Patent Urban Legends & Bad Patent Math

New and improved patent urban legends that are popping up all over the place. Patents are hot and every business journalist is checking in with their vision of what's happening in the patentsphere. Newly enhanced patent urban legends are breaking out all over the place. And the numbers are taking on a life of their own without much in the way of fact checking.

The most popular is the Intellectual Ventures (IV) patent count. On May 27, 2009 the Seattle Times reported that IV held 27,000 patents. Two years later on May 31, 2011 an IV press release announcing an intellectual property agreement with Micron says that the IV patent portfolio is more than 30,000 IP assets. (IP assets as in patents or as in licensing agreements or something else - who knows?) By June 28th the count was up to 35,000 patents. There is no way to figure out if these numbers are true or what they are made up of. So, the legend lives. There is no way of knowing if these patents are worth anything, if they can be commercialized, or if they are even valid. All we know is that there are a lot of them.

The latest trending patent urban legend has to do with how many patents cover inventions in the wireless space. During Google's pre-Motorola acquisition, Google's Senior Vice President and Chief Legal Officer David Drummond noted in a post on Google's Official Blog that "a smart phone might involve more than 250,000 (largely questionable) patent claims." Patent claims - not patents.

Patent 101 - each claim in a patent is an invention. A claim starts with a capital letter and ends with a period.

If the average US patent has 20 claims then Mr. Drummond was throwing around a number of about 12,500 patents (12,500 x 20 = 250,000 right?). Not a small number. But here comes the multiplier effect.

Today, Una Galani and Reynolds Holding's names appear on the byline under an article of titled, "A Murky Patent War" that, "Google cannot identify all the patents that may cover... the Android operating system. The company's chief legal officer says as many as 250,000 patents might apply to a smartphone." Not patent claims as Mr. Drummond said in his post but patents.

So we went from about 12,500 patents, depending on your favorite average number of claims divisor, to 250,000 patents in about 20 days. If we really want to blow it out we can take the Reuters number of 250,000 patents and extend it to the number of inventions (claims) in each patent so the new number of patent claims would be 5 Million patent claims. The legend grows.

But during the 20 days between Mr. Drummond's original posting and the Reuters article, Google bought Motorola mobility which owns 17,500 patents according to the press and another 7,500 patent applications. How will the press factor that in? What will be the new patent math?

The Reuters Breaking Views article adds that "A reasonable approach would be stricter approval of standards." I don't even know what that means? What standards? The standards of patentability which are spelled out in Title 35, Section 101? Standards vs. examination procedures? And who should approve the standards, the patent examiners? The courts? Who's responsible for this stricter approval of standards being recommended?

According to Reuters, Ms. Galani is a Middle East correspondent based in the United Arab Emirates. Maybe she should get a pass on this one since it appears she wrote the first piece on rethinking Libya and oil prices. But Mr. Holding is a lawyer who has what appears to be extensive experience in business and law reporting. Did they check anything before they published this stuff?

This new patent math and uninformed commentarydoesn't help the conversation on what's going on with patents. It fills up a lot of space in the business section but that's about it. The average reader leaves this article thinking how could there be 250,000 patents on a smart phone and that the way to fix the problem is to have stricter approval of standards.

The path to constructive improvements in the patent dialog is information transparency and statements of facts. Intellectual Ventures should cough up the list of all their "IP assets", Mr Drummond should be more specific about his 250,000 patent claims and why he things they are largely questionable, and reporters from Reuters and the folks at the New York Times who distributed the story should get the facts, even if it's hard.

Calling Michael Porter

The snarky exchanges between Google and Microsoft continue. The latest is "When patents attack Android" a shallow attempt at riding the anti-patent troll sentiment generated by the NPR This American Life broadcast, "When Patents Attack." The exchanges are taking place on Twitter and the Google blogs - a testament to the reach of new technology in the public relations wars.

Google is pouting that the Rockstar Bidco bullies are trying to prevent them from selling Android devices. It's not fair. It's hindering innovation. That the Rockstar guys are banding together to add $15.00 per device to the cost of each and every Android device. (The $15 number is another one of those patent urban legend numbers that lives on its own without a lot of detail behind it.) I pay a premium every time I buy an Apple device and I'm happy to do it because I perceive that I am getting value for my purchase. Do these guys really think that a $15 surcharge is going to be a critical factor in a user's decision to buy an Android device?

And what about that dubious statement that "A smartphone might involve as many as 250,000 (largely questionable) patent claims, and our competitors want to impose a "tax" for these dubious patents that make Android devices more expensive for consumers." So where did this come number come from? I'm sure this commentary endear's Google with the folks at USPTO but more importantly, if google was so worried about the "largely questionable patent claims" why didn't you challenge the claims when the applications were published instead of waiting for your competitors to whack you in the head with the granted patents? (I like the fact that the link to the word might included in the post sends you to a Financial Times article that you can't read unless you are a registered user - way to go on the transparency front.)

Perhaps it might be a good time for these smart guys at Google to take a look at some of Michael Porter's work on competitive advantage and competitive strategy. There is the part about first mover advantages in which the first guy in a market has a competitive advantage and the other guys play catch up. . Kind of like Apple running Nokia and RIM out of the smartphone market and leaving Microsoft empty handed in the tablet market. Apple had first mover advantages in the smartphone/touchscreen world - oh and great design and an awesome marketing plan.

Lots of patent guys get this first mover thing - consider Apple and the iPod and Apple and the iTunes store. Apple, a patent savvy organization, licensed the infamous One-Click patent from Amazon. While I could fill pages with a discussion on whether business methods patents like the Amazon One-Click patent are valid or useful, that's not the point. Patent savvy guys figure out what they need to license, get the best price they can, build it into their cost structure and head out to the market to sell their stuff. Ask Barnes & Noble what happened to their 1999 holiday sales when they didn't have a license for the One Click patent.

Then consider barriers to entry - yep, patents are one of those things that restrict entry into an industry - in this case the mobile device space. Note to Google - see the Polaroid v. Kodak case where Polaroid kept Kodak out of the instant camera business. It wasn't pretty. When you enter the game late, the playing field isn't level. The guys who got there first have competitive advantage.

Google pointed out in its blog post that DOJ is demanding the winning group (Microsoft, Oracle, Apple, RIM, Sony, EMC) give a license to the open source software community. What's curious here is that Google seems to imply that this is a done deal - that the Rockstar team is going to be forced to license the technology. It doesn't look like DOJ has finalized such a demand yet. This doesn't change the equation though - developers of Android products are still going to have to pay royalties, the real question is where will the numbers come out in light of the earlier $15.00/device royalty. Things are not going to change any time soon.

I find it interesting that a company founded on a patent is whining that patents are impeding their ability to innovate. Maybe Google should take part of the money it didn't spend on acquiring the Nortel patents and invite Dr. Porter in for a discussion on the state of the technology markets and how to achieve competitive advantage.