Are Patents a Drag on High Tech Innovation?

A patent is nothing more than a government-sanctioned monopoly.  As a reward for innovation, the government allows the patentholder to enjoy the fruits of a monopoly over the invention for a period of years.  The U.S. patent system is one of the keys to why the country is a center for innovation.

In the lightning-fast area of high tech, however, the patent system may be creating a drag on innovation.

The problem was first brought to light in a Forbes magazine article in 2002.  Attorney Gary Reback recalled a “shakedown” that IBM lawyers ran on Sun Microsystems.  A troop of IBM attorneys conclaved at Sun to claim rights over an idea that seemed to Sun lawyers to be obvious and absurd.  After the Sun lawyers and engineers tore the claims apart and showed why they had no case, they waited for IBM’s response:

An awkward silence ensued. The blue suits did not even confer among themselves. They just sat there, stonelike. Finally, the chief suit responded. “OK,” he said, “maybe you don’t infringe these seven patents. But we have 10,000 U.S. patents. Do you really want us to go back to Armonk [IBM headquarters in New York] and find seven patents you do infringe? Or do you want to make this easy and just pay us $20 million?”

      Almost all innovation is built on the discovery of others.  An innovator usually has the choice between drawing from old and obvious concepts that don’t merit a patent.  Or else advancing the state of the art by using another firm’s teachings.  But in the high-tech world, so many ideas and methods are floating around, that it is easy for a firm with some patents to lay claim to a lot of technology.

       This is why the smartphone world is such a mess of litigation right now.    Oracle is suing Google over infringements on Java patents.  This month, the US International Trade Commission found the Taiwan firm HTC guilty of violating two Apple patents when it produced mobile phones based on Google’s Android operating system.   And Microsoft, in turn, is going after a number of developers of phones based Android.  Meanwhile, Lodsys is suing 37 app developers over technology used in such games as Angry Birds and Big Hit Baseball.

In the grab for patent rights, Microsoft tried to up the ante by moving the test for infringement from a “clear and convincing” weight of the evidence down to a preponderance of the evidence, which would make it easier for a patentholder to prove its case.  Luckily for small startup firms, the U.S. Supreme Court ruled this summer in Microsoft v. i4i Limited Partnership et al. that the higher standard would remain.

It is hard to see a way out of this swamp.  But the Patent Office can help by giving much closer scrutiny to patent applications.