Patents Are Stifling Innovation - Really?

The conversation starts the usual way. Business owner comes in to talk about a patent predicament. Usually with a cease and desist letter in hand, the business owner has discovered that there is a patent out there that covers some feature of their product or service and the business owner is mad. This patent is "stifling innovation." Or to quote Kent Walker General Counsel of Google on Google's own patent predicament, "patents are Gumming up innovation."

The mandatory non-disclosure and confidentiality agreements are signed before the real conversation begins. The business owner never looked into patents when they started their new internet or software juggernaut. Patents are boring and hard to read. The process of building the company was hard enough, there was no time to dig into patents, there were products to release, investors to find, customers to sell to, accountants to meet, Tweets to write, conferences to go to. Now the business owner is mad that some "troll" is coming along and trying to extort money from their hard work. Oh, and here's a copy of my EULA that has language protecting the company's intellectual property. Make this go away. Then comes the phrase I always wait for, "THIS ISN'T FAIR."

Let the hunt begin - that quest for prior art that will kill off the patent that has become the fly in the ointment of business growth, the patent that is stifling innovation.

If you want to hear how this conversation usually goes down across the intellectual property landscape, the check out the latest podcast at This Is My Next. At around the 50 minute mark the conversation turns to patents, Google's pouting about how it's not fair that the guys who own patents are coming after Android and the rest of the technology patent wars. Joshua Topolsky and Nilay Patel go at it. Imagine Joshua Topolsky as the disgruntled business owner and Nilay Patel as the patent attorney (he really is a patent attorney) reasoning with his client. It's an anecdote to all the patents are terrible patents are stifling innovation vitriol out there. The patent spat is enlightening and rest of the podcast is worth a listen too.

Patent Trolls, Lodsys and Business Methods Patents

Cue the Soprano's music...

Listen to NPR's This American Life podcast "When Patent's Attack" a great piece of reporting on the scourge of the patent trolls, their impact on companies and innovation, and what's going on with the cookbook developers at Intellectual Ventures. The reporting has an interesting spin on the current Lodsys attacks on Apple and Android app developers.

It's worth a listen.

Then have a look at the RICO laws.

Rockstar Bidco and the Patent Wars

Rockstar Bidco is the name of the consortium set up to bid on the Nortel patents - AAPL. MSFT, EMC, ERIC, and RIMM. Nice to see that these guys have sense of humor.

The early press noted that the Google bid seemed to be some kind of nerd play on math. The Rockstar Bidco was the announcement that the big guys have come out to play. Now the drama continues.

According to the Washington Post the Justice Department is stepping in to see if this move will block the development of Android devices. Don't patent provide the owner with the exclusive right to block someone else from using the patented invention unless they buy a license? Isn't that one of those patent basics?

This is another article about patents that reports that activity in the patent space is going to have a dramatic impact on markets and innovation without any real discussion of the patents or why they are important or why we should care.

"Google's rivals...combined forces to prevent the company from buying a critical trove of patents." (Did they prevent Google from buying the patents or simply make sure that they bought them? Is there something nefarious here? Didn't Google let everyone know their price point before the actual auction date?)

"..6,000 patents covering an array of wireless and Internet technologies.....touching nearly every aspect of telecommunications and additional markets as well, including Internet search and social networking."

Here's Google the Internet search giant who missed out on the acquisition of this treasure trove of patent goodies but the article doesn't have word on what the Internet search patents are about or if these will have any impact on Google, the Internet search giant. Perhaps it is 7,895,183 - Associative Search Engine - an invention that relates to an advertisement machine which provides advertisements to a user searching for desired information within a data network. (Didn't Google invent this business model?)

Then there's the question of why the portfolio was worth a "whopping $4.5 billion" and the question from a leading antitrust lawyer about "Why is the portfolio worth five times more to this group collectively than it is to Google?" There are lots of potential reasons. Bad bidding by Google. Bad advise. Failure to recognize that a consortia can form just for the purposes of buying the patents. Insurance that the Rockstars would get the patents vs. not knowing how they will surface later. A good investment decision to lock out the new kids on the block. Fear of one of those patent assertion entities aka "The Trolls getting their hands on them."

My favorite quote in the article that the price paid demonstrates, "the growing dysfunction of the country's patent system, where even the most amorphous ideas can be rubber-stamped by the government and protected for years." First, ideas can't be patented. Please refer to that whole Bilski Supreme Court thing that makes clear that abstract ideas aren't patentable. Second, even a cursory look at what was in the Nortel portfolio makes it clear that there are some extremely valuable inventions there. Finally, rubber-stamped? Really? If USPTO was rubber-stamping everything it wouldn't take so long to get a patent. (Yeah, I know there is some junk in there but I think "rubber-stamping" is a little naive about the tortuous process of getting a patent in the first place.)

Then there's the quote in the Financial Times from Eric Schmidt that the $4.5B exceeded Google's value threshold. Mr. Schmidt added that Google is worried that this is an attempt to use patents rather than to innovate. The Nortel patents are very valuable innovations. The Rockstars thought they had value so they spent some serious dough. But then there's this whole discussion about patents vs. innovation. Patents are what you get for innovating. When you innovate you want to get patents. This statement about using patents rather than innovating is discordant to say the least. Besides Google has a market cap of $171.43B and $36.68B in cash. $4.5B seems like a good investment to protect the future of Android.

Who knows where this will end up but it will make for some interesting drama.

The end of this discussion is no where in sight.

Rock On.

Curiosity Counts

Here is a very cool infographic timeline Gutenberg to ipad...

curiosity counts - A visual timeline of the “the press,” from...

Apple v Samsung - Two Great Blog Posts

After finishing my morning work out with Rex Parker I wandered over to the Wall Street Journal to see what they had to say about the Apple v. Samsung case. An ok analysis for most but for us IP junkies it simply wasn't enough. General statements about patent and trademark infringement, a couple of pictures on one of the AllThingsD blog but not much to give you a feel for the scope of what's really going on. Is there some reason why the WSJ never puts the patent numbers on any of their IP articles? Are we just not smart enough to read them ourselves?

So, I went on the hunt. Here are two blog posts that have the goods on what's going on.

First, FOSS Patents written by Florian Mueller click here to read his post.

The second is ThisIsMyNext - the temporary home of Joshua Topolsky, Nilay Patel, Paul Miller, Joanna Stern, Ross Miller, and Chris Ziegler. Here's Nilay Patel's post - click here.

Patent Allowance and Business Methods

Mark Nowotarski, Mike Bowman, and I wrote a guest article on IP Watchdog that was posted today. The article, "Increasing Patent Allowance Rates by Selectively Targeting a More Technological Patent Class" deals with how the class assigned to your patent can drive patent allowance. You can read the article by clicking here.

Thanks to Gene Quinn of IP Watchdog for having us in his online magazine.

New Business Methods White Paper

Our business methods guru, Mike Bowman, has taken a look at the Patent Reform Act of 2011 and how its tax strategy language has the potential to impact firms in the insurance and financial services arena who hold or use patents with tax strategy elements. For our latest insight on what's happening in business methods patents please click here to download the white paper, US Patent Reform Act of 2011 - Implications for Insurance and Financial Firms.

We published another important paper focused on the impact of business methods patents on university technology transfer and commercialization efforts - Business Methods Patent and Technology Transfer. It provides some compelling examples of the types of business methods patents that are appearing in the healthcare and medical research domains. Please enjoy them and let us know what you think. I like the handwashing method with onboard entertainment!!

Please let us know what you think.