Archive for healthy paranoia

Sep
20

David and Googleliath (or VSL vs. Google): A Small Company Fighting a Giant Reminds Us Why Software Patents Matter

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A small start-up company fighting one of the great giants of all time: it’s a classic story of David vs. Goliath, or in this case, David vs. Googleliath (a.k.a. VSL vs. Google).

Googleliath's Googleplex (source: Wikipedia)

Googleliath’s Googleplex (source: Wikipedia).

Many small companies have claimed that Google misappropriated trade secrets or other IP, but rarely has Google graciously (and accidentally) cooperated in providing smoking-gun evidence the way they apparently did for Vedanti Systems, Ltd. (VSL). In this case, they allegedly left sticky notes on VSL’s trade secret materials showing their questionable intentions to take Vedanti’s technology. If VSL prevails against this giant, it may be more a case of Googleliath falling on its own sword than David being great with a sling.

VSL and their partners are now suing Googleliath for infringement of patents and theft of trade secrets in two courts. The suits are against Google (here also known as “Googleliath”) and their subsidiairies, YouTube and On2 Technologies. London-based Vedanti Systems Limited and their U.S.-based parent, VSL Communications, Inc., have turned to Max Sound for help in enforcing IP rights. The patent suit was filed in U.S. District Court for the District of Delaware, while the trade secret suit was filed in Superior Court of California, County of Santa Clara.

The complaints claim that Google executives met with Vedanti Systems in 2010 to discuss the possibility of acquiring Vedanti’s patented digital video streaming techniques and other trade secrets. Vedanti’s compression technology for streaming audio and video files is far superior to what Google had, Google’s own standards for streaming video t the time led to “jittery, low-quality video and sound for large-sized video files,” according to the patent complaint.

As part of the talks with VSL,  Google had access to trade secrets such as VSL’s proprietary codec for encoding and decoding a digital data stream.  That codex has proprietary techniques for “key frame positioning, slicing and analyzing pixel selection of video content to significantly reduce the volume of digital video files, while minimizing any resulting loss of video quality.”

Shortly after the negotiations began, Google allegedly began implementing VSL technology into its WebM/VP8 video codec, applying what they had learned from VSL but not letting VSL know. The WebM/VP8 video codec is extremely important for Google. It is used in many of their services and websites including YouTube.com, Google TV, the Android operating system, and Chrome web browser. They had inferior technology, but by allegedly stealing Vedanti’s, they were able to quickly advance their business at virtually no cost.

There’s just two pesky little problems for Google:

1. Vedanti has patents for its technology and is not afraid to sue. Now you might see why Google seems to really hate software patents (rather, other people’s software patents). They have been a leading force in some of the patent reform measures and related steps that have made protecting IP rights harder than ever for little guys like Vedanti. This giant, with its easy access to the White House and many other influencers, has also been an important voice against software patents, and may have helped influence popular opinion and the courts into recent devastating attacks on software patents. But Vedanti’s patents are still alive for now, so Google has cause for concern.

2. Google seems to have assisted VSL’s case by returning VSL’s trade secret materials with tell-tale sticky notes all over them showing their intent. Huh? This is really an amazing part of this story.

Attorney Howard Ankin puts it this way in a post from Sept. 17, 2014:

When the VSL Google talks ended, VSL demanded the return of its files. The returned documents were covered with incriminating Post-it notes that had apparently been left behind by Google employees. Attorney Adam Levitt claims that the notes said, among other things, that Google might possibly be infringing VSL’s then-pending patent and that Google should “keep an eye” on VSL’s technology and sweep it into a Google patent. In addition, notes warned Google engineers not to be caught “digging deep” and to “close eyes to existing IP.”

The complaint alleges that Google began to amend its preexisting patent applications and file new applications using VSL’s technology. Then in early 2012, VSL noticed that there were significant improvements to the video quality of Google’s Android operating system as well as other Google software. In June, the staff at VSL analyzed Google’s publicly available code only to discover that the code contained VSL trade secrets. Levitt asserts that the “Defendants’ theft of VSL’s trade secrets pervades virtually every website and product offered by defendants.”

“The use of new technology by established companies should be based on original creation and innovation,” said Adam Levitt, head of Grant & Eisenhofer’s Consumer Protection practice, who is representing the plaintiffs. “Vedanti Systems created groundbreaking digital video technology — technology that has forever changed the way that video content is streamed and displayed over the Internet.”

The lawsuits allege that Google willfully infringed Vedanti Systems’ patent and did so deliberately and knowingly, while recognizing the serious shortcomings of their own video streaming capabilities prior to the infusion of stolen IP.

Whether the suit will succeed or not remains to be seen, but I find Google’s lapse in leaving sticky notes on the borrowed materials to be rather hilarious, if it is true. One thing is for sure: If Vedanti’s allegations are factual, their chances of seeing some degree of justice are vastly greater by virtue of having a patent than if they did not. Software patents are essential for protecting innovations in the hugely important arena of information technology. This is the Knowledge Economy, folks, not the Iron Age. Economic growth and progress is more likely to come from advanced software and IT innovations than from hammering out better cogs and gears, and we need an IP system that understands this. Most judges and politicians ranting against software patents or patents in general do not understand this. Recent ruling that make many software innovations not even eligible for patents show that we have judges and influencers very ignorant of the physical nature of information and computer systems. Innovations like those of Vedenati are not tantamount to mere abstraction and mental exercises. They should have just as much right to be considered for a patent (provided they are novel, nonobvious, and useful) as any tool wielded by or widget hammered out by an innovative blacksmith.

Software patents matter, and they are vitally important for the best innovators of our day if they are to stand against the anti-patent giants that want anything but a level playing field. VSL vs. Google, or David vs. Googleliath, is a compelling reminder of that.

VSL’s patents in Europe are already causing pain for Google. Here is an excerpt from “Court Seizes Google’s Infringing Android Devices in Germany at IFA,” Stockhouse.com, Sept. 11, 2014:

SANTA MONICA, CA–(Marketwired – September 11, 2014) – VSL Communications, creators of Optimized Data Transmission technology and Max Sound Corporation (OTCQB: MAXD) (MAXD) creators of MAX-D HD Audio solutions, have been granted multiple preliminary injunctions from the District Court Berlin against OEM’s (Original Equipment Manufacturers) to stop the sale of certain Google Android devices in the Federal Republic of Germany at the Premier show IFA in Berlin (Internationale Funkausstellung, http://www.ifa-berlin.de/en), the world’s leading fair for Consumer Electronics and Home Appliances).

Max Sound, under agreement with VSL Communications, is enforcing intellectual property rights on VSL’s behalf and has obtained preliminary injunctions against Shenzhen KTC Technology Co. Ltd and Pact Informatique S.A., France. German Customs authorities further inspected several other exhibitors of smartphones and tablet PC’s with Android operating system. Shenzhen KTC Technology Co. Ltd. is one of the largest Chinese electronics groups operating worldwide, and Pact Informatique is a French electronics company operating in many European countries under the brand Storex. Max Sound’s actions were based on infringement of VSL’s European Patent EP 2 026 277 concerning an Optimized Data Transmission System Method. The Infringement was found on the basis that Google’s Android OS implements the H.264-Standard for video encoding, which is protected by VSL’s patent. A bailiff seized all smartphones and tablets of KTC and Pact at the trade fair IFA in Berlin on September 10, 2014. The injunctions have no automatic time limit, and opponents can file an opposition.

So what will Google do? For starters, I’m predicting we’ll see VSL and their allies soon being called some kind of “troll.” I also think we can rely on Google’s friends at the USPTO and beyond to find all sorts of reasons why Vedanti’s patents aren’t even drawn to patent eligible subject matter, regardless of how novel they may be. But the trade secret case is where I think tiny Vedanti might have a fighting chance, thanks to Googleliath’s cooperation with the sticky notes. Who said IP law wasn’t entertaining? Weird Al could have a lot of fun with this story. Suggestions for what tune to use in his spoof?

Note: The US cases referred to are captioned as: Vedanti Systems Ltd. and Max Sound Corp. v. Google, Inc., YouTube, LLC, and On2 Technologies, Inc., No. 1:14-cv-01029 (D. Del., filed Aug. 9, 2014) and Max Sound Corp., VSL Communications Ltd., et al. v. Google, Inc., et al., No. 114-cv-269231 (Cal. Sup Ct.).

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For connecting one human to another, it’s been said that any two people can be connected by acquaintances in six steps, hence the concept of “six degrees of separation.” The term “seven degrees of separation” occurred to me when reading Malcolm Gladwell’s discussion of airliner accidents in his outstanding book, Outliers: The Story of Success. He observes that extensive studies of airliner crashes show that the fatal tragedies often require a combination of seven things going wrong, any one of which might just be an inconvenience or minor problem by itself, but in combination with the others can lead to disaster. When it comes to connecting skilled humans to the very disasters that they have been carefully trained to avoid, there are seven degrees of separation to disaster.

While mechanical defects, fatigue, and bad weather are often involves in the seven degrees of separation, these airliner disasters almost always involve flaws in interpersonal communication. For example, there may be a copilot who is afraid to speak up and challenge the pilot when an obvious mistake is being made, or there is a lack of clarity in communicating a problem to the air traffic controllers. When trouble is brewing, success often requires extensive communication between the flight crew, other crew members, ATC staff, and sometimes others. Plans must be made, checked, implemented, revised, clarified, conveyed, and so forth, at many levels to handle an emergency properly. When crew members keep their mouths shut and don’t share what they know or sense, when courtesy or fear stops urgent information from being shared, or when there are cultural or linguistic barriers to effective communication, multiple mistakes and miscues can accumulate, whittling away at the separation between survival and disaster. It’s that way in the world of innovation as well.

Superior IQ and innovative genius is often far less important than the ability to communicate. Disasters in innovation and new product development are often due not to lack of intelligence among the innovators and corporate leaders, but gaps in communication. Launching a product and safely navigating it through the storms of the market can be much trickier than flying an airplane. The flight of a new product always involves malfunctions and emergencies that require communication skills above all. Information from the market must be effectively shared with the developers. Plans must be shared and communicated with external partners and internal teams. Benefits and features must be effectively communicated to end-users. Expectations must be clearly conveyed to suppliers and service providers. A plethora of data must be handled and shared in ways that inspire, motivate, drive action, and keep all parties aligned.

As in an airplane emergency, “yes men” are not the people you need around to help. You don’t want devil’s advocates either or professional naysayers–you need people willing to share what they know and challenge directions and assumptions that may mislead the project or the company. You need people who can help you confront and conquer the brutal facts of your present reality. (See my previous post on the Stockdale paradox and the danger of optimism.)

More than words alone are involved in the communication relays that are essential for a successful new product flight. Intangibles related to trust, loyalty, and common agendas must be in place. It’s all about relationships, and these take time and effort to build and maintain. Unreliable or misleading communication can break those relationships and jam navigation systems, as can abusing or taking advantage of partners and employees. Bonds of trust and mutual respect inside and outside the corporation are essential to maintaining effective communication and bringing about the alignment and common purpose needed for innovation to succeed.

As Gladwell notes, the seven errors that tend to accumulate in major airline disasters “are rarely problems of knowledge or flying skill. . . . The kinds of errors that cause plane crashes are invariably errors of teamwork and communication.” Ditto for the risky, high-flying adventure of innovation, where crashes are the rule rather than the exception. It’s not that the team wasn’t skilled or clever, but fundamental gaps in teamwork and communication resulted in the product launch smashing at full speed into barriers they failed to notice or attempting landings on runways that weren’t there. These disasters are always going to be far more likely than airplane disasters, but improved communication and teamwork across your innovation ecosystem can do much to bring you safely home.

In Conquering Innovation Fatigue, our chapter on the Horn of Innovation is devoted to illustrating the importance of including the innovation team in feedback loops that bring data from the marketplace to the innovators to allow them to make rapid on-the-fly adjustments for iterative innovation. Cut off that communication, and your innovators are flying blind. Blind innovation is what fills the convention “innovation funnel” with numerous abortive attempts that need to be weeded out. Keeping innovators inside the loop with clear and instant communication gives them a more clear map and helps them work with your team to develop the right flight plan for success.

Innovation success is all about abundant communication and teamwork, not hand-offs that isolate those with the vision from those at the helm. Innovation is disaster prone enough when everything is running well–no need wiping our a half-dozen of your degrees of separation from disaster by your own communication and relationship mistakes from the beginning.

Shortly after I became Corporate Patent Strategist at Kimberly-Clark Corporation in 2001, I had the opportunity to address nearly several hundred people in the innovation community of K-C at a large internal technical conference held at Stone Mountain near Atlanta, Georgia. My theme was “Healthy Paranoia” as the key to success in innovation. I drew upon the experience of Admiral James Stockdale, the highest-ranking naval officer held in captivity during the Vietnam War and a remarkable survivor and leader. James C. Collins’ famous book, Good to Great, describes a conversation with Stockdale regarding his coping strategy that helped him survive. Stockdale explained:

I never lost faith in the end of the story, I never doubted not only that I would get out, but also that I would prevail in the end and turn the experience into the defining event of my life, which, in retrospect, I would not trade.

Then he asked Stockdale about the other POWs who didn’t survive. What made the difference? Who were they?

Oh, that’s easy, the optimists. Oh, they were the ones who said, “We’re going to be out by Christmas.” And Christmas would come, and Christmas would go. Then they’d say, “We’re going to be out by Easter.” And Easter would come, and Easter would go. And then Thanksgiving, and then it would be Christmas again. And they died of a broken heart.

This is a very important lesson. You must never confuse faith that you will prevail in the end—which you can never afford to lose—with the discipline to confront the most brutal facts of your current reality, whatever they might be.

The need to confront brutal facts applies to all of us, and especially to those involved in innovation and business development. Foolish optimism leads businesses to neglect competitive threats, to ignore key information from early market studies that challenges expectations, or to make terrible mistakes with intellectual assets.

One small company with a terrific innovation recently told me not to worry about their intellectual property, for they were sure it was rock solid and didn’t need any further attention. I said, “OK, but every time I’ve heard that kind of talk in the past, it was a sure indicator of trouble.” Turns out their intellectual property estate was in shambles, and when I gently pointed out the gaps, they ended up asking me to prepare a new application, which we were able to do quickly just days before it would have been too late. Near disaster!

Innovation is always a high-risk activity. Those who do not recognize the risks and think everything is secure and sure to succeed are inevitable disappointed and often poorly prepared for the real risks they face. Those who practice “healthy paranoia” and recognize that there are risks and unknowns at every stage are much more likely to pay attention to those threats and mitigate them.

Mere paranoia and fear of the unknown is unhealthy, as it causes people to abandon the dream unnecessarily. The gloom-and-doom anti-innovation crowd lacks the faith that inspired Stockdale with the vision that he would prevail in the end. Successful innovation requires that faith, for it drives people to keep trying, to learn from their mistakes and learn from the market to iterate and find new approaches to succeed. A combination of faith in the end but a willingness to face and respond to the many brutal facts of reality – a “healthy paranoia” rather than blinding optimism – is what it takes to succeed.

The brutal facts of reality include inevitable failure in initial efforts. This is what separates the innovators from the rest. You are going to fail: the patent will receive a rejection, the initial launch may be a disaster, the partnership may go sour, the funding source may fall through, or the focus group will turn up their nose at your product. Success will go to those who learn from that, and iterate to improve and come back again. “Iterate to innovate.”

Keep the end vision intact while applying healthy paranoia to face and overcome the many innovation fatigue factors that will stand in your way.

Our Mission

InnovationFatigue.com is the official blog for the new book, Conquering Innovation Fatigue. Here we provide supplementary innovation, news, tips, updates, and, when needed, a correction or two, to keep those who are using the big on the inside edge for innovation success.