We are approaching a nuclear war era with patents, but at least people are noticing

My last post on Intellectual Ventures and the NPR article that gained national attention was the most read post I’ve ever written, in no small part because people are more interested in the state of patent law in America than possibly ever before. And that’s because patents in America are reaching something of a boiling point. We are seeing really unprecedented wars over patents in completely ridiculous technologies and software, and as more and more people become familiar with Apple and Google and Microsoft as technology spreads, more and more people are becoming interested in the fights behind the companies.

Things have really been building lately in terms of patents in the news: Nortel sold a portfolio of their patents for $4.5 Billion to a consortium of buyers lead by Apple and RIM just last month. Google, missing out on the Nortel bunch, jumped at the chance to buy a bunch of IBM patents for an undisclosed price, but likely somewhere north of half a billion. Apple is currently engaged in a boat load of patent suits against Android phone makers like HTC, who, by the way, just bought a small company for $300 million solely based on the fact that the company won two patent cases against Apple. Rovi is suing Hulu. A company that hasn’t released a product in a decade is suing Spotify over a patent that they claim covers streaming music. Patent troll Lodsys is suing a bunch of mobile app makers, including Angry Birds developer Rovio, indicating that no app maker is safe right now. And of course there was the Intellectual Ventures/NPR piece, highlighting the fact that most software patents don’t inform anybody of new technology, and don’t actually help innovate. Oh, and by the way, the DOJ thinks patents are becoming important.

It’s really an unprecedented era for patents – all the major tech companies are arming themselves with hundreds if not thousands of patents to use against one another, and small rogue nations (Intellectual Ventures and the rest of the non-practicing entities) are taking pot shots at every company they can construe their patents to read on. We might be on the cusp of a patent war unlike anything we’ve ever seen, if we aren’t in that era already. The mainstream media is starting to notice that patents are getting out of control more than usual – the NPR article, this economist article, a post on the Guardian, and a great article by Mark Lemley that is getting some attention. Will this help? Probably not – don’t expect substantial patent reform from Congress. Perhaps the Supreme Court will continue their trend of cutting back on the rights associated with patents, but that process is likely to be slow, and with billions of dollars being spent on the transactions, the court might actually hesitate to cut back on the property rights further to avoid angering those who have already invested.

I think patents are interesting because they cover technologies I love, and they have innate notions of property implicit in their use, but I also think anybody in any software/tech industry (which is increasingly where a lot of business is going) has to be aware of the activity in this space. A company really can’t launch in those spaces without factoring in the cost of licensing patents from patent trolls at this point, as Lodsys is teaching many app developers in the mobile space right now. And while I agree that the notion of a defensive patent goes against the aims of patent law, new companies need new patents so they retain some leverage against the biggest companies in the space they seek to enter. Take Hulu or Spotify, for example, who are both being sued over obvious patents on streaming video and streaming music, respectively. While Hulu is being sued by a real company, Spotify is being sued by a company that hasn’t released a product in a decade. Spotify is an extremely well-funded startup and can mount a strong legal defense if need be, but if it wasn’t, this sort of suit could potentially ruin the business. If Spotify was smaller (watch out Turntable.fm), this patent could be used to strong arm them into an acquisition, or could force them to take a funding round on unfavorable terms to mount a defense, or in any number of ways disrupt their progress. One could wax poetic about how ridiculous this outcome is, and how our patent system is completely stifling the innovation is was meant to inspire, but I’ll leave that to Techdirt. The real lesson is that new companies need patents to protect themselves in this cold war/nuclear era of software patents, at least until something major changes. If Hulu held just one patent that could read on Rovi, they might have avoided this suit – or at least they might have bought some leverage in a settlement negotiation.

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