It seems hard to imagine life these days without our beloved smartphones. They have affected almost 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 his pocket. However, it has also become a common fact to read about the latest big money lawsuit between tech companies that have developed these technologies. And these are not run-of-the-mill legal disputes; we are talking about multimillion-dollar lawsuits for intellectual property rights that allow a majority share of the global technology market. And yet such high stakes has just become a part of doing business, but it raises questions about how much damage is done 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 rights of the inventor to be credited for his or her work. The truth is that there are very few NEW ideas or inventions left. Most new ideas and technologies are based, at least partially, on old technologies and ideas, and there’s nothing wrong with that. Most companies don’t try to reinvent the wheel; They are trying to improve it! It is more realistic to put a tire on it, change the material they are made of, improve the tire tread, etc. And this is where the legality of such efforts becomes complicated. In order to register a trademark or patent, an improvement on a pre-existing idea, you must first enter into a license agreement with the owner of the original patent.
The problem in the tech industry right now is that there are so many overlapping patents that developers of new ideas (or improvements) don’t know where to start when trying to license the original patent their improvement is based on. On top of that, the global tech market has made license fees unaffordable for smaller businesses. Not only are license fees a deterrent to smaller entities, but the atmosphere of bloodthirsty lawyers waiting to attack anyone who steps on them 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 are “tech patent wars” stifling innovation in the industry, but who really pays the cost of these multi-million dollar lawsuits? The consumer of course. Yes, it is a cost of doing business these days and all costs associated with developing and selling a product must be included in the price of said product.
How do we solve the problem?
Much of the rhetoric you’re likely to read on various popular tech blogs points the finger at the USPTO and the “broken patent system,” but who’s to say the patent system isn’t working as designed?
First, we need to clarify whether this problem is insurmountable or even unexpected. It should come as no surprise that this is not the first “patent war” we have seen. Not only that, but when it comes to these types of legal conflicts historically, everything is on track to be resolved eventually. We just have to be patient enough to let things take their course and allow the legal system to do what it does and sort through all these overlapping IP rights to decide who owns what and who owes whom. Probably the first such conflict was the sewing machine patent wars of the 1850s, which mirrors the same issues we’re seeing in today’s smartphone wars: entities licensing patents, overlapping patents covering individual products; costly litigation, etc. Eventually, things worked out and everyone calmed down.
That’s not to say that the USPTO doesn’t have to catch up in order to operate as efficiently as it could be. That is why the recently enacted United States Inventions Act aims to bring the patent system into the 21st century and make the patent application process more efficient by:
• Encourage applicants to submit their applications electronically. Applicants who choose the paper filing option will be charged an additional $200-$400 ($200 for smaller entities).
• Fast Track Request Option. The USPTO will offer a “fast-track” option, which will allow applicants to expedite their applications for a surcharge of $4,800 (or $2,400 for smaller entities).
• Reduce the current backlog. There is currently a backlog of approximately 680,000 patent applications. Due to new financial arrangements at the AIA, the USPTO will begin hiring new examiners and other staff that will help reduce this backlog and improve applicant wait times.
In addition, we have also seen steps taken by the US Federal Trade Commission to control the ever-increasing number of IP infringement lawsuits. When Google acquired Motorola in 2012 for $12.5 billion, it also took over Motorola’s patent portfolio of more than 24,000 patents. The most significant outcome of the 19-month-long case is a legally binding agreement by Google to allow its competitors access to “standard essential patents.” Those “Standard Essential Patents” are basic patents that many NEW smartphone technologies must access in order to develop new products and improve old ones.
Between the AIA, the FTC, and the legal system, I think it’s safe to say things will settle down…eventually. But no one knows yet when that will be.
