Patent Lawyers Gone Wild!

The modern day patent system has no doubt provided substantial societal gain throughout the years.  Government grants of exclusivity arrangements have encouraged R&D, promoted invention, and protected new ideas.  As most things that have political fingerprints, however, it seems the very system that was supposed to keep the public from being held hostage by large corporations is now helping them create barriers to entry.   In the current mobile patent war, for example, its the richest companies that gobble up patents to stifle competition through through lawsuits (yes Apple I mean you).  Is innovation being left in the hands of the few with the largest war chests and most lawyers on the payroll? 

The patent infringement assault on Android is bloody.  Apple is suing every handset manufacturer they can think of to essentially take the guts out of the free mobile OS.  HTC pays Microsoft $5 per handset sold (Microsoft makes more from HTC sales than their own Windows phones).  Samsung cannot sell their Galaxy tablet in Australia thanks to Mr. Jobs.   Mobile “patent troll” companies like Interdigital have tripled in price on speculation that they will get sold to the highest bidder.  Remember Motorola?  They are back from the dead sporting a 17,000 patent portfolio.  Some of these companies actually have more attorneys on their staff than any other discipline.  I’ve never seen a case when this is a good thing for the general public (read:  Congress).  Are these R&D havens or lawyers gone wild?

Its one thing if Apple had some sort of super patents that companies were blatantly stealing.  If this was the case, Apple wouldn’t have the need to drop nearly $3B to purchase Nortel ‘s patent assets (incidentally with other “consortium” monopolists like Microsoft) and continue their shopping spree.  They are filing claims for patents around the fringes, ones they acquire after the fact, or even ones they might not be using or so insignificant to the overall OS.  Apple just became the second most valuable company on the planet, why do they see the need to stoop to this level?

Simple.  The IPhone represents almost half of Apple’s revenue.  Android is inching towards a 50% market share in smartphones.  What they spend on patents is a fraction of what they can defend by taking the largest competitor out.  And of course, consumers will suffer the most by reduced choice.  It is fortunate that Android is backed by deep pockets (Google) who can afford to fight back, but what if they weren’t ?  How would they fight back against Apple’s $80B cash balance? Why can’t Apple just continue to disrupt the market through innovation instead of focusing on legal brinksmanship? 

We saw similar games in the pharmaceutical industry.  Most of the blockbuster drugs that came out were brought by a limited number of companies with vast resources.   And as the 17 year patent period would expire, they would work the system by making minor tweaks to their drugs to extend the patent life.  You saw very little innovation coming from smaller players who don’t have the resources and knowledge of the system to compete.  There were rarely any development firms or smaller companies that could bring wide scale drugs to market in large part because of the muscle of the big boys.  And remember how much your prescriptions cost as a result?

I don’t want to imagine a world where my only choice is Apple and Microsoft (di dnt we have that in PC-land?) or where the only drugs being developed are by 3 or 4 firms.  I continue to hope the patent system will favour inventors like Robert Kearns in Flash of Genius who miraculously defeated the Detroit automakers that stole his design.  With patents being so easy to file for sophisticated lawyer groups, however, its the large companies with vast resources that are being aided the most.  But lets hope in the long run, things work out the way they should  A warning to Apple:  just look at Pfizer now — they are nothing more than a large cash balance.