Leviathan's Van Luchene on why building the biggest library of social gaming patents doesn't mean it will trigger a legal apocalypse
Whether it's the likes of Nokia and Qualcomm, Nokia and Apple, Apple and Samsung and HTC, or most recently Lodsys versus the rest of the mobile games industry, few subjects manage to generate such fierce discussions over incredible complex topics that most of us know little about.
Someone who does know about patents and their value, however, is Andrew Van Luchene.
An serial entrepreneur, he's co-founded Leviathan Entertainment, a company that claims to have the largest number of issued (18 to-date) and pending (55) social gaming patents in the world.
We caught up with him to find out why he thinks patents are so important, whether they have to be so confrontational, and more specifically, how he expects them to impact the future social gaming ecosystem.
PocketGamer: When did you first get interested in social gaming?
Andrew Van Luchene: When I started inventing games and game technology, World of Warcraft was the MMORPG everyone was playing and Second Life was a new freeform virtual world.
As I played WoW, I was blown away by how successfully Blizzard had created a new online world, but the play became tedious. I thought the game would be much more enjoyable if players had new ways to interact with one another so I started to develop ideas around solving that problem.
At the same time, Second Life had tremendous potential but it was unapproachable to most because it was just too freeform to be fun. I felt Second Life could be more approachable to more people if the developer made better in-game tools for players to carry out sophisticated interactions with each other.
So, the first few years of inventing were all about making WoW and Second Life more social.
How have more recent games affected your thinking?
As we developed this portfolio of gaming ideas, Facebook was rapidly scaling and then Zynga figured out that all those people on Facebook needed something to do with each other, so began to provide games. These games were much more basic than WoW and the exact opposite of Second Life in terms of how controlled the experience was, but they brought social to games - not just for gamers, but for the masses.
I think it's safe to say that social is the element that made video games something for everyone. Social gaming is a paradigm shift in the video game industry.
It's a little surprising to me that traditional game companies didn't recognise this themselves.
For example, EA and Activision had the rudiments of online player-to-player interaction almost ten years ago in tremendously successful games such as the Battlefield and Call of Duty franchises, but they never went beyond the basics of player interaction. Instead they focused their innovation efforts on other aspects of gameplay, so now they're playing catch-up.
How do you think social games will develop in future
Social games are rapidly evolving as everyone is being taught about games and, as they understand how these games work, they need them to be more sophisticated in order for them to continue to be enjoyable.
What we are seeing now in social gaming is the layering of MMORPGs such as World of Warcraft onto the social framework. Once this layering has been completed, we will be at a new frontier where social has become games and now games need to evolve into places they have never been in order to stay compelling. Social has increased the gamer population at least tenfold by taking people away from soap operas and slot machines and turning them into gamers.
The lesson is that there are many distinct markets of gamers. Many people say there are hard core gamers and social gamers, but I believe there are many, many more distinct markets. The companies that recognise and cater to these distinct markets will be able to offer games that are both compelling and profitable.
What do you think are the ways of enabling better social gaming?
Two key elements we have worked on that enable better social gaming are: 1) tools that allow you to work with others to progress in the game and, 2) financial architecture that allows for efficient virtual commerce in the games.
When you think about the diverse ways that people interact, from intimate friendships to arms-length commercial transactions, you realise games could embody many of those types of interactions and account for the different types of relationships among people.
Similarly, when you think about the different types of commercial transactions that people enter into, you realise that rich categories of in-game commercial interactions are not only inevitable, but will add exciting new element to games.
How do you encapsulate these into patents?
I've been an inventor for my entire adult life. Right out of college, I worked as an inventor at a think tank that developed and patented new system designs. We were rigorously trained on how to develop patentable, outside-the-box ideas and how exactly to patent them.
When I left the think tank and had all these ideas about how to make WoW and Second Life better, I was able to use the training to turn intangible ideas into designs that companies would want to pay for so they could have exclusivity.
It takes a lot of research to make sure you keep inventing in original directions, and not all the ideas pan out, but it's still a lot of fun.
Why do you think finance within a virtual environment is so important?
When you have millions of people connected online, it's hard to imagine these people wouldn't benefit from engaging in different types of financial transactions. For example, there's been a lot of press about how Facebook could become the world's largest bank due to processing micro-transactions in its social games.
Back when we were developing our portfolio, we saw two exciting elements that we built many ideas out of:
1) Because virtual currency will have a real world value, the virtual world will eventually allow every category of financial transaction done in the real world, such as paying for services from small or large providers, buying insurance against events, even an IPO for a business that's run entirely within a game.
2) Because these financial transactions will be done from within the game, all sorts of new layers of fun and entertainment can be added to the transaction to empower players. For example, a player who's an expert at a game should have an infrastructure that lets him set up shop and sell his services to other players.
That player should also have a sophisticated advertising system that lets him reach other players having the most trouble with the game. If someone fails to reach the next level three times in a row, you ask them if they want to pay a dime for help from the expert, and the expert appears by his side to walk the player through the level.
As another example, one player could loan virtual currency, or even an in-game item like a special weapon, to another player he doesn't even know, and the loan is secured with a real world credit card. If the player does not make his virtual payments, his credit card can be charged a penny, or the player's avatar could be given donkey ears until he has made a payment.
What are your views about the US patent system in terms of how it protects inventors' ideas?
The patent system needs a lot of fixes, but once you learn about it, it's an indispensable asset to the small developer with great ideas.
Without patents, there's a tremendously smaller chance that the big companies will pay for original technology, because companies don't have to pay if it's not patented - they can just copy it. Also, even if a company was inclined to pay for unpatented technology, they'd know that their competitors would freely copy it, and so that dramatically lowers any price the company would be willing to pay.
When a start-up can give exclusivity to a large company, that large company receives real business value, and companies are always willing to pay for real value.
Patents allow the smartest developers to specialise in generating great new technology such as game features, and then partner with the established companies that are much better at production, marketing and distribution.
Together their collective expertise brings innovative products to customers more rapidly than if they weren't partnered, and they share in the profits of great ideas. I would have no way of turning all the ideas I have into transferable assets without patents.
Raising money to build out these ideas would also be impossible; venture capitalists always want to see a barrier to entry or a sustainable competitive advantage before they are willing to invest in the idea. There is no other reliable and repeatable business tool that allows a smaller, innovative companies to compete and thrive in the fields dominated by bigger companies.
Are there any issues with the system?
I think one of the biggest problem with patents in the US is that someone can sue using a weak patent and when they lose they don't have to pay the innocent company's legal fees. This reward for unproductive and frivolous behaviour is a criticism of the US legal system, not patents specifically. Every groundless slip-and-fall case or groundless breach of contract lawsuit is the same kind of thing. If the loser in a patent battle had to pay the winner's legal fees, as they do in the UK and many other countries, frivolous patent lawsuits would disappear practically overnight.
Also, the most significant point for technology start-ups and other inventors is that they are almost never knowledgeable about any business strategies for patented inventions. If companies were educated about the proper business (not legal) strategies, I think companies would behave very differently, and we'd see many more new and innovative products being produced. Unfortunately many people equate business strategy with legal strategy and let a lawyer pick a business strategy and trust they'll execute the right business strategy for your assets.
I think business schools should be teaching entrepreneurs and technologists how they could make it more worthwhile to innovate, and how to successfully partner with large incumbents, rather than having to fight head-to-head in every other area like manufacturing, marketing, sales, etc. That would even the playing field for more entrepreneurs and we'd all get more innovative products more quickly.
How do you hope to enforce your patents in the light of the current situation in mobile gaming with IP holders such as Lodsys suing multiple companies?
In our situation, it has little to do with enforcing patents; we need to convince game companies that they should implement very different game features if they want to flourish in this space. Every company is reluctant to innovate when its competitors can just copy its most successful innovations for free. In fact, I think that's why you see such slow progress in companies introducing new game features.
Patents overcomes that reluctance. A company can take the risks in deploying new game features and if they're successful, can force competitors to come up with their own innovations rather than copy for free. A company that sees valuable, original ideas embodied in good patents will naturally pay to be the only one offering those features.
Do you think patents have to be confrontational in terms of a holder suing other companies in order to gain licensing revenue?
Not at all. Most patent transactions are completely non-confrontational, but they're not publicised and are often confidential.
You read about the worst offenders, litigation or threatened litigation, in the news but those are not typical. For every patent litigation there's hundreds and hundreds of licenses signed and patents purchased that nobody will ever read about because it's an uninteresting private transaction.
As an inventor, I am looking for a way to contribute with what I am best at doing - improving things in a way that drives the most financial reward with the least amount of confrontation. As the idea economy emerges, I hope that the marketplace creates a more efficient market for original ideas.
Some amount of confrontational litigation is the norm in every area of commerce, and in many other areas of activity too. Patents are just another asset that companies can buy and sell. Buyers of assets always want to pay as little as possible and sellers of patents always want to get as much as possible. Sometimes one or both are unreasonable and litigation results.
Unfortunately, since the patent system practically forces patents to be written in arcane language, it's too common that a patent is unintelligible to most readers. When you read about a patent lawsuit, the article rarely gives an accurate description of the patent, so you never know the real story unless you conduct your own analysis of the patent.
What sort of companies do you think would be interested in acquiring Leviathan for its patent library?
Ideally, we'd be able to convince every game company to start implementing exciting new game features, and then we'd see more players playing for longer periods and engaging in diverse types of new activities.
In my opinion, companies such as EA, Zynga and Disney could significantly increase player enjoyment and add new revenue streams if they stopped worrying about copying and adopted a different mindset about game innovation.
In addition, game infrastructure providers such as Google, Facebook, or Apple, could benefit from implementing some of our technology such as in-game transaction infrastructure and cross-game player interactions.
Thanks to Andrew for his time.
You can check out Leviathan Entertainment's patents here.