Patent Wars Stifle Innovation
The founders of the United States believed that patents were so vital to a growing capitalist nation that they included intellectual property protection in the Constitution. Without a doubt, patents have been a cornerstone of innovation for which the U.S. has led the world. In fact, I believe that innovation can lead the U.S. out of the current recession if it’s not hamstrung by what I have dubbed ‘patent perversion.’
We see it in the pharmaceutical industry, where innovative companies are held hostage by generic drug makers who threaten to make a clone and are paid extortion money not to do so. In this case, the patent laws are not protecting the company that has taken the R&D risk.
Now, the Justice Department is investigating whether some high tech companies including Apple, Microsoft and Research in Motion (maker of the Blackberry smartphone), are playing fast and loose with the intent of patent laws by scooping up a portfolio of 6,000 patents in order to cripple Google’s Android software. The consortium calls themselves “Rockstar Bidco.” Don’t ask.
DOJ is looking into what this consortium intends to do with these patents for which they paid $4.5 billion at a bankruptcy auction from telecom gear maker Nortel Networks. As a defensive move, Google recently purchased 1,000 patents from IBM.
Someone please stop this insanity.
There is precedence for the government’s preemptive action. In April, the Justice Department forced another patent cartel composed of Microsoft, Apple, Oracle and EMC (and you thought these four were enemies) to give up patents that could unfairly hobble competitors.
They key word is ‘unfairly.’ Nobody denies a company or an individual the right to sue another for patent infringement. That’s not the issue here. My main gripe is that companies intentionally buy up patents, sometimes obscure or very narrow patents, with the sole intent to block competitors through lengthy litigation. Owning a possibly relevant patent ensures that the courts won’t quickly throw out a suit because the company, at first blush, may have a viable case. The court is forced to give them their day in court which can cost a rival time and money, even if they eventually fend off the litigation.
I find this practice appalling on so many levels. My biggest complaint is that it uses litigation as a strategic tool which, in this case, squanders resources better spent on innovation. It keeps companies in court when they should be focusing their energies on designing and building better s products.
As a nation whose strength has always relied on innovation, creativity and risk-taking, this practice of patent perversion keeps us running in place and not ahead of the pack.
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Larry Kahaner has been a business journalist for more than 20 years, a former Business Week Washington correspondent, and the author of many books about business ethics including: Values Prosperity and the Talmud: Business Lessons from the Ancient Rabbis; Competitive Intelligence: How to Gather, Analyze, and Use Information to Move Your Business to the Top; and Say It and Live It; The 50 Corporate Mission Statements that Hit the Mark, (co-author).
Clearly, one of the Rockstar coalition's aims is to try to take out Android. The reality is that, if you have a hit, high-quality product, your competitors will try as hard as they can to put you out of commission. Another inescapable fact is that patents inherently serve to limit competition. So unless the coalition is found to have engaged in activity that is monopolistic or otherwise per se illegal, I don't really see what the DOJ can do to effectively intervene.
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