey we need to lead and put simple and concrete proposals on the table that balance the interests of everybody.” I’m not talking about a one-sided failure here; this is a multi-sided failure. It’s going to be real leaders who step forward and say if we don’t fix this we’re going to reap a whirlwind of problems we never wanted.
What concrete steps can be taken?
I think IP owners need to find an organization that they believe has reasonable leadership that they can support. They’re going to need to turn to their own organizations and say, “We need you to step up here.” It’s going to take some people stepping up and saying, “Look, we’re going to need leadership, not just arguments.” Powerful, moneyed interests are at work here, so like all things it’s going to take a coordinated, groundswell movement for them to make any change at all.
You’ve won many awards – what does this particular award from IPOEF mean to you?
Well, I don’t think I ever met an inventor who did what they did to achieve an award. Inventors are guided by a desire to make a difference, to change the future. And I like to think that is what has motivated me over the years.
However, I am gratified to be recognized by my peers for the work I have done and for what that work has meant to others. I hope to continue inventing in areas that make a difference, and in a few years [I also hope] IPO members feel that my award this year is as much recognition of what I have done since my award as what I have done in the past.
Mr. Walker will be honored as IPOEF’s 2015 Inventor of the Year during the Foundation Awards Dinner at the Smithsonian American Art Museum & National Portrait Gallery in Washington, D.C. on December 8. Learn more and register to attend here.