Friends and Foes: Information Technology Patent Wars

8/13/2019 Friends and Foes: Information Technology Patent Wars

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Both parties were fighting angrily over their concepts and the judge became impatient. Is a"tap" just a very short "swipe" or something completely different? It would not really beconvincing to call a point the shortest form of a line, argued the judge, and the case wasdismissed. He dismissed it "with prejudice" making it more difficult for them to return to hisbench soon.

This certainly appears very funny, however, it was a serious matter, as the parties in the casewere the companies Apple and Motorola. They were fighting over the applicability of a patentabout unlocking a phone by swiping or tapping its screen. Judge Richard Posner is a prolific

jurist who has written several books, including one about economic and intellectual propertylaw. Normally he sits at the 7th US Circuit Court of Appeals in Chicago, but took the case overfrom a lower district court. He wrote after the trial in The Atlantic that there are just toomany patents in America.

This patent war between Apple and Motorola is just one of many currently going on. In fact itis difficult to have a full overview as the companies involved like Apple, HTC, Nokia, Motorola,and Samsung sue each other in several different countries making their legal wranglesdifficult to follow. Apple and Samsung alone seem to be engaged in more than 30 legaldisputes distributed over 10 countries. There are not only several countries in which to wage

legal fights as institutions like the International Trade Commission also offer a place forhaggling.

The basic problem is that technological gadgets nowadays often comprise tens of thousandsof patents making it almost impossible to keep track from a legal perspective. These patentsrefer not only to the hardware but also to its look and feel especially relating to the userinterface. In hardware issues often fair use agreements of patents need to be foundotherwise communication between devices and over networks would become a critical issueand lack of interoperability would be a disadvantage for all. However, the look and feel of adevice, be it the order and position of menus on the screen, the ability to stream movies or

the activation of the device by swiping or tapping, have become a major terrain ofcompetition. Consequently the company most famed for its brilliance in design is involvedregularly when a patent war comes up. Steve Jobs remark to go thermonuclear againstAndroid as a stolen product was thrown out of court as an argument, but the statementindicates the temper with which intellectual property is defended.

The purpose of a patent is to shield the holder against a competitor copying innovative ideasand developments. A patent confers a monopoly which in the USA is for a period of twentyyears if the innovation is novel, useful, and not obvious. Judge Posner sees the mostcontroversial feature of US patent law being the non-discriminative between types of

inventions and industries. In consequence for every innovative feature relating to a product a


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patent application can be filed. The hurdle to get the patent is fairly low since there is no in-depth examination of applications. Every year the US patent office issues about 80,000patents in the area of information technologies alone.

The granted patent is presumed valid until it is declared invalid in court proceedings. Thenumber of patents has swelled to a mass which makes it very difficult to know beforehand ifa patent is infringed and in most cases it needs a challenger, usually a competing company,to take a patent down.

Robert Black, president of the US Computer and Communication Industries Associationspeaks of a patent pollution. This proliferation of patents has led to two new phenomena in

their use. The first is defensive patenting; companies buy patents en masse not to fend ofpossible copies of a product but to make sure they are not infringing existing ones of whichthey may be not aware . Secondly, so called patent trolls buy patents not to secure theirproducts but to trap companies who might infringe them. Patent trolls cost US companiesabout US$ 29 bn last year and while the big companies make headlines, this burden ismainly felt by the smaller ones. Over 80% of the companies sued for patent infringement hadrevenues of less than US$ 100 mn.

The perfunctory examination of patent applications also takes its toll on customers andproducers. Since patents are issued on a first come, first serve basis a company with a

better but similar innovation might lose the race and be afraid or disabled to market itsproduct for possible patent infringement. This can result in customers suffering by beingprovided with the fastest product available which is not necessarily the best.

At least in the USA two ways to solve these problems emerge. The first is for a stricter regimerelating to the patents issued. Judge Posner argued that some industries could managesuccessfully without patents and therefore patents should be restricted to those industries,like the pharmaceutical industry, in which considerable money and research has to beinvested until a patent can really be exploited. Complementary, in the court cases partiesshould be forced to make a really solid case for the damage that is incurred by the

infringement of the very few patents which actually form the basis for legal action aimed atcompletely banning a competitors product. Finally, this is a field in which internationalcourts could be of considerable help. Only local legal traditions can explain why a device isbanned on infringement accusations in some countries but not in others.

In the end, are the companies suing each other actually foes? Not really, as a forthcomingcase of Apple vs. Samsung indicates. In the preliminaries the judge rejected several requestsfrom both parties to keep documents out of the public eye and ironically Samsung alsomanufactures important parts for Apple products. "The Economist" described theirrelationship as "symbiotic". Maybe some explanation for these wars may lie in a competitionbetween legal departments and law firms which has got out of hand. Certainly the money is


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better invested in research and development for new innovative products which canconvince customers of their worth and desirability without a patent wrangle.

Why There Are Too Many Patents in America (Richard A. Posner)www.managing-essentials.com/2gy

Patent Trolls and the Growing Toll On Innovation (Edward J. Black)www.managing-essentials.com/2gz

Slicing an Apple: Apple and Samsung's symbiotic relationship (The Economist)www.managing-essentials.com/2g1

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Friends and Foes: Information Technology Patent Wars