Let’s talk patent law.
WAIT! I know your head’s telling you to flee and your heart’s telling you to flee, but hear me out. This is a story with trolls and $12 billion deals and even a scene from 2001: A Space Odyssey.
It starts with the passage of a law on Capitol Hill, which only adds to the fairy tale quality. Late last week the Senate passed the America Invents Act, and when President Obama signs it, our patent laws will get their first significant reform in 60 years. Proponents say that by streamlining the process and making it harder for people to sue, more inventions would turn into more innovations, which would turn into—drum roll, please—more jobs.
Simply put, the law would give patent rights to the person who files for a patent first, not the person who claims to have first had the idea. And that, in theory at least, would result in more inventions actually getting to market. An inventor who spends money to file has more motivation to create something than a businessperson who can sit on an idea and force cash settlements from people who come along later with similar ideas.
That’s where the trolls come in. In this world, trolls are companies that buy up a huge number of patents with the main purpose of using them to get settlements or licensing deals. Software patents tend to be particularly vague and squishy, which is why, in recent years, trolls have become the scourge of Silicon Valley. One Texas-based firm, for instance, has made a business of suing other companies in defense of patents it owns that broadly relate to Web interactions and online payments. To get the lowdown on software squeezes, listen to the recent “This American Life” program, “When Patents Attack!” If you don’t have an hour, here’s the transcript.
The new law should help discourage trolling, but it’s likely too late to stop what has become one of the more corrosive trends among tech companies—stockpiling patents in the event they have to wage war with competitors. Case in point: Last month Google agreed to pay $12.5 billion to purchase Motorola Mobility, with the main prize being the 17,000 patents Motorola owns.
That was in response to a deal made earlier this summer by a consortium led by Microsoft, Apple and Blackberry maker Research in Motion. The group ponied up $4.5 billion to take over the 6,000 patents owned by the bankrupt telecommunications firm Nortel Networks. That comes to about $750,000 per patent, which is roughly four times the going rate for computer or software patents in recent years.
If you’re a corporate lawyer, this is beautiful thing. It loads up the company with legal grenades. But, as Steve Lohr recently asked in the New York Times, what does it do for innovation? Wouldn’t we be better off if trailblazers like Google were spending $12 billion on something more game-changing than courtroom firepower?
Oh, and 2001: A Space Odyssey? You’ll never guess how that fits into the story. Apple has been suing Samsung in courts all over the world, claiming that the Korean firm’s Galaxy tablet rips off the “unique and novel ornamental appearance” of the iPad. Last month, Samsung finally said enough was enough and countersued in a California court. It boldly claimed that the iPad was not such an original idea, pointing to this scene from the 1968 movie of two astronauts chowing down as they watch an interview with HAL the computer on little video tablets.