Eventually they settle, and you, the pay-TV customer, ends up paying more.

And that’s what’s happening in the latest dustup between Dish Networks, the satellite TV service, and AMC Networks, the programmers now best known as the guys who bring you “Mad Men,” “The Walking Dead” and “Breaking Bad.”

The slight twist here: For argument’s sake, at least, Dish is saying that because AMC is selling digital versions of those shows to other outlets, its hit shows are worth less to Dish subscribers. “It’s actually devalued,” says Dish chairman Charlie Ergen.

The fact that networks are selling or giving away their stuff online has been a minor but growing issue in carriage fights for a while now. But this is the biggest stink that a cable/pay TV provider has made about it, at least in public.*

Dish first brought this up via a press statement last week, but Ergen went on about it at length today during the Dish earnings call.

It’s worth reading. I’ve cleaned up his comments just a bit for clarity (note that AMC Networks includes multiple channels, including AMC, IFC and Sundance):

We have very, very specific viewer measurement. Much more granular than somebody like Nielsen might have. So we’re able to watch our customer base and — we realize we skew a bit more rural — between [AMC Networks] programming, they have very, very low viewership, outside of a few obviously popular [shows] on AMC.

But those particular channels are also available to our customers on a variety of other sources, like iTunes, Amazon, Netflix and so on.

One of the things that programmers have done is that they’ve devalued their programming content by making it available in many multiple outlets. So, when someone asks for price increases …

We just look at it. Our customers are not really saying “We want to pay more money,” they’re saying, “We want more flexibility in our programming, and we don’t want to pay more.”

And when you look at that from a timing perspective, that’s just a contract that we can change. And we believe that the product is actually devalued. Not that there’s not some good programs, but that they’ve been devalued, because you can get it in multiple ways. And customers are asking for more flexibility, or have more flexibility to get the programming. So it’s not quite the same as something that was exclusive.

So we look at it and say, “This is a good opportunity to make a good business judgment call.” And obviously there’s a price where an [AMC Networks] product makes sense. We just don’t think that’s where we are today.

First things first: Obviously it makes the most sense to dump all of this into the “posturing” bucket, and treat it accordingly. The easy money here is to bet that, yet again, Dish and AMC will strike a deal, which Ergen, at the end of his remarks, explicitly says is on the table.

That said, a couple of points:

• Most of the big TV programmers seem to agree with Ergen’s point when it comes to free repeats of recent shows. Which is why they have been taking stuff that they’ve been giving away via outlets like Hulu, and either pulling them off the Web entirely, or requiring that customers “authenticate” — prove that they’re paying for cable or satellite TV —  in order to see them without delay. Note that Dish was the first pay-TV service to participate in the Fox authentication plan last summer. (Fox is owned by News Corp., as is this Web site.)
• TV programmers don’t seem to think that iTunes’ and Amazon’s a la carte sales of shows that aired the night before are devaluing their product. Because they’re still selling them, and by all accounts there doesn’t seem to be a ton of volume for those episodes. If there was, advertisers would squawk long before pay-TV providers would.
• The really touchy subject here is what happens to prior-season episodes of AMC hits like “Mad Men” and “Breaking Bad” on Netflix. Netflix has been arguing that these episodes are big draws for its customers, and that this is good for networks like AMC, because people discover the old shows on Netflix and then watch the new ones as they air. There is some evidence for this, too.
• But there is also evidence that Netflix repeats hurt some cable programming — like kids’ shows — too. And that leads to speculation that Viacom and Disney will pull back their shows from the service or raise prices when their contracts expire — even though Netflix is already paying big dollars for them. Netflix will have its hands on “Mad Men” and other AMC shows for at least a couple of years more. But it will be interesting to see what Dish’s complaint means for the renegotiations.

*There is also a wrinkle involving a lawsuit between Dish and a former AMC subsidiary, but that’s par for the course, too. All of these guys sue all of these guys, all the time. No recession, ever, for TV attorneys.

But in a new survey conducted during the first quarter, Nielsen discovered that the two devices are not being used for the same kinds of shopping-related activities.

For instance, U.S. consumers are most likely to use their smartphone to find a store and check prices, whereas tablet owners are more likely to do PC-type activities, such as researching products and reading product reviews.

Owners of both devices report frequently making purchases, including 42 percent of tablet owners and 29 percent of smartphone owners.

Last Christmas, the mobile shopping category first started to get retailers’ attention in a big way, leading to new vernacular such as “m-commerce,” or more fun things, like “couch commerce,” which conjures up images of consumers shopping while sitting in front of the TV.

Most retailers, like Amazon, haven’t started breaking out the mobile contribution, but eBay is forecasting that purchases made from apps or the browser on a phone or tablet will hit $8 billion in mobile gross merchandise volume this year, up 60 percent from $5 billion in 2011.

I’ve written my own critiques of Google. But the big G is more on par with Microsoft, IBM and other perennial brands than with Myspace. Google may have its ups and downs, but it’s not going anywhere.

Here’s why:

Google is a utility, not a toy

Google isn’t just a fun toy. It has become a utility for the vast majority of Internet users. It’s a major driver of commerce for businesses. And it collects and redistributes data in a way that no other tool or site has been able to replicate.

Myspace wasn’t a utility. It was a place where teenagers gathered to trade messages. Bing and Yahoo? They never approached the market share — or the effectiveness — needed to become as important.

Google has become a tool we constantly use. It’s integrated into web browsers and phones, and now it’s testing the waters of wearable computing. It powers the flow of content around the Internet. And it isn’t going anywhere.

Social isn’t a “new way of thinking”

Jackson says that Google’s failure to move into social media (we can debate that) is a major weakness, because social media and the structures it creates are replacing search:

Why has Amazon done so little in social? And Google? Even as they pour billions into the problem, their primary business model which made them successful in the first place seems to override their expansion into some new way of thinking.
There are a few problems with this statement:

• Social isn’t replacing search. It can’t, any more than a walnut can replace a bicycle. Social and search are completely different: Social media generates content and relationships. Search engines help us sift through content and relationships. There’s very little overlap.
• Social media isn’t new. It has been around since AOL, CompuServe and Prodigy. Truthfully, it’s been around since humans could communicate. It’s not disruptive. The ways innovators apply it is disruptive. But that application doesn’t threaten Google.
• Google is desperately clawing at social media because the publicly traded company needs revenue growth, and because it wants to tap social media as another portion of its search algorithm.

Social really does not pose a threat to Google. If Facebook were to introduce a first-rate search engine, that might reduce Google’s market share. But even that wouldn’t drive it out of existence.

People

Even with its post-IPO brain drain, Google has an unparalleled ability to attract and retain top-rate engineers. Google is a unique engineer’s paradise, if you like the environment there. Between its culture and the mountain of cash upon which it sits, Google can have first or second pick of the best talent in the industry.

Until it becomes a truly entrenched, mature corporation with all of the baggage that brings, no one can really touch Google’s talent pool.

What could destroy Google

There is one potential Google-killer out there: Legal action.

Google’s moving into dangerous territory and could end up getting carved up through government action:

• It dominates search, and isn’t afraid to use that dominance to acquire some competitors, crush others and generally move the industry as it sees fit.
• It has access to mountains of analytics data across different online channels, and can potentially use that data in ways that should give regulators hives.
• Its promotion of Google+ seems awfully similar to Microsoft’s promotion of Internet Explorer 2001-2005. It has locked out other social networks when it controls more than 85 percent of the search world. That alone might force antitrust action.

The federal government could, if forced, order Google to break up into separate units around search, social, applications and email. Or it could force the company to completely abandon some initiatives. That would be nearly unprecedented. But then again, so is Google.

Ian Lurie is CEO of Portent Inc., an Internet marketing agency that he founded in 1995. He co-published Web Marketing All-In-One for Dummies and wrote the sections on SEO, blogging, social media and web analytics. He also wrote Conversation Marketing: Internet Marketing Strategies.

Here’s a proof point: Discovery Communications, parent of the Discovery Channel, has purchased Revision3, a Web video start-up that makes and distributes its own shows, like “Tekzilla” and “Epic Meal Time.”

Discovery isn’t disclosing a purchase price, but multiple sources familiar with the transaction tell me the cable guys will pay around $30 million for the start-up. The company ended up raising about $10 million during its six-year lifespan, with the last chunk coming from a group of investors that included Mark Cuban.

All of Revision3’s 50 employees are supposed to stay on, and there’s a chance that they could end up pulling down sizeable earnouts. But they probably won’t, because that’s the nature of earnouts.

TechCrunch reported the deal talks earlier this week.

This deal isn’t an “acqhire,” as Discovery intends to keep Revision3 operating out of its San Francisco headquarters. The idea is that Revision3 will continue to make its own Web shows, which generate some 100 million streams a month, and that Discovery will eventually figure out ways to sync up some of its own stuff into the mix.

“We want them to continue doing what they’re doing, and to continue developing native digital talent,” says Discovery’s digital boss JB Perrette. To date, Discovery hasn’t done a lot with Web video, and has traditionally kept most of its cable programming off the Internet. That has changed a bit recently, via library deals with Amazon and Netflix, and may ramp up a bit more in the future.

The deal comes as big Web players are trying to convince advertisers that their video stuff is just as good as TV — see Google’s big show in New York last night.

But Discovery thinks there’s still a distinction between TV and the Web — which is why it wanted to buy Revision3 in the first place.

“We produce content on a $500,000 to $750,000-an-hour scale,” Perrette says. “Producing something at a tenth of that cost means it has to be very different.”

Meanwhile, Revision3 CEO Jim Louderback, who used to write blog posts with titles like “Cable TV Is Screwd,” now says there’s life in the cable business, after all. “One’s not going to destroy the other,” he says. “I don’t think any new media destroys the other. I think it just creates its own path.”

According to IDC’s review of worldwide tablet shipments for the first quarter of 2012, Kindle Fire shipments dropped from 4.8 million units in the fourth quarter of 2011 to less than 750,000 units last quarter.

From 16.8 percent to “just over 4 percent” global market share is a swift decline indeed, and enough to cost Amazon its second-place spot in IDC’s ranking of tablet vendors. Amazon is now in third place, behind Samsung.

In the first-place slot: Apple. While the company shipped 11.8 million iPads in the first quarter, down from 15.4 million units in the fourth, that was more than enough to maintain its dominant position and grow its market share to 68 percent from 55 percent.

One last detail worth noting: Worldwide tablet shipments for the quarter reached 17.4 million units, about 1.2 million units below IDC’s projections. That said, they were more than double the 7.9 million units shipped in the same period a year earlier.

(Image courtesy of Someecards)

Instead, the Burlingame, Calif., company was going to focus on building games for smartphones.

Now CrowdStar, known for titles such as Top Girl, Social Girl and Modern Girl, is announcing that it has raised $11.5 million in a second round of funding to fuel its mobile ambitions.

Investors in CrowdStar’s second round are Time Warner, Intel Capital, YouWeb, The9 and NV investments. To date, the company has raised $35 million in capital.

With the new funding, the company said it plans to pursue mobile games targeting the female audience and focusing on shopping and fashion. The games will be distributed using Facebook’s social graph, the Gree social gaming network and Apple’s Game Center.

“This funding round validates our pivot to mobile social games,” Relan said in a release. “We’re going for a bigger market with lower production and acquisition costs compared to social games on the web.”

This summer, CrowdStar will launch a brand-new Girl franchise game on Gree’s emerging mobile social network. Just yesterday, Gree announced it had acquired mobile social game maker Funzio for $210 million, showing its committment to signing up new games to the network. CrowdStar is also distributing games on Amazon’s Kindle Fire.

And, as you can see from the screenshot at left, Target has already pulled the Kindle from its Web site.

“Target is phasing out Amazon- and Kindle-branded products in the spring of 2012,” the retailer said in a statement. “We will continue to offer our guests a full assortment of e-readers and supporting accessories.”

It’s not yet clear why Target is ditching Kindle, though The Verge, which broke the story, claims the reason is a “conflict of interest.” And that could be any number of things: A contract negotiation gone bad, Target’s decision to open iPad-peddling Apple mini-stores at a few dozen of its locations, or the growing retail rivalry between the two companies. Remember, Amazon’s Kindle Fire is very tightly integrated with the company’s vast online retail store, which competes directly with Target and has a penchant for undercutting the prices of traditional retailers.

Amazon did not respond to a request for comment.

A new report by digital marketing agency iProspect finds that millions of affluent men are using the Internet for research and shopping — and spending a boatload of money.

It has long been assumed that women are the dominant shoppers online, and that if you were to start a company, it should be aimed at the female wallet. Well, here’s some testosterone to shoot down that argument.

IProspect identified a population of 19 million men over the age of 18 who make at least $100,000 and are frequently shopping online.

More of the report’s findings:

• 40 percent of respondents are shopping online at least twice a week, and those who are shopping multiple times are spending in excess of $30,000 annually.
• Luxury menswear in particular is benefiting, and is growing at a rate of about 14 percent every year.
• 70 percent of men in this demographic research and buy online, as opposed to researching online and then purchasing in the store.

To put the market into perspective, here’s a pretty — albeit manly — infographic from iProspect:

The company is pulling back the covers (a bit) on its plans to produce kids’ shows and sitcoms via its “Amazon Studios” unit, which has already been dipping a toe into the movie business. Word of the new push leaked out earlier this year, via hiring notices — such a useful way to track a secretive company! — and now Amazon is ’fessing up.

A bit. Amazon Studios head Roy Price won’t discuss his budget, or the number of shows he intends to make, or a timeline for getting them on the Web. But he is willing to sketch out a couple of notions:

• Like the movie effort, Amazon is soliciting scripts for new productions via the Web, and will pay out modest fees — $10,000 for an option, $55,000 if a show gets produced, plus possible royalties — for stuff it likes.
• The big difference between his TV effort and his movie effort is that Amazon intends (with some exceptions) to actually make the shows, and distribute them via its own “Amazon Instant Video” offering. (For the movie effort, Amazon is feeding scripts it likes to Warner Bros., which will decide what to do with them.)
• Price says the shows he does make should look and feel like “real” TV shows, with commensurate production budgets.

Lots of wiggle room in all of this. So the big news is that Amazon is formally declaring that it’s in the original video business — just like Google, Hulu, Netflix, Yahoo and lots of other tech guys.

Not surprisingly, Price doesn’t want to talk about Amazon’s place in that newly formed constellation. But he does point out that this isn’t the first time the company has started making its own media. Amazon has already launched its own book-publishing business, and has started poaching “real” authors for that effort, and that has traditional book publishers terrified.

Hard to see Hollywood freaking out about this right now — particularly when they’re making a ton of money selling Amazon their old shows. But if this ever takes off, that could change.

In the first quarter, LivingSocial’s revenues totaled $110 million, increasing 168 percent compared to the same period a year earlier. The Washington, D.C., company also recorded a profit of $156 million during the period, compared to a loss of $60 million a year earlier.

[Update: To clear up any confusion, a footnote in Amazon's filing explains that LivingSocial's net income in the first quarter was boosted by non-cash gains from acquisitions during the quarter. Otherwise, it reported an operating loss of $92 million.]

The results of the privately held company were reported last week by Amazon, which holds a 29 percent stake in the company.

The positive results were echoed in a report released yesterday by Yipit, which independently tracks the performance of the daily deals market. According to its data, LivingSocial gross billings are accelerating and are up 15 percent in the first quarter compared to the previous period.

A LivingSocial spokesperson declined to comment on third-party estimates.

Despite what information is publicly available, LivingSocial’s operations remain a mystery compared to its largest competitor, Groupon.

Since going public late last year, Groupon has tripped up multiple times, leading its stock price to tank and critics to question the sustainability of the entire industry. Just yesterday, Kara Swisher reported that two of Groupon’s board members were being replaced with board members who have more of an accounting background.

Any LivingSocial screw-ups, as well as its accomplishments, are masked by the fact that it is privately held.

According to Yipit, LivingSocial’s gains in North America during the first quarter were propped up by Escapes, its travel division. It said Escapes grew by 31 percent to $38 million in gross bookings in the first quarter, up from $29 million in Q4.

What’s most impressive, according to Yipit, is that LivingSocial’s growth comes as it showcases more deals — sometimes more than a dozen in one city.

In the first quarter, it offered roughly 21,000 deals, a 15 percent jump compared to the fourth quarter. Despite offering more deals, gross bookings per deal have remained relatively steady — in other words, as it offers more deals, customers buy more deals.

At the same time, the company continues to experiment with new products, including 918 F Street, which is a venue where LivingSocial can host a number of experiences. It also recently launched Takeout & Delivery services, where users can order full-priced meals online.

That option replaced the company’s instant deals, which offered last-minute discounts on meals, pedicures and other offers.

Just yesterday, Groupon reaffirmed its commitment to a similar product called Groupon Now by announcing that it had sold 1.5 million mobile offers since launching a year ago. It said it was live in 31 of its 175 North American markets with more coming soon.

In late afternoon trading today, Groupon’s stock was finally trading up 2.5 percent, or 27 cents, to $10.98 a share, after sliding for multiple weeks. At that level, the company was worth $7 billion. In comparison, LivingSocial was last presumed to be valued at somewhere between $4 billion and $5 billion.

Spencer Platt | Getty Images News

According to sources close to the situation, Starbucks Chairman and CEO Howard Schultz and Accel Partners’ Kevin Efrusy will be stepping down from the board of Groupon.

Schultz’s departure will be effective today, but Efrusy — who was critical to the initial funding around the Chicago-based daily deals site — will not be standing for re-election at the company’s annual meeting in June.

The departures are voluntary, but sources said the pair will be replaced by two new directors with significantly more fiscal oversight experience, whom one source characterized as “accounting types.”

(Update: Groupon just posted a press release noting the board departures, with the names of the new board pencil pushers: Daniel Henry, CFO of American Express, and Deloitte Vice Chairman Robert Bass. Henry joins immediately in Schultz’s place. Full press release below.)

It is a move that is critical, given Groupon’s recent series of missteps around its financial reporting that have hurt both its reputation and, more importantly, its stock.

Interestingly, several sources noted that Schultz almost left the board right before Groupon’s public offering last fall, after several ongoing disputes with its management, but stayed on so as not to scuttle its IPO.

The board of the company has not involved itself as prominently in the accounting messes at the company, but it appears as if they will begin to now.

It must, given Groupon shares have been trading at a low of $11. Its stock has dipped to $10.98 today.

As Tricia Duryee wrote recently about the fall:

At that price, it is now worth just over $7 billion, down 57 percent since the company went public last November and well off the more than $10 billion it was valued at as tech’s hottest start-up of 2011.

Ironically, Groupon’s current market valuation is actually not much more than the $6 billion offered for it by search giant Google in late 2010.

The fall of Groupon has been swift, from the honorific of being the fastest-growing company ever to one that cannot keep control of that runaway growth.

That’s perhaps no surprise.

Perhaps most significantly, Groupon went public in just four years, delivering the biggest tech IPO since Google.

The quicksilver move was typical for it. In just two years’ time, the company ballooned from 37 employees to 9,625 and from serving five markets in the U.S. to 175 in North America alone. And that’s leaving out massive expansion abroad. In the past year, Groupon has acquired roughly 17 companies, including many international copycats.

The company also has entered many new segments, expanding from selling lower-priced and simpler deals on restaurants and spas to more complex and pricey arenas, including travel, physical goods and luxury items.

But Groupon is now learning that its original business does not work across just any segment, especially to more discerning customers of its higher-level and more expensive offerings.

In fact, it was those newer and potentially more lucrative markets that forced the company recently to revise the company’s fourth-quarter report after returns skyrocketed on luxury items, such as Lasik eye surgery.

The problems forced Groupon to lower revenue in the period by $14.3 million and net income by $22.6 million. It is now reporting a wider net loss of $64.9 million on revenue of $492 million, pushing it further away from its goal of profitability.

The company also disclosed at the time that independent auditors had noted “material weakness” in its financial controls. In addition, The Wall Street Journal reported that the Securities and Exchange Commission was examining Groupon’s revision. 

With many companies, investors might have shrugged off such accounting issues, but the impact on the stock has been greater since they are only the latest in a string of similar mistakes at Groupon.

In its pre-IPO period, for example, Groupon was forced to restate revenues after counting both its portion of the revenue and the revenue that goes to the merchant together. It also had to dump a controversial accounting metric that made the company look more profitable than it was, because it did not include important costs, such as critical online marketing expenses to attract new customers.

Those came after the company retracted a statement by Eric Lefkofsky, Groupon’s co-founder and executive chairman, who told Bloomberg in an interview that Groupon would be “wildly profitable.”

At least the wild part was accurate.

Much of the blame for these missteps by Wall Street is being aimed at CEO and co-founder Andrew Mason, the iconoclastic 31-year-old entrepreneur who is largely responsible for defining the company’s culture, as well as Jason Child and Joe Del Preto, the chief financial and accounting officers, respectively.

Child joined the company in December 2010, coming from Amazon, where he held several roles over a 10-year period — including VP of finance, international, and director of investors relations. Prior to joining Amazon, he worked at Arthur Andersen as a certified public accountant.

Del Preto has been Groupon’s chief accounting officer for the past year and, before that, he was the company’s global controller for three months. Before Groupon, he was controller and VP of finance at Echo Global Logistics and also served as controller at InnerWorkings, the same company where Mason was a computer programmer in his early career.

Mason, of course, is the best known and the person most responsible for establishing the company’s whimsical culture and managing — or mismanaging, depending on how you look at it — Groupon’s hard-charging growth.

It will also be up to him to turn it all around, as the company sinks in both value and investor regard. Since the restatement, Mason has said little about how he intends to do that. In February, when Mason concluded Groupon’s first-ever earnings call, he said: “Thanks, guys, this was a lot of fun, and I look forward to many more of these.”

It’s not clear fun will be on the agenda at his next outing on Groupon’s first-quarter call in mid-May.

Here is the official press release from Groupon on the board changes:

Groupon Appoints Two Directors to Board Daniel Henry, CFO of American Express, and Robert Bass, Vice Chair of Deloitte

CHICAGO — (BUSINESS WIRE) — Groupon, Inc (http://www.groupon.com) (NASDAQ:GRPN) today announced that Daniel Henry, the chief financial officer of American Express Company and Robert Bass, a vice chairman of Deloitte LLP will join its Board of Directors. Both will serve on the Audit Committee with Audit Chair, Ted Leonsis. Daniel Henry was appointed to the Board on April 26, replacing Howard Schultz, who has stepped down from the Board. Robert Bass will stand for election at the annual stockholder meeting to be held on June 19 following his retirement from Deloitte, replacing Kevin Efrusy, who will not stand for reelection at that time. “With their deep financial, accounting and operational experience, Dan and Bob will provide invaluable expertise to the Board going forward,” said Eric Lefkofsky, Groupon Chairman.

Daniel Henry, 62, has been the Chief Financial Officer of American Express Company since October 2007. Henry is responsible for leading American Express Company’s finance organization and representing American Express to investors, lenders and rating agencies. He has also served as Executive Vice President and Chief Financial Officer of U.S. Consumer, Small Business and Merchant Services and joined American Express as Comptroller in 1990. Prior to joining American Express, Henry was a partner with Ernst & Young.

Robert Bass, 62, has been a vice chairman of Deloitte LLP since 2006, and a partner in Deloitte since 1982. He will retire from Deloitte on June 2, 2012. Bass has specialized in e-commerce, mergers and acquisitions and SEC filings. At Deloitte, Bass is responsible for all services provided to Forstmann Little and its portfolio companies and is the advisory partner for Blackstone, DIRECTV, McKesson, IMG and CSC. He has also previously been the advisory partner for priceline.com, RR Donnelley, Automatic Data Processing, Community Health Systems and Avis Budget. He is a member of the American Institute of Certified Public Accountants and the New York and Connecticut State Societies of Certified Public Accountants.

“I’m thrilled to have been a part of Groupon’s development,” said Kevin Efrusy. “The Company is well on its way to becoming the operating system for all local commerce.”

“Howard and Kevin helped guide us on our journey to becoming a public company and I want to thank them and acknowledge their contributions,” said Groupon CEO Andrew Mason.

“During my tenure on the Board, I was impressed by the game-changing opportunities that Groupon has delivered for both merchants and customers on a global scale,” said Howard Schultz. “Groupon has a strong sense of mission and purpose, and as I move on to focus on my other time commitments, I wish them the very best.”

My personal wake-up call happened in November 2008. The financial crisis was exploding, the hot start-up computer company I worked for, OQO, was in the process of shutting down, and my 19-month-old son had just been diagnosed with Type 1 diabetes. Unlike when someone is laid off and can receive ongoing benefits, when a company shutters and jobs are disappearing everywhere, there is no Cobra coverage.

At the time, I was responsible for building and growing OQO’s patent portfolio. It was staffed with some of the smartest and most talented people I have ever met. OQO pioneered innovations in computer miniaturization, antenna design and power management. Unfortunately, due to delays in getting patents processed, OQO had 13 patents granted but over 90 pending, and without further collateral, the company was out of time and options.

Instead of helping the company though a critical time, the complexity and inefficiencies in the patent system contributed to the entire 100+ employee company being lost.

Since that time, I have worked to make sure things like this don’t happen again. As a former U.S. patent examiner and advisor to the Obama-Biden transition team, I was appointed by the Obama Administration to help fundamentally reform the quality and speed with which patents are issued. Today, there is a fast track for small businesses to build large patent portfolios quickly, and expanded work-sharing programs with patent offices all over the world. Last year, the Small Business Administration Office of Capital Access supported over $30 billion in financing and is now working with the USPTO to better ensure that lenders can feel more confident that patents are able to be used much like equipment, machinery, or real estate to secure financing.

Since leaving the Administration, I’ve joined MDB Capital, an investment bank which looks to capitalize early stage companies with disruptive technology. MDB has invested millions in building internal tools which we use to more deeply understand patent portfolios and better assess companies with potentially disruptive innovation.

Late last year, a number of Yahoo investors approached me to better understand the value of Yahoo’s patent portfolio. One of those investors was Eric Jackson, who published a portion of my analysis under the seemingly prophetic headline “The Owner of Yahoo!’s Patents Could Cripple Facebook’s IPO Aspirations.”

When major companies like Yahoo and Facebook go to war over patents, the company with the strongest assets is going to win.

Patents are technical and legal documents, each one costing about the price of a new Fiat 500 to draft. There is a very small community of IP professionals who write, prosecute and sell these assets. Of the over 1,000,000 attorneys in the United States, only 30,000 or so have passed the Patent Bar. So few, in fact, that the USPTO allows scientists and engineers to take the exam, adding about 10,000 more “Patent Agents” admitted to practice patent law before the USPTO.

This means that at any given time, depending on the technology area, there are only a few thousand people who really have any idea what a given patent likely covers, or what it’s potentially worth.

And that is at the core of all these IP wars.

The entire reason the patent system exists is that the Government wants to buy something from inventors: Disclosure. Society benefits when inventors disclose their ideas so that later innovators can learn from, reproduce and build upon or around those ideas. What the Government gives the inventor is exclusivity — it grants the right to exclude others from making, using or selling those new innovations.

But remember — in certain industries, almost no one really knows what a patent covers. And nowhere is this issue worse than in IT and Software.

So many companies in these industries launch products without even bothering to check whether or not a new feature or function would be covered by granted patents or pending applications. What many of them do instead is enter into broad cross-licensing agreements with their customers, competitors and suppliers, ensuring a relatively stable, peaceful existence with respect to IP. When they overlap a small patent portfolio of a company or inventor unable to commercialize, they typically litigate or purchase the assets, however with far lower stakes.

Going public with roughly 60 granted patents, Facebook clearly did not see the portfolios or players in its space as presenting an IP risk. Yahoo owns over 1,200 patents from over 2,700 different inventors. Its top 10 patents alone have been cited over 2,200 times by later inventions.

More broadly, the top patent holders in the world are all hardware or software companies, all have over 20,000 granted U.S. patents, and together average a three year compound annual growth rate of over 10 percent — Facebook ally Microsoft among them.

These IP dynamics are not going away. The large players have spent billions over decades to use IP and strategically position themselves within their markets. Google learned this the hard way in the mobile space, watching large established players prevent it from buying the Nortel patents, extracting royalties from its customers, and eventually compelling the purchase of Motorola Mobility and its thousands of patents for over $12 billion. Today, the OQO patent portfolio is owned by Google.

Facebook is having the same growing pains with Yahoo, but is following the same roadmap in rapidly acquiring assets applicable to its ecosystem, and ultimately, given its applicability to Google, Apple, and Amazon among others, it is still possible that Yahoo could be Facebook’s Motorola Mobility.

Twitter seems to be in the worst position of all. Having secured little IP for itself, despite developing a significant and important communications platform, Twitter recently decided to needlessly encumber any future patent portfolio it may develop with its recently announced Intellectual Property Agreement, making that portfolio nearly impossible to value or transact. If Facebook is acquiring arms, and Yahoo is building them, then Twitter is playing Russian roulette.

I only wish I could communicate the feeling of watching the business tide rapidly turn, and having everything riding on a valuation of your IP.

Erin-Michael Gill is Managing Director and Chief Intellectual Property Officer of MDB Capital. He is a registered patent agent and licensed securities broker. He has no individual holdings in any of the companies discussed above. The opinions presented are his alone and are not intended to be nor should they be construed as legal or investment advice.