12th aug, 2011

Whats going on with those patents!?

It’s not very often that I get requests for my blog, so when I do I try to fulfill the request. The other day I had a long message on my mobile from my friend Malte. He was demanding that I do a post on what is going on with apple, Microsoft, Google and others. Stockpiling and trolling. I’m happy that he took time from putting shoes on his two year old to demand action.

Recently a lot of stories have been popping up telling about mobile and software companies like Google, Microsoft and Apple are fighting each other in the courtrooms. Sometimes patent trolls get mixed in the pot. For example “This American life” did an hour long podcast on patents…getting some points mixed up.

So here is the deal on what is happening right now:

What we are dealing with are two different things. Stockpiling and trolling. It’s important not to mix the two because the causes and effects of each are different.

Stockpiling  is about getting technology, inventions and patents to combat your competitors. As a company you either research the technology yourself or buy other companies to get access. The new part is that these days some companies don’t want the other companies but only their tech – so they buy IP.

Of course the older players have an advantage over the new companies, who in turn feel that the old guys treat them unfairly.

Why are companies stockpiling tech and patents? This is an old story. Some do it to use the IP defensively, some do it to get operating room (freedom to operate), some do it to harm their competitors and believe it or not some do it to get the technology and develop new products.

The stockpiling is most evident in selected areas: mobile, software and other network technologies. The reason for this is that the number of patents and inventions is important just to produce a networked product – networked in the economical sense of the word.

So what is new? Not much. The media attention is new but for the companies this is business for the last 75 years. It is not a patent war raging as some describe it but a new division of the market. Sony-Ericsson and Nokia has been substituted in the mobile market and the players on the bench fight over who is going in on the field. A new thing is that the contended technologies are not hardware but software functionality. Googles attitude, playing offended by patents, is nothing new. Lots of companies have done this before. It’s all because they haven’t got the IP power they want yet. I have read several places that the only result of fx the purchase of Nortel’s patents is more expensive products. That’s not true. The patents will mean lower risks for the buyers for infringing and lawsuits. The patents must have been so important for the companies that they would pay the price. There is one aber dabei in this but Ill get back to that later.

Trolling is about companies harvesting patents from mostly tiny companies or solo inventors. The patents they gather they use only for suing companies for patent infringement. In the USA this has become a business model. The first mental barrier is to accept that a company can make money without doing anything…like a stock trader or a collecting agency.

Trolling is most common in networked technologies. Some trolls are pursuing a scam like business model suing everybody and seeing what fall off. Courts in the US are reacting to this. Some Trolls are actually acting like collecting societies for inventors and are not trolls in the evil sense of the word. The MP3 algorithm(s) is a good example of this.

This brings us to the answer to the question: why is all this happening right now? The answer is: The US legal environment is like a fertilizer for patent lawsuits. On one side there is a patent system long overdue for a patent reform and a patent agency being starved of funds necessary to do quality work. On the other side you have an enforcement system where peer juries decide in patent cases and the fines for infringement are astronomical. That is why Courts in Texas see a drastic increase in patent infringement cases. Statistics say that a jury in Texas is very likely to find for the party claiming infringement and are very liberal when awarding compensation. Fix these two problems and you have a whole other situation. The problem is that the businesses are not encouraging patent reform…they may say that they support it but don’t in reality.

This situation makes for good news stories. Ingredients like absurd claims of inventions, huge sums involved and evil lawyers (who in some cases actually are engineers I may add) make fantastic tv, radio, podcasts and so on.

The tragic part is that all this is only happening in America. I Europe and Asia (and Africa and South America) you don’t see patent trolls or infighting. So if you ignore the US market you should be fine. Funny part is that when Apple hit Samsung the other day and got all the new Galaxy Tabs grounded it was not due to a patent but to a registered design.



Good example of trolling and good example of differences in patentsystems. If there is a re-examination request pending in the patent office in fx Denmark the court case will be put on hold until its decided…and in Denmark (and at the EPO)we have a nice track record for invalidating whole patents.

I wouldn’t ceralbete quite yet. The assault on intellectual property based on claims such as the one IBM just dropped given a long history of making such claims for offensive and defensive business tactics could give way to a worse situation. Take the case of SceneCaster and the Google Warehouse. Did the contributors to the warehouse know a company would build a profitable business over their works? There is a continuum of conditions from the non-profits to the strictly for profits that should be part of a sober discussion of intellectual property. There are agreements that must be explicit and conditions set or the wholesale rape of author’s works continues unabated just at the time companies such as IBM and Google are sponsoring worlds that close the doors to sharing works by applying proprietary systems to the open Internet.Good on IBM for an instance of good behavior, but this is from the company that is the MOST notorious for using its patent portfolio to muscle competitiors. If this is a cultural sea change, I am glad to see it. If it is a sop to generate publicity to assume a patina of good will then it is the kind of act that has to be factored into a complete analysis of the company’s overall strategies in the business services market.Before I applaud, I think I will wait to see the end of the second act in the show.

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