It seems hard to imagine life these days without our beloved smart phones. They have affected nearly every facet of our daily lives to varying degrees and 15 years ago it would sound absurd to say that in the near future, everyone will have a device with the functionality of a computer, GPS, Camera, Audio device etc. in their pocket. However, it’s also become a common occurrence to read about the latest big money law suit between the tech companies that have developed these technologies. And these aren’t your run of the mill legal squabbles; we’re talking about multi BILLION dollar law suits, waged over the rights to the intellectual property that allows for a controlling interest in the global tech market. And yet, such high stakes have just become a part of doing business but it raises questions about how much damage is caused to the industry in the process and could there be a better way to resolve these conflicts?
To really understand the impact we must first look at how new ideas are developed and the legal process that protects the inventor’s rights to be credited for their work. The truth is that there are very few NEW ideas or inventions anymore. The majority of new ideas and technologies are at least partially based on old technologies and ideas, and there’s nothing wrong with that. Most companies aren’t trying to reinvent the wheel; they’re trying to improve it! It’s more realistic to put a tire on it, change the material that they’re made of, improve the tire tread etc. And this is where the legalities of such endeavors become tricky. To be able to register a trademark or a patent an improvement to a preexisting idea you must first enter into a licensing agreement with the owner of the original patent.
The problem in the tech industry at the moment is that there are so many overlapping patents that developers of new ideas (or improvements) don’t know where to begin when trying to license the original patent that their improvement is based on. On top of that, the global technology market has made licensing fees inaccessible to smaller companies. Not only are the licensing fees a deterrent to smaller entities but the atmosphere of blood thirsty lawyers waiting to pounce on anyone who steps on their toes certainly doesn’t help. Never before has it been more difficult for smaller tech startups to develop new technologies and bring them to market.
Not only do the “tech patent wars” stifle innovation in the industry but who really pays the cost of these multibillion dollar law suits? The consumer of course. Yes, it’s a cost of doing business these days and all the costs associated with developing and selling a product must be bundled into the price of said product.
How do we fix the problem?
Much of the rhetoric that you’re likely to read on a number of popular tech blogs like to point the finger at the USPTO and the “broken patent system” but who’s to say that the patent system isn’t working as designed?
Firstly, we should clarify if this problem is insurmountable or even unexpected. It shouldn’t come as a surprise that this is not the first “patent war” we’ve ever seen. Not only that, but as far as these types of legal conflicts go historically, everything is on track to eventually work itself out. We just need to be patient enough to let things run their course and allow the legal system the time to do what they do and sort through all these overlapping intellectual property rights to decide who owns what and who owes who. Probably the first such conflict was the Sewing Machine patent war of the 1850s, which mirrors all of the same issues we’re seeing in today’s smart phone wars: patent-licensing entities, overlapping patents covering single products; expensive litigation etc. Eventually, things worked out and everyone settled down.
That’s not to say that the USPTO doesn’t have some catching up to do to be able to operate as efficiently as it could be operating. Which is why the recently enacted America Invents Act aims to bring the patent system into the 21st century and make the patent application process more efficient by:
• Encouraging applicants to file their applications electronically. Applicants who opt for the paper filing option will be required to pay an additional $200 – $400 ($200 for smaller entities).
• Fast track application option. The USPTO will offer a “fast track” option, allowing applicants to expedite their applications for a surcharge of $4800 (or $2400 for smaller entities).
• Reduce the current backlog. Currently there is a backlog of approximately 680,000 patent applications. Because of new financial provisions in the AIA the USPTO will begin hiring new examiners and other personnel which will help to reduce this backlog and improve applicant wait times.
Furthermore, we’ve also seen measures taken by the US Federal Trade Commission to reign in the ever increasing number of intellectual property infringement suits. When Google acquired Motorola in 2012 for $12.5 billion it also took ownership of Motorola’s patent portfolio of over 24,000 patents. The most significant outcome of the 19 month long case is a legally binding agreement from Google to allow its competitors access to “standard essential patents”. Those “standard essential patents” are basic patents that many NEW smartphone technologies need to access to, to be able to develop new products and improve old ones.
Between the AIA the FTC and legal system I think it’s safe to say that things will settle down… eventually. But it’s still anyone’s guess as to when that will be.