I was introduced to Bob Zeidman by Capers Jones. Capers has been working on a scoring method for software. On that scale the most damaging practices have to do with the litigation over patent violation and IP theft. Turns out that Bob has a company called Software Analysis and Forensics Engineering that helps clients with these problems. Bob has written several books including the soon-to-be-released The Software IP Detective's Handbook.
John - Bob, thanks for joining me on the Patterns of Success series of interviews. Before we get into the core questions tell me about your new book coming out.
Bob - The book covers a lot of areas. Hopefully that will mean a lot of people will like the book, the union of all the possible readers instead of the intersection. There is stuff in the book for software managers, business people, and entrepreneurs, teaching them what is Intellectual Property and what kinds of Intellectual Property can protect my software and my business. There is stuff in the book for attorneys who want to understand in very broad terms what the issues are in protecting software intellectual property in particular. I sometimes deal with attorneys who don't have much IP experience and I sometimes deal with IP attorneys who don't have much software experience. The book is also for computer scientists and mathematicians. Some of the sections are highly mathematical showing algorithms for measuring software IP value or for comparing two sets of software for IP similarity.
John - When I worked at IBM as part of Global Services, I would sometimes run into a problem with my colleagues in IBM Software or IBM Research over IP protection. If we asked them to participate in a customer meeting, they could brief the customer on a topic but had to leave the room if a brainstorming session of new ideas was going to take place. This rule was to avoid any contamination of their current or future development work.
Bob - I think that is a smart strategy. I have been a consultant for almost 25 years and at a bunch of companies I was treated like an employee. This was great because I had access to relevant information and I had a camaraderie with people. Now I had signed an NDA but there were times when I would be in a meeting where all sorts of company confidential information was being discussed and sometimes they would get uncomfortable and ask me to leave. But they had not thought through a consistent policy to deal with the situation.
John - So let’s talk about these Patterns of Success. Over the years as you have been giving advice to clients, what have they done in this area to be successful?
Bob - One piece of advice I give companies is to have written procedures for protecting your IP. Trade secrets are another big area that needs written procedures. Trade secrets are not very well defined in a company. In some cases having an ill-defined Trade secret allows one company to take another company to court to resolve the issue. But if the defendant can show that the plaintiff did not have well documented procedures for protecting the trade secret then the suit would be dismissed.
John - So what you are recommending is that companies identify what their trade secrets are and then put in place procedures to protect them.
Bob - Well you don't have to identify the trade secrets up front. That is hard to do. But you need to put in place some general procedures. For example, everyone who comes to work for you signs a non-disclosure agreement. Everything that you think is important to your business you mark as confidential. There is a written policy where employees are not allowed to email source code outside the company or put it on a USB drive. This does not prevent the improper behavior but it does prove in court that you were trying to prevent the theft of trade secrets.
John - If I am a software developer and am going to a conference I need to be careful about what I disclose but at what point is the general description of a concept or a demo of a prototype become an issue for protection of trade secrets?
Bob - Yes. Whatever you disclose in public cannot later be claimed as a trade secret. So if you describe the architecture then that is not a trade secret but the source code would be if it was protected and not disclosed. The problem is that the more you disclose about something the more difficult it is to protect the rest of your product. Let’s say an employee leaves your company and goes to a competitor and creates the same product. The claim could be that the employee stole a trade secret. But as soon as it is revealed that you talked about the product in a public forum, you have to fight very hard to prove what you did not say at the forum or that others could not have guessed the details of the product from what was revealed.
John - What happens if prior to going to the conference I had filed for a patent?
Bob - Now patents are different.
John - Don't they cover the whole trade secret area?
Bob - No. Actually they are complimentary. A patent is a protection from the government that says if you disclose your invention and make it public, so that others might improve on it or work around it, the government will give you the rights to all income based on the patent for a limited period of time. A trade secret is something you do not want to be made public and goes on forever as long as you can keep it secret.
My company, SAFE, has some tools which are used in court and lawyers always want to prove that the tool really works. So we have to disclose the inner working of our tool. That is what we have patents on. But we have some tools used within our company that are never shown in court. These tools we keep as trade secrets.
John - That got me thinking about the tools you use in court. Is the way it works is a comparison of two bodies of source code looking for signatures/patterns that prove one source is a copy of the second?
Bob - Yes. And ultimately it means you must show both sets of source code side by side and show how you know one is a copy of another. Our tool pinpoints where those locations are.
John - Any other patterns of success?
Bob - Start ups and small companies do not focus enough on patents. I think that is a mistake.
John - But filing for a patent is a fairly expensive process. One that smaller companies often cannot afford.
Bob - There are ways to cut down on the cost. But my experience as a software entrepreneur is that the investment in the patent pays off. With a patent pending, you are more likely to get investment in your company. It also means that if your business fails for any reason the patent might be something you can sell.
John - It is also a barrier to entry for potential competition.
Bob - Yes. I have had big companies tell me that they intended to duplicate my protected IP because they thought the patent was invalid. In reality they thought that I did not have enough money to pay the lawyers’ fees to defend my patent. However, there are people out there who will provide the funding to defend a patent in court.
John - As a small business you really have to be clever in figuring out the smallest number of patents that provide the maximum benefit.
Bob - Here is a scoop. An exclusive for your blog. I just started up a new company called The Zip Fund to fund patents for entrepreneur and start-ups. My company will help pay for the patent and help them go through the filing process.
John - For a share of the future value of the patent?
Bob - The reason I have not made a big public announcement is that I have not worked out the best business model to realize revenue. It would be a long term investment for me because even valuable patents often do not become valuable for years.
John - Now, in the area of Failures to Launch. Where have you seen companies have catastrophes around IP?
Bob - One of the classic problems is when an employee leaves one company to join another or start a new company and takes the software they were working on.
John - Is this done for financial gain, or is the developer often just taking what they worked on so that they could repeat a clever design pattern?
Bob - I have seen both. In the extremes of the Open Source movement I see people who feel that software is the same as thoughts and that you can't control my thoughts so you should not control my code. But that is pretty rare. More often, programmers see a financial opportunity and don't think they will be caught. All these scenarios are copyright infringement. On the flip side I have seen big companies bully little companies, especially when an employee from the big company goes to the smaller company.
One recent case was a couple of people who went into a big company with a PowerPoint presentation to sell them some software. They also showed a demo of the software. A few years later they sued the big company for theft of trade secrets. It boiled down to six slides in that PowerPoint deck. They ended up settling out of court because the judge decided to allow the case to go to trial on merit. I worked for the big company at the time. The problem was that a lot of judges are not well educated about software IP. The plaintiffs found an expert willing to testify that the PowerPoint slides were the key to everything. The judges are often reluctant to make an early decision and prefer to bring it to trial and let the experts battle it out.
John - Based on your knowledge of this whole IP litigation area, what have been some of the biggest cases?
Bob - One of the largest settlements was a case that I worked on that involved Texas Instruments. They successfully pursued patent infringement cases against Samsung and Hyundai. Each case was settled for approximately one billion dollars.
John - What had Samsung and Hyundai done?
Bob - They had used TIs technology for their products either not knowing of the patent or thinking that they were not infringing. TI has some very basic patents on putting semiconductor wafers through a process to make chips.
John - So TI must have a substantial chunk of their revenue coming in through patent royalties,
Bob - I have heard that some years TI makes more money from royalties than from sales.
John - Any other major litigation's involving IP?
Bob - One of the major cases involved Atari Games vs. Nintendo, where Atari wanted to make game cartridges for the Nintendo console. They reversed engineered the cartridge functionality and the judge ruled that reverse engineering from public documents was perfectly legal. Except Atari made two mistakes. They got something from the copyright office under false pretenses. This might not have been a crime but the judge was not happy about it. But worse, when they reverse engineered the Nintendo cartridge so that they could make it work with the console, they copied some of the code. If they had set up a clean room development lab where the communications in and out were controlled, then they could have avoided the copyright problem.
John - Shifting gears. What is the NEXT BIG THING about three years out?
Bob - Well I have a lot of stuff my company is working on...but I can't tell you.
John - Ha Ha. You would lose your trade secrets via this interview.
Bob - Right. But some of the stuff we have announced that will be important is in the area of Social Gaming. All of that code is accessible by the users of the game. There is a big frenzy to create new games and we have seen some similarities in code from different social games. We did a press release on the similarity of some Zynga code and some CrowdStar code. We think in the coming years this will a big problem that needs to be protected on social networks.
John - Why is the source available to the users?
Bob - These games are done in Flash which is very easy to decompile. Because they want to run on multiple platforms, a company wants to use an interpretive language like Flash.
John - And another problem might be that these social games might have many people contributing to the problem. I might want a super tractor in Farmville so I grab an object from another game and enhance it to run in Farmville. And hundreds of my fellow gamers do similar things. Lots of people to prosecute.
Bob - That brings up another good prediction. Right now we are focusing on the game companies, but in a virtual world like Second Life the virtual economy is tied back to real money. So if someone steals something is Second Life and sells it for Lindens, they can convert those Lindens for Dollars. Someday there might be a service in Second Life, a detective agency, to track down these thefts and return the virtual property. Instead of using DNA and fingerprints we would use software tools.
John - Thanks for your contribution to Patterns of Success.