INSIGHTS FROM INSIDE THE TECH WORLD Innovation, Disruption, and Intellectual Property: A VIEW FROM SILICON VALLEY Ted Ullyot has been closely involved with major ventures and developments involving the technology industry in the United States. He is currently a partner at Andreessen Horowitz, a leading venture capital firm in Silicon Valley, where he directs the firm’s policy and regulatory affairs group. From 2008 to 2013, he was general counsel for Facebook, leading the process of the firm’s initial public offering. His previous positions include serving as chief of staff to the attorney general of the United States, deputy staff secretary to the president of the United States, and a law clerk to the late Justice Antonin Scalia. Ullyot delivered the annual Helen Wilson Nies Lecture in Intellectual Property at Marquette Law School on April 12, 2016. The following are lightly edited excerpts of his remarks. As a lawyer who has spent the last few years advising to ample venture capital . the relationship companies in Silicon Valley—and who has learned a lot (with its high tolerance and been surprised by a lot over that time—I thought for risk), free movement between intellectual it might be interesting for this audience of intellectual of labor and talent property law property (IP) law experts to hear a firsthand perspective (non-competes are not and today’s tech on how intellectual property law is viewed and is being enforceable in California), “disrupted” (as the phrase goes) out in the valley. maybe even California innovators is, as the The American technology sector, centered in weather and Napa Valley kids say these days, and around Silicon Valley, stands today as a wines. complicated. celebrated leader of innovation, disruption, As lawyers, we certainly and economic progress. It is home to also can be proud of the companies such as Apple and Google (the role that the rule of law number one and two companies in the has played in Silicon world by market cap); Facebook, which Valley’s innovation culture—and perhaps no aspect of recently passed Walmart to become number law more than American intellectual property law, whose 12, barely three years into life as a public fundamental purpose, after all, is to promote innovation. company; innovative startups such as Tesla, For this expert audience, it’s probably not Twitter, Pinterest, Airbnb, Uber, and Lyft. necessary to demonstrate the linkage between IP And that’s not to mention the long law and innovation. But just in case, starting with the list of older, more-established Constitution, in Article I, section 8, clause 8, Congress is technology companies such as assigned the power to “promote the Progress of Science Hewlett-Packard, Intel, eBay, and useful Arts, by securing for limited Times to Authors and PayPal. and Inventors the exclusive Right to their respective Numerous factors have Writings and Discoveries.” So right from the outset, the been cited as contributing to stated purpose of patent and copyright law is to promote the valley’s success as a hub scientific and artistic progress—i.e., innovation. On of innovation. Among those trademark, the innovation link is perhaps less discussed frequently mentioned are and not as direct, but it’s still there. As the Supreme strong universities, access Court said (this was in Qualitex Co. v. Jacobson Ted Ullyot Marquette Lawyer 33 INSIGHTS FROM INSIDE THE TECH WORLD Products Co. in 1995): “[T]he [trademark] law helps I’ll illustrate those points with some case studies assure a producer that it (and not an imitating and war stories from my time working as a lawyer and competitor) will reap the financial, reputation-related adviser in Silicon Valley. rewards associated with a desirable product.” Surely, therefore, IP law has played a critical and well- Some caveats appreciated role in tech innovation. But the relationship Before diving into those, a couple of caveats. between intellectual property law and today’s tech One is that my comments regarding IP law today are innovators is, as the kids say these days, complicated. focused primarily on the software sector, which is where And that’s what I want to focus on in my remarks. I’ve spent most of my career (at Facebook, at Andreessen Specifically, it’s Horowitz, and even way back at AOL-Time Warner). complicated in two ways. In areas outside the software sector—for example, . the widespread First: The prevailing hardware or biotech—we generally see more support for perception among view in Silicon Valley today patents and traditional IP rules. But as software becomes Silicon Valley is that IP law is prone to integrated into more and more products and more and being abused. To be sure, more facets of life—in the phrasing of Marc Andreessen, technologists today the potential for abuse is founder of our firm (and a Wisconsin native), as is that IP laws are a feature of any legal or “software is eating the world”—the perspective of the often more of regulatory scheme. But software community regarding intellectual property is when it comes to IP law, likely to become increasingly influential. an impediment it’s not simply that the The other caveat is that I’m humbled to be up here to progress and laws are being abused but giving the Nies Lecture, for I don’t consider myself innovation than an also, more specifically, an expert in intellectual property law. I didn’t even that the abuse ends up take an IP law class in law school, and before my enabler. hindering innovation. So going to Facebook, my practice was predominantly in whereas patent, copyright, administrative law, antitrust and litigation more generally, and trademark laws are and corporate governance. So to be clear—in case of any designed to promote conflict between what I say today and what Professors innovation, according to this view they’re being misused Boyden and Murray are teaching you—I strongly advise in a way and to an extent that discourages and defeats you to go with what they say. innovation. Suffice it to say the widespread perception But I do hope to offer today the perspective of among Silicon Valley technologists today is that IP someone who has spent extensive time over the past laws are often more of an impediment to progress and several years dealing with IP law as it’s being practiced innovation than an enabler. “on the front lines,” in an innovative and rapidly evolving Second: It’s not just their being prone to abuse that ends sector where legal doctrines and prevailing theories— up defeating the purpose of the IP laws. In addition, there’s and, especially, perceptions of market participants—can an emerging belief that the fundamental underpinning change dramatically in a matter of years. of American intellectual property law—to wit, the free- Forget the framed patents on the wall market concept that innovation is best achieved by giving inventors the incentive of an exclusive right to exploit and Twenty years ago, and maybe even as recently as 5 to profit from their inventions—is misplaced, or no longer 10 years ago, if you walked into the office of a successful operative. Instead, the increasingly popular view, certainly computer programmer at a prominent tech company, with respect to software and also with some hardware, you most likely would have seen, proudly displayed on is that technological advances are more likely to come her office wall, framed patent certificates from the U.S. through sharing and collaboration than via the exclusive- Patent and Trademark Office (PTO)—with the nice gold rights paradigm of traditional intellectual property law. seal and the red ribbon—attesting to patents that the Perhaps the best example of this is the rapid growth programmer had secured. in popularity of the open-source movement, in which Today, that picture is entirely different. software designs, and occasionally hardware, too, are To begin with, in today’s Silicon Valley, there are few shared widely and often for free. if any offices to walk into. Silicon Valley has embraced 34 Summer 2017 the “open desk environment,” first popularized by another patent-reform bill, H.R. 9, titled the Innovation Facebook, where not even Mark Zuckerberg has an Act. House Judiciary Chairman Bob Goodlatte, the office. They don’t even have cubicles. Instead, employees primary sponsor, introduced the bill in 2013, saying, work out in the open. “Abusive patent litigation is a drag on our economy.” The But even were there some wall space, most computer perception of many in Congress remains that the patent engineers today would not think of hanging a patent laws are being abused in a way that hampers innovation. certificate on the wall. In contrast to the prevailing view Certainly that is the prevailing view in Silicon Valley. only a short few years ago, patents today are viewed In my time, there was perhaps no better illustration of with disdain by many programmers. this than when Yahoo sued our company (Facebook) for The attitude of modern software engineers is captured alleged patent infringement in early 2012—and how that well in this post from the blog of Mozilla Corporation. played out. (Mozilla produces the Firefox web browser and is a In February 2012, Facebook’s long-awaited initial public “free software community.”) In an April 2015 blog post, offering was imminent. We had just filed our Form S-1 with Mozilla’s general counsel wrote: the SEC, thereby publicly indicating our intent to go public, The threat posed by the growing pervasiveness of which we ended up doing in May of that year. overbroad and vague software patents is the But in late February, Yahoo made its move.