NEW YORK (AP) — When an Internet company plunks down
$12.5 billion to buy a struggling cellphone company for its collection
of patents, it’s another sign that, for the high-tech industry, patents
have become a mallet wielded by corporations to pummel their
competitors.
Google Inc. announced the deal to buy Motorola
Mobility Holdings Inc. on Monday, specifically for its trove of 17,000
patents. Google needs them to shield companies like HTC Corp. and
Samsung Electronics Co. —who make phones based on Google’s Android
software— from lawsuits filed by Microsoft Corp. and Apple Inc.
"Google
is not acquiring Motorola for the sake of its technology or its
research," said James Bessen, a lecturer at Boston University and
co-author of a book on the patent system. "Patents have become legal
weapons — they’re not representing ideas anymore."
The trend, decades in the making, raises questions that pending patent legislation in Washington only
begins to answer.
Google’s
multi-billion bid to get its hands on Motorola’s output of legal
paperwork is the culmination of a "bubble" in the value of patents
relating to smartphones that started last year, as Microsoft and Apple
mounted their legal attack. Industry watchers say that bubble may
deflate now that Google is set to gain the protection of Motorola’s
patents in a deal that’s set to close late this year or early next.
But
an underlying problem will keep growing: patent filings and lawsuits
that distract companies and sap resources that are better spent on other
things.
Engineers spend their time writing patents rather than
inventing things, or reworking products just to avoid patent
infringement. Customers put off purchases because of pending lawsuits,
and independent software developers close up shop because they can’t
afford licensing fees.
"If you have to pay $12.5 billion dollars
to play, you can sense why maybe an individual who has a great idea
would feel discouraged," said Julie Samuels, a patent lawyer with the
Electronic Frontier Foundation, a technology-oriented civil liberties
group. "It affects the whole economy."
It wasn’t always this way.
The U.S. software industry got its start with nary a patent filed, and
on the hardware side, patent suits were rare until the mid-1980s. That
was when calculator and chip maker Texas Instruments Inc., on the brink
of extinction, decided to see if it could make some money from its
patent portfolio. It started filing patent lawsuits and demanding money
from companies with infringing products. It saved the company.
IBM
Corp. latched on to TI’s lead in patent licensing in the mid-90s, when
it was down on its luck. That coincided with courts broadening the types
of patents allowed. Patents on software and "business methods," with
vague, broad claims, were now accepted.
Since then, an arms race
has slowly escalated in the industry. Companies found that the best
defense against a patent suit from a rival was to have a patent
portfolio to wield as a deterrent: "Sue me and I’ll sue you back," is
the message Google is sending by buying Motorola.
Motorola is
already suing Apple over several patents, including one that purports to
cover the act of sending address data between two phones. Another
patent at issue covers the idea of concealing a phone’s antenna in its
outer case, which Apple arguably does with the iPhone 4.
It’s a
situation reminiscent of the nuclear standoff between the U.S. and the
Soviet Union. But just as the threat of nuclear weapons didn’t stop
third-world guerillas during the Cold War or deter terrorists today, the
patent arsenals are useless against "patent trolls" — companies that
own patents but don’t do actual research or development. Since they
don’t make anything themselves, they can’t be the targets of patent
suits, says Colleen Chien, assistant professor at the Santa Clara
University School of Law.
"Mountains of patents have proven
useless against the patent system’s ‘stateless actors,’ non-practicing
entities who are invulnerable to patent counterclaims," Chien writes.
In
one example, a company with a 1980s patent on a kiosk that made music
audiotapes on the spot for customers in stores tried to levy license
fees from tens of thousands of technology companies, claiming that the
patent covered any downloading of media from the Internet. Microsoft was
among the companies that settled.
Bessen puts the cost of dealing
with "patent trolls" at half a trillion dollars in the last two
decades. Yet patent trolls account for only one in six patent suits, by
his estimate, so the patent system’s burden on the economy is much
higher.
Just as we worry about old Soviet nuclear weapons falling
into the wrong hands, Chien says that the patent hoards accumulated by
corporations as "defensive" measures are starting to end up with
"non-practicing entities" who use them for lawsuits.
For example,
memory chip-maker Micron Technology Inc. in 2009 sold 4,500 patents to a
patent lawyer in 2009. Chien points out that the patents are worth more
to "non-practicing entities," because they can sue without fear of
retaliatory patent suits.
During the Cold War, there were arms
limitation talks. Similarly, many of the big technology corporations
want the patent bombs taken away, or at least limited. Google’s lawyers
are critical of the patent system, and it’s clear the company would
rather not have to strike deals like the one to buy Motorola. Cisco
Systems Inc., the world’s largest maker of networking gear, wants patent
infringement damages to be based on the value of the component in
question rather than the entire product.
Tech companies can expect
little help from Washington. After a decade of wrangling, Congress is
set to approve a patent reform bill when the Senate reunites in
December. It will be the largest legislative change to the patent system
since 1952. Even so, experts say its effect on the high-tech industry
will be marginal. It had sought more sweeping changes, but resistance
from the pharmaceutical industry, which is much better served by the
current system, has kept out the more radical proposals.
The
legislation will make it marginally harder to get and hold onto patents,
Chien said, but that’s unlikely to cut down on the number of spurious
patents, she believes.
And paradoxically, the bills could expand
the glut of patents that’s plaguing the industry, since one of its goals
is to reduce the three-year backlog of patents pending at the Patent
Office.
"It’s going to take a long time for Congress to tackle
patents again, and that’s really a problem because this troll problem is
going to continue to fester," Samuels said. "We all feel the effects."
Copyright 2011 The Associated Press.