Steve Jobs considered Android “grand theft” of the iPhone, and vowed to fight it to his dying breath.Keith Bergelt has a totally different point of view.
He believes that most of the patent litigation going on in the mobile space is more about relative newcomers in mobile phones — mainly Apple and Microsoft — using their cash to stall Android by raising its cost of ownership.
Bergelt heads the Open Innovation Network, a group that aims to create patent protection around open source software, including Linux and Android. The OIN was founded by IBM, Sony, and other companies involved with reselling Linux.
Before you dismiss him as an open-source zealot with a warped view of reality, take these points into account:
- Traditional phone companies, including Android resellers, have patents that are necessary for mobile phones. “If you look at the patent portfolios of LG, Samsung, Motorola, Sony Ericsson, those patent portfolios are representative of the overwhelming majority of relevant patents that enable you to offer wireless products and services. It’s nice to have touch, but you can have touch on a device that can’t communicate and you’re not going to sell a lot of devices.”
- Some of those phone patents are more valuable than what Apple has: recall that Apple is paying Nokia, not the other way around. “When it comes to the cross licence, at the end of the day, it’s just like the cross licence that Nokia struck with Apple.”
- Microsoft has the resources to tie up Android resellers in court for a long time, which is why a lot of them are licensing instead of fighting. “When you have a dynamic when you are incredibly cash rich, when you can outspend people, it’s about tying people up and creating issues that can slow or stall a platform. It’s not about who is necessarily right or wrong, it’s about the effect that you can exact by taking advantage of that dynamic.”
- By buying Motorola, Google changed the game completely. “I’m not sure what their ultimate goal is but clearly if you look at the mobile patent holders, they’ve just become one of the 5 largest patent holders in the world. They’ve gone from a position where they had some patents to now having a purpose built portfolio that is exactly what you want if you’re going to continue to support and advance a platform….From a quantity standpoint, they may not have as many patents as Microsoft or Apple but they have qualitatively winning patents because they have more standards based patents now. The fruits of 35+ years of Motorola’s birthright as one of the founding, inventing and most innovative companies in wireless technology.”
Here’s a transcript of our conversation:
Business Insider: What do you think of all the patent litigation going on in the mobile space, with Microsoft and Apple suing Android resellers? Are we going to end up seeing a bunch of cross patent licenses in private and then this problem goes away, or do you think we’re going to continue to see these kinds of litigation events?
Keith Bergelt: I think over the near to medium term, within the next 18 months, you’ll continue to see forum shopping, litigation with a goal of not a lot of cross licensing discussion or broad licensing discussion, but rather one-off licenses with a goal of increasing the total cost of ownership of the platform.
You kind of have to trace back to the pre-Android period, and look at the Linux licensing strategy that Microsoft had which was focused around application patents wrapped around one fundamental patent which they owned, which is the FAT patent. For every individual licensing deal that they tried to do, they’d look through the portfolio, seemingly, and find patents that might be relevant to what a company was doing on the application side, and have the core focus be the FAT patent, because it deals with the interoperability between heterogeneous networks. I think they felt it was a broad patent and it was relevant. I don’t necessarily agree with how the re-exam was dealt with and the conclusions that were drawn, when the re-exam was had with that patent.
They claim that they have patents that read on active synchronisation, when the interoperability or interconnection order that was issued by the European Commission was handed down, directing interconnection or interoperability, unfortunately there was no requirement of reasonableness or fairness or any cap placed on royalties that could be secured. So I think the open source community probably viewed the European Commission’s actions as a win but specifically Microsoft reserved the rights to assert its patents related to the activities that would be required to enable the orders satisfaction.
What were very nominal licenses that were struck as early as five years ago on these patents, have now, as far as I understand it, I don’t have any first hand knowledge, but what I understand is that the licence fee is somewhere in the neighbourhood of triple what it was just five years ago, largely driven by one factor, use and apparently the threat that Android poses to Windows 7’s viability.
As an observer of Microsoft, the real concern over time is not the 12% or 10% or 8% of market share Microsoft might get by doing billions of dollars in advertising for its platform, but the bigger issue here is losing the consumer market for computing, for Windows. Because of these operating systems allowing you to back into offerings for tablets and same client devices like the Chromebook and others that are out there, and because this threatens the privacy of the franchise in those areas, I can see where they would be very concerned about, and looking to make a stand in the mobile space, because of its ramifications.
It used to be that you would look at mobile, your choice of cell phone and your choice of computing equipment as two separate, distinctive, unrelated decisions. Now they are very much becoming one and the same decision. If you look at the AT&T and Verizon solutions that are offered by Motorola, where they’re also coming out with it at Apple — dockable smartphones that create the intelligence to drive 12 to 14 inch displays on host mechanisms. They look like PCs but they’re really being driven by a dockable smartphone. Those experiences are I think very threatening because they’re not tablet experiences where you’re playing with a scaled down web version of your applications, but you’re playing with real applications and you have the ability to bring in data in all kinds of formats, whether it be display content from Microsoft applications or from Open Office. I think there’s a transition now to this other strategy that’s designed to preserve or create a “what you can’t accomplish in the marketplace, you need to attempt to accomplish through the utilization of patents to be able to slow or stall the movement of Android to its inevitable position.” It’s an interesting dynamic.
BI: There are other patent disputes over Android, it’s not just Microsoft. What do you think of what Apple is doing?
KB: I think it’s a similar dynamic that, it’s a more comfortable world when you have a duopoly environment and you live in a world that you understand and you deal with competitors that you understand. The threat from Android is very significant to the incumbents, period. And the incumbents…these are not incumbents in the wireless space, by any stretch of the imagination. These are companies that have precious few patents that really relate to the products they have in the market, whether it be Windows 7, or Windows 8 for Mobile, or iOS for that matter.
So the relative exposure to patent risk is actually far more acute for Microsoft or Apple than it is for Android because you have some of the most patent rich wireless companies that are standardising around Android, where you have companies that are new entrants, for the most part, that have some interesting patent areas that they are attempting to assert. It’s essentially evidence of who the antagonist and who the aggressors are in the environment. If you want to try and slow or stall Linux, you take advantage of the fact that you have such a rich cash position that you can impose your will utilising patents to create an artificial cost structure. When it comes to the cross licence, at the end of the day, it’s just like the cross licence that Nokia struck with Apple. The net payment flow is from the newcomer to the incumbent.
BI: So why haven’t those incumbents gone ahead and struck cross licence deals, and said, “hey the flow is going to come to us”? It seems like flow is actually going from them to Microsoft, at least in the case of Android.
KB: Microsoft has this very significant amount of capital. Many, if not all of the licenses that took the, what used to be called Linux licenses for Microsoft, they didn’t even look at the patents that were allegedly related to Linux…
BI: They were never tested in court, correct?
KB: That’s right. They’ve never been identified publicly by Microsoft as to what they are or what they read on or what their relevance is.
When you have a dynamic when you are incredibly cash rich, when you can outspend people, it’s about tying people up and creating issues that can slow or stall a platform. It’s not about who is necessarily right or wrong, it’s about the effect that you can exact by taking advantage of that dynamic. If it’s 3.5 to 5 million dollars to defend a domestic lawsuit in district court, and it’s 8.5 to 12 million dollars to defend an ITC action, eBay [a legal case, eBay v. MercExchange, which addressed patent trolls] has pushed companies away from focusing on district court and has pushed both trolls and Linux antagonists towards the ITC to essentially forum shop to try and not negotiate.
As far as I can see, there is no attempt to negotiate effective cross licenses, and sit down at the table as will inevitably have to be the case, but rather an attempt to enjoin the sale of products as a way to slow or stall the advance of Linux based products, like Android, so that you can essentially catch up or compete.
BI: What do you think about Google’s purchase of Motorola? Are they going to be able to use those patents to indemnify Android retailers and does that reduce some of the effectiveness of Microsoft and Apple going after these Android companies?
KB: I’m not sure what their ultimate goal is but clearly if you look at the mobile patent holders, they’ve just become one of the 5 largest patent holders in the world. They’ve gone from a position where they had some patents to now having a purpose built portfolio that is exactly what you want if you’re going to continue to support and advance a platform. These are countermeasures that are purely defensive that Google’s taking. Google obviously has no intent of asserting and litigating but if attacked, they will now have significant patent resources to be able to create detonate and a levelling of the playing field. The relative patent, again it’s a quality and a quantity thing. From a quantity standpoint, they may not have as many patents as Microsoft or Apple but they have qualitatively winning patents because they have more standards based patents now. The fruits of 35+ years of Motorola’s birthright as one of the founding, inventing and most innovative companies in wireless technology.
BI: Who are the other big incumbents?
KB: These are companies that are standardising on Android. If you look at the patent portfolios of LG, Samsung, Motorola, Sony Ericsson, those patent portfolios are representative of the overwhelming majority of relevant patents that enable you to offer wireless products and services.
It’s nice to have touch, but you can have touch on a device that can’t communicate and you’re not going to sell a lot of devices.
BI: Do you think it would make sense for these companies to get together and create a patent pool?
KB: It could. By joining OIM, these companies are essentially neutralising patent threats and allowing their patents to be licensed out to third parties. It’s accomplishing a similar goal, it’s just not generating revenue for them. I think these companies are very interested in competing in the marketplace, and getting offerings out there where they can have differentiated products. It’s an incredibly kind of luxurious product that Apple puts out in the marketplace.
The problem is, over time, you have only the productivity and the collective intelligence of a group of however many people that work in your company, versus those things of an entire population of people around the world. Linux is not about technology, it’s about a modality for invention. It’s very difficult to sustain a competitive advantage when you are only able to tap into those people you can hire. We’re at a crossroads, and Android is almost the standard bearer of change in the technology world because it’s emblematic of what happens when you have lots of the best and brightest people around the world contributing to the development of the platform, versus a highly creative company like Apple. You may have some blips that you have something that’s generationally a little better or make good choices about displays, so it’s not that the creativity of Apple will fall under the weight of the multitude of creativity that comes from Android or any other open source platform, it’s just that sustainable competitive advantage can not be had long term.
BI: But Google is a for-profit company and they maintain a pretty tight control over some aspects of Android. If you want to be certified, you have to comply with certain specs, so it seems that they are using the advantages of open source, and turning that advantage into a profitable product that they use to compete against companies hiring full time staff to work on their product.
KB: The way I see it, they don’t see a lot of discomfort with the fact that Amazon is forking a version of Android and new platforms are coming out. Samsung indicated that they were originally were looking to fork Android, and then run their own version of Android, and now it looks like they’re developing their own approach with Bada.
I think it’s unfortunate but I can understand Microsoft’s actions in trying to neutralize…you’d rather fight a one-front war then have me go out there with the strengths and force as a marketing entity of Nokia and Intel’s intellectual capital strengths. That means you’ve got a system where you not only have to deal with Android, you’ve now got Meego, and potentially WebOS, and whatever Leemo does, if it’s picked up by low cost manufacturers, and whatever the Koreans do with LG or Samsung. It becomes very difficult to keep the lid on the genie’s bottle.
I’m not sure what happened to WebOS…why was it pulled after only a few months in the marketplace? I’m not sure what the motivation was but I don’t think that was in the plan for the people that are operating the company. It seems interesting that suddenly it was pulled…especially one that was going to be the future of their computing business. These are neutralization activities, and with Nokia it’s obvious, but with WebOS I don’t know what happened…
The creativity is contagious and viral and open source is essentially the match that gets lit that starts this process because it gives you a way of contributing and innovating. We are at a phase shift and these technologies are caught up in this shift. We as individuals are changing the way that we communicate and participate in information technology sharing, and transformation of work is occurring because these devices are changing in the way we’re connected. When you’re an incumbent, you can never underestimate how difficult it is to adapt to a new paradigm. There’s been an effort to adapt but you can’t avoid going through what Thomas Koon described in the Structure of Scientific Revolutions, as a paradigm shift, which is a very overused term, but the reality of it is, you first see things as anomalies, you then go into an early stage denial, a late stage denial, and then it takes a tremendous amount of energy in acceptance of a new paradigm, and that changes the way you compete. Until then, it’s very difficult, so there are a lot of challenges ahead for incumbents and companies that have made the decision they want to compete on the back of Linux, whether it be in back office transaction processing, or compete in the mobile space around Android, or on the desktop.
Companies are doing what you expect them to do, incumbents are trying to protect their space by making the battlefield the mobile space, and the incumbents in wireless are attempting to adopt a platform that allows them to create more better options for their customers. And at the same time, play defence, the battle is not just about mobile, they see the threat that Android and platforms of this type represent to the core cash earning businesses of the PC space.
BI: Do you think that the patent system is broken?
KB: No. I think reform is good. Any legislation is born of compromise. I think the next arena to be tackled is the ITC, and ITC reform, and I would propose that over time you’ll see that open source and Linux because of the economic benefits that these platforms provide, will actually be subject to public interest exception so that you will see fewer opportunities for companies and trolls to forum shop and to seek to avoid the effects of bay, by using the ITC. And the ITC will go back to a more type focus of cases that are more properly within its purview.
BI: The other thing I hear is that software should not be patentable at all because it’s just a collection of mathematical algorithms. What do you think of that argument?
KB: I’m a supporter of the patent system and I believe that the subject matter of what’s patentable is within the patent and trademark offices and those that guide their hand. I believe there should be much fewer patents issued and much higher bar, and if we had a history of codifying inventions in the Linux and open source community over the last 20 years, that through defensive publications or patents, we’d have the benefits of those patents, or defensive publications being statements of art that could then be used to raise the bar on what’s patentable. I think that’s unfortunate but we’re working on programs with other companies to make code searchable and have it be an effective source of prior art going forward. So we’re trying to address those issues in collaboration with other companies but I don’t think the solution is to go back and say the patent system is broken, and rail against the system. But rather accept that we have the system that we have, and how do we work within it so we still have avenues for innovation and advances in technology.
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