IP Theft

Copyright symbol from PNGIMG

This week my time and energy got unexpectedly consumed by signs of a theft.

I’m not an involved party. I was asked to review what came back from the initial round of pre-trial discovery (call it pre-discovery) in a case where a company is apparently using intellectual property (IP) without paying appropriate royalties. They are making pots of money from someone else’s work without paying for the privilege.

The IP is heavily technological, right up my alley. What did I think of the pre-discovery response? Could I please go through it as quickly as possible and tell the lawyers how it looks to an outside expert?

That’s why I couldn’t write much here. Wading through all that material took a lot of time and concentration. I won’t discuss the case, but I would like to discuss IP theft.

Most of us grow up recognizing that tangible items are worth something. They may be products we buy or they may be tangible work we hire someone to do, such as building a shed or painting a house or repairing a car. It’s easy to grasp the idea of paying for such things. We can see or touch or hear what we buy. Whoever provided it deserves to be paid.

The value of intellectual property, ideas or knowledge is harder to understand. Most of us are brought up heavily conditioned to believe that we should earn money by putting in our labor, or in some cases by producing items of piecework. That’s how bosses want employees to be oriented. Why should someone be paid because they know information most people don’t know or they can think in unusual ways or they invented a new way to do something?

It isn’t such a big step for people who move up in the business world. Businesses constantly look at value. What can I do to this incoming material that will make a more valuable product so I can sell it for more than the cost of making it? That’s still relatively concrete. It’s still based mostly on numbers: cost of materials, cost of labor, cost of utilities… and of course the price the market is willing to pay for the end result.

But that last number is not as concrete as the others. Intangible factors play into it. Do people get an irrational craving for it? Is it trendy? Are people feeling their budgets too pinched to spring for it?

The value of intellectual property, ideas and knowledge is even less concrete.

Knowing Where to Hit

There’s a standard joke about this among people who have special IP, ideas or knowledge. It’s easily tweaked for various industries. In an engineering version, a factory’s most important big machine stops running. No one in the factory can get it to start again.

At last management brings in an engineer from outside the factory, someone who has worked with such machines for eons. The engineer walks around the machine, looking at it, and at last simply hits it hard with a hammer. The machine promptly starts up and runs like nothing ever went wrong.

The engineer sends an invoice for $10,000. Management is outraged. The engineer didn’t have to drive far to get to the factory, didn’t use any supplies and spent only a few minutes on-site. Management demands a line item invoice to justify why they should pay so much for so little work. The engineer sends an amended invoice that says

• Hitting machine to make it run: $1

• Knowing where to hit it: $9,999

Basically, in a situation like the one that wanted my expert assessment, someone has created IP that “knows where to hit” someone else’s problem. It’s okay to use IP or ideas or knowledge from another person or company, but only if you make a deal with them. To do it right, you need to agree how you’re going to use their cleverness and how you will pay them for doing so.

Business Example

I’m going to start with a hypothetical business example, but this type of theft has a broad range. If you’re a published author or an online blogger, you may be getting hit without even knowing it. I’ll get to that after the business example.

Let’s say you invent a new way for automatic dishwashers to clean dishes that uses half the electricity and half as much water as the most efficient dishwashers on the market, and dishwashers made your way run quieter too. But you’re an inventor, not a manufacturer. Your new method is your intellectual property. You spend tens of thousands of dollars to patent it. Then you look for a manufacturer you can persuade to buy a license to use your patent.

You make a deal with Posh Dishwashers Company. (Obviously, that’s a fictitious business.) They buy a license to build dishwashers using your method. They pay you some money up front. They also agree to pay you a small percentage of all the revenue they get from selling dishwashers that use your method over the next 20 years.

So far, so good. Your work was the cleverness of getting the idea for the invention, figuring out how it can be built in real life, and finding a company willing to put your invention into mass produced appliances for the consumer market. You didn’t get paid while you were doing all of that. You’re getting paid later, not for your work but for the value your unique method provides to Posh Dishwashers.

But Bargain Dishwashers Inc. (another fictitious business) is not so above-board. Posh’s marketing material says prominently that the new machine uses patented new technology. Bargain Dishwashers looks up the patent. First they look for ways to build a machine just different enough from the patent so they wouldn’t be infringing on it. That turns out to be too hard. They decide to simply put your patented portions into a sealed box that cannot be opened without destroying what’s inside.

They offer the dazzling improvements you came up with for dishwashers, but they undercut Posh Dishwashers on price. They aren’t paying you at all for their use of your methods. Only Posh and Bargain are offering this advantage, so every sale at Bargain Dishwashers is a sale taken away from Posh Dishwashers. The company infringing on your patent is stealing from both Posh Dishwashers and you.

Unfortunately, there are more businesses similar to Bargain Dishwashers than you might expect. What happened in this example is the reason filing for a patent isn’t always the best way to protect intellectual property or inventions. Patents are published. Anyone can get a copy of your patent and look for ways to take advantage of it without crossing the legal boundary to infringe on it. Coca Cola is a prime example of a business based on a unique invention that is not patented. Their recipe is protected by secrecy, not a patent.

My client did some of both. They’ve got a patent but kept some of their intellectual property as unpatented (and therefore unpublished) trade secrets. I don’t know how much financial loss they’re trying to recover, but the lawyers working for them only take cases with millions at stake.

It Happens to Individuals Too

I mentioned this general type of theft happens to individuals, too, especially authors and bloggers. Once upon a time, plagiarism required manually copying someone else’s writing. Then software robots began trawling the internet for text, splicing sentences from different published articles together into pseudo-articles intended to simply draw traffic.

My online articles got picked up by those software robots from time to time. They were a pain in the neck. Each time I caught it happening, I had to file complaints and try to get websites or hosting companies to take down the artificially “spun” articles that contained blocks of my writing.

Now it’s worse. Now there are artificial intelligence engines on the internet. They suck in vast quantities of people’s writing (including copyrighted work) and spin it into something else. Small fry use AI to do this. Big fry (huge tech companies) do it too, claiming they are only using all that intellectual property to train the engines.

Some published authors are banding together to take big tech to court over this. The authors are outgunned. Big tech can afford armies of lawyers and few judges will be able to sift reality from obfuscation in the face of such an onslaught.

But it is a form of theft. When it happens to someone who writes because they feel like it, the harm is not obvious. But when it happens to someone who writes for a living, it’s easier to understand the harm. AI can quickly learn to imitate an author’s style and thought patterns, and it’s getting better at doing so every day. Drawing upon vast data banks of information about the author’s favorite subject areas, in the blink of an eye it can spew out material that would take even the famously fast Stephen King months to create. That can go into the marketplace like a machine from Bargain Dishwashers. It redirects money from the actual creator of that style and actual owner of those thought patterns in the same way.

It's hard to make a living as an author. Only a modest portion of the books published each year sell enough copies for an author to live on the royalties. Every erosion of their royalties hurts.

IP theft isn’t just a contest between big companies, remote and unconnected with ordinary people. It happens at every level. And it could be hurting a creative, clever person you know.