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.

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.