Tech patent wars: a lose-lose situation

4/4/2012 5:44:33 PM
Tech patent wars: a lose-lose situation

Apple vs Samsung, Microsoft and Google... Are patent lawsuits out of control? Who wins and who loses? Eric Mack examines what’s at stake

Description: Tech patent wars: a lose-lose situation

These days, mobile-technology patents and lawsuits go together like bread and butter. Previously, patents primarily served to help companies protect their intellectual property; now. Apple, HTC, Microsoft and smaller companies are using patents as leverage, suing one another in an attempt to gain the upper hand. The trend, experts say, is quickly spinning out of control, and hurting consumers when it comes to mobile-gadget choices and prices.

Mobile-handset-related lawsuits are up 25 percent year on year since 2006, according to Lex Machina, an intellectual property litigation firm. Blame for this increase lies with the technology landgrab involving mobile companies that are eager to get a slice of the billions of pounds at stake in the fast-growing mobile arena, said David Mixon, patent attorney for Bradley Arant Boult Cummings.

“It may not be how the patent system was envisioned to operate, but this is the way that the business has evolved among these tech giants - because there’s so much money at stake, and it’s so competitive, and the marketplace is changing so rapidly,” said Mixon. “Everybody is desperate to secure any kind of competitive advantage that they can in the marketplace.”

What is a patent worth?

Microsoft upped the Android-patent ante recently drawing up its 10th patent-licensing deal with China-based handset maker Compal Electronics. It already has inked deals with Acer, HTC, Samsung and six other Android handset manufacturers, charging each for using its patents in their smartphones, although Microsoft is struggling to get its Windows phone 7 platform to compete against apple and the Android army, its Android patents are estimated to earn the company $444m in 2012 in licensing agreements, according to Goldman Sachs. Those numbers are based on projected royalties of $3-6 per device.

The mobile industry: Lawyering up


Description: Galaxy Tab vs iPad

When someone doesn’t pay Microsoft, or any other mobile patent holder, the lawyers roll up their sleeves. Hundreds of patents are buried in smart phones. Not only are a phone’s camera, chips, and other outs patented, but so too are specific features, such as the ‘swipe to unlock’ function on the Motorola milestone. The method an iPhone uses to receive email, and the structure underlying in-app purchases (like those that allow you to buy game levels inside a mobile app).

Such phone functions are at the heart of patent lawsuits affecting mobile firms large and small. For example, a company called Lodsys asserts that it owns the sin-app payments’ patent, and it has taken dozens of third-party iPhone app developers to court, demanding compensation.

When patents are your business

Florian Mueller, a patent expert and analyst, and writer of the Foss patents blog, thinks Lodsys represents what are known unflatteringly as ‘patent trolls’. Mueller said that Lodsys is going after app developers - particularly small developers - unfairly, exploiting a patent that it may never use itself just to make money.

Those small developers a rent able to defend themselves properly, and often they find it easier to pay licensing fees or penalties rather than battle it out in court. “Even a basic analysis of an infringement assertion, no matter how spurious it may be, costs them huge amounts of money by their standard, Mueller said.

Lodsys bristles at the notion that it’s doing anything unethical. In a blog post, Lodsys defends itself, stating that it’s simply protecting technology it rightfully owns and seeking undisclosed compensation from app developers that have made money off the back of its patent.

However, Lodsys’s patent claim is just the tip of the iceberg - the patent wars are raging. Oracle is suing Google over the use of java in Android. Apple is suing HTC, claiming that its phones copy the phone. And Microsoft is suing Barnes & Noble over its Nook e-readers and the way the devices allow users to tab between screens.

Stifling innovation?

Patent battles are undoubtedly costing the wireless industry billions of pounds - an expense that companies end up passing down to the consumer, indirectly.

But just how much all this patent stockpiling and legal feuding is stifling innovation is hard to quantify. Mueller points out that the amounts of money that big-name companies such as apple and Google are spending on patent warfare are relatively small.

HTC America president Martin Fichter disagrees, however. At a recent mobile future forward conference in Seattle, Fichter complained that patent battles distracted wireless companies, as they waste a lot of time and energy litigating instead of developing new technologies and user experiences, according to a GeekWire report. He said that the wireless industry needs to “stop itself from wasting all this energy that should go into putting better technology into people’s hands.

In other words, when a company is too busy looking over its shoulder and worrying whether someone is ripping off its patents, customers lose out.

The patent wars get worse

Fichter is speaking from experience. In September, HTC acquired several patents from Google and countersued apple, alleging that the company had violated four of its patents. It claims that apples Mac, iPhone, iPod, iPad, iCloud and iTunes violate a patent that allows the devices to upgrade their software wirelessly.

Many industry observers see the fight between apple and HTC as a prelude to a larger battle between apple and Google. The late Steve Jobs famously called the Android operating system a rip-off of the iPhone. Apple has yet to sue Google directly, deciding to go after Android proxies instead.

In august, apple prevented Samsung from selling its Android-based Galaxy Tab 101 tablet and its Android-based Galaxy S smartphone in parts of Europe including - briefly - the UK. Apple has convinced both a Dutch and a German court that Samsung is in breach of its patents.

Goode, with relatively few mobile patents at the beginning of 2011, paid $l2bn to acquire Motorola, adding 17,000 patents to its war chest by including the (now-defunct) patent for the original mobile phone. At the time of the acquisition, Google said the Motorola patents would help it build a stronger patent portfolio and deter intellectual property lawsuits.

Experts say the current patent wars are following a familiar pattern of new technologies. In the early days of the PC, for instance, computer makers often slugged it out in court, fighting over patents. The wireless industry will likely follow a similar patent-lawsuit trajectory.

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