6 AM Pacific

Too much of a good thing

The patent law in the US is one that the country is justifiably proud of. Over decades it has nurtured and rewarded inventors for inventing things that improve the lives of their fellow beings by granting the inventors a limited time monopoly over the uses of their inventions.

But it seems like the pendulum has swung too far to the other side. The range of innovation that is now addressed by patent law is vast and extends to things like business methods. The duration for which the inventor has monopoly rights to exploit his invention keeps going up (now 17 years).

Michael Crichton  (of Jurassic Park fame) recently wrote a piece where he talks about the need to reign in the patent law. In a recent ruling a federal court ruled that an existing patent that simply links elevated homocysteine to vitamin B-12 will stand. Just to be clear, this patent is not about a novel test to check for elevated homocysteine. It is simply the causal link between it and B-12, which is a natural phenomenon in the human body. And the court is allowing the patent on it.

Earlier this week, Netflix sued Blockbuster for patent infringement. The patents are on its business methods of unlimited rentals with no late fees and a ‘range of automated interaction with its customers’. Now I am no friend of Blockbuster and actually think Netflix has reached its dominant position in online DVD rentals through grit and gumption. They deserve every bit of what they have achieved so far. But do they deserve 17 years of untramelled access to the online rental market for some hohum ways of interacting electronically with customers? I don’t think so. An earlier and bigger brouhaha on a similar award of a business method and software patent was Amazon’s 1-click ordering.

These may be one-off exceptions and don’t necessarily prove anything. But if you look at the facts, US patent law (and other IP laws like copyright laws) have become looser, more wide-ranging and give the owner of the patent longer exclusive protection. This, it is claimed, encourages innovation.

But it doesn’t. All innovation is accretive. All creativity is remix. Great inventors stand on the shoulders of inventors before whose inventions allow them to see further. Restricting the use of an ever-widening range of patents for longer reduces innovation because new inventors will not have free access to the inventions. Businesses will spend too much time trying to figure out what to patent or how to side-step others’ patents.

In some industries like healthcare, the upfront time and costs of FDA approval make it hard for the inventor to commercialize a patent quickly. But in most of the world of commerce, 17 years is many lifetimes. The speed of business is faster than at any other time. A shorter period of patent protection should be very doable. Jeff Bezos had some very good suggestions back in 2000 when the 1-click ordering patent controversy broke.

The patent law needs some serious attention from Congress. Otherwise, be prepared to see poorer inventors and richer lawyers.

Tags: Business, Information Products

Infosys getting the attention of class-action lawyers

In another development it seems like my old employer Infosys,
like TCS, has also caught the attention of the class-action trial lawyers. Some
law firm seems to be soliciting interest on the internet from Infosys employees
who, in the past have worked overtime in California and have not been paid
overtime. Interestingly, if you search for ‘Infosys’ on Google, the top-most
sponsored link is from this web-site. Someone obviously thinks this is worth
the trouble.

 

Interestingly, IBM has a similar overtime class-action
lawsuit brewing. Many law firms are behind this one, including Lieff Cabraser,
the firm suing TCS. So Infosys is in good company on this one, with IBM.
Unfortunately, that is the only good thing you can say about the situation. A
lawsuit like this, if indeed it materializes, can be expensive, distracting for
management and can damage the company’s reputation.

 

The claim itself, that the company’s employees were asked to
work overtime without payment, is not going to get more than a shrug, at least
in the Bay Area. Silicon Valley runs on Jolt Cola and other higher forms of
caffeine that allow IT workers to minimize sleep and maximize work. Whether its
IBM, Infosys or the latest start-up, IT workers in general put in more than 8
hours of work a day. Before we start feeling sorry for them, we should remember
that an IT worker is well paid and in-demand. His skills are highly
transferable in a huge global market for IT workers. I don’t believe he needs
the kind of protection a unionized auto worker has (and see what that’s done to
Detroit) - neither in the US, nor in India.

 

I do hope the Infosys overtime ‘fishing expedition’ fails.
Otherwise, it will be bad news all around – for IT services companies, for
clients and yes, for employees as well.

Tags: Business, IT Services

Class action lawsuit against TCS

Last week was a pretty interesting week for the business of global business
– our focus in this blog. Google, Microsoft, Yahoo and Cisco were raked over
the coals in a congressional hearing for aiding censorship in China. More on
this later. First let’s look at the class action lawsuit against TCS in
California.

An Indian employee of TCS America sued TCS for ‘unjustly
enriching itself by requiring all of its employees in the U.S. who are not U.S.
citizens to endorse and sign over their federal and state tax refund checks to
Tata’. The law firm involved, Lieff Cabraser is a well-known plaintiff’s law
firm that pursues class-action lawsuits and has quite a track record doing it.
It regularly features on the National Law Journal’s ‘Plaintiffs’ Hot List’.

A law firm specializing in class-action lawsuits takes no
upfront fees from its clients (the plaintiffs – in this case the TCS
employees). It works for a cut of the settlement that the plaintiffs get. Since
they are dealing with individuals, they could get as high as 30% of the
settlement. Since this is an all or nothing game, the law firm will be very
careful in picking their lawsuits – the target should have deep pockets and
there should be a reasonably good chance of winning the case. Once they sink
their teeth into something they are very hard to shake loose. All of this is
bad news for TCS.

The news on the lawsuit has few details. It seems like TCS
had contracts with Indian employees working in the US that allowed TCS to take
the tax refunds from the IRS (US tax authorities) back from the employees. To
the American public this will sound totally egregious. So why would TCS do
this?

My guess is that TCS had good intentions. They probably
wanted to guarantee a certain post-tax income to their Indian employees in the
US. The amount of tax one pays in the US can vary widely depending upon not
just your monthly income but also the duration of your stay (if it is less than
a year), which state you are resident in and dozens of other federal and state
tax rules. The employee’s tax can vary widely depending upon which client they
are assigned to and the duration of their engagement. So (TCS perhaps thought)
why not relieve the employee from worrying about all this? Why not guarantee a
post tax income to every employee? To do that TCS would have to be able to take
employee tax refunds back from employees if the refunds pushed the employee’s
income including the refund over the promised post-tax income.

Noble intentions, but they seem to have had unintended
consequences. I hope TCS resolves the matter quickly and satisfactorily. PR is
a major weapon for trial lawyers. If this thing goes all the way, they will
drag the Tata name through the American press. There will be collateral damage
to everyone in the Indian offshore industry. I hope it doesn’t come to that.

Tags: Business, IT Services