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Google sees itself as a victim of a broken patent system, and is demanding reform.  (Source: Hottest Review)

Acquisitions of IP from InterDigital, Inc. or Eastman Kodak could help protect Google. The company has $39.1B USD on hand, which it could use to buy patents.  (Source: Reuters)

Critics say Google only got to be huge using its patented PageRank (software) algorithm.  (Source: Vic Consulting)
Google's legal team insists that patent reform is necessary; but some reformists say it's hard to trust

Echoing previous comments voiced by Google Inc.'s (GOOG) ex-CEO Eric Schmidt, the company's General Counsel Kent Walker expressed frustrations at what he views as a broken intellectual property (IP) system impeding innovation.  He tells Bloomberg, "[Companies have to] sort through the mess.  It's hard to find what’s the best path -- there's so much litigation. We're exploring a variety of different things.  The tech industry has a significant problem. Software patents are kind of gumming up the works of innovation."

I. A Broken System?

From Google's perspective, the U.S. patent system is broken.  Google points to companies buying much of the intellectual property that they litigate with from small firms.  Google itself buys up IP, admittedly, but it says it only uses it in a defensive capacity, not an offensive one.

The company points to the high rate of invalidation of patents when they are put to the legal test.  Estimates put the rate of full or partial invalidation during reexamination at around 75 percent.

And Google has a big problem -- or so it says -- with the concept of software patents.  It claims that companies should not be allowed to litigate with respect to software mechanisms.

Ron Laurie, managing director of Inflexion Point Strategy LLC, appears to agree.  He says that Microsoft Corp. (MSFT) and Oracle Corp. (ORCL) -- both of which are currently locked in licensing struggles [1][2][3] with Google -- used to agree, but in the end fell in love with patents and litigation.

He comments, "Every software company would be happy if patents went away. Patents are irrelevant to YouTube, face it. Software is developed incrementally and patents get in the way of incremental innovation."

Currently, Google's biggest patent foe may be Apple, Inc. (AAPL).  Apple has sued all three [1][2][3][4][5] of the world's top Android phone makers, claiming they violate its design and technology patents.  Android is number one in global smartphone sales, and Apple is a ways behind in second place, so the outcome of these suits is very important.

Apple chief executive and co-founder, Steven P. Jobs, freely admits to stealing ideas, commenting [video], "Picasso had a saying - 'Good artists copy, great artists steal.' And we have always been shameless about stealing great ideas."

But Apple has argued in court that HTC has stolen its ideas -- and this time the theft isn't okay.  Mr. Jobs has commented, "Competitors should create their own original technology, not steal ours."

HTC Corp. (SEO:066570) chief financial officer, Winston Yung, shares Google's claim that the only good use of software patents is in a defensive capacity.  He also expresses frustration at what he views as a patent arms race. 

He remarks, "Each side can blow the other up on some level --everybody can block the other’s products from coming to market. You create this mutually assured destruction scenario, but it’s very expensive to get all those munitions. Buying patents so you can hit the other guy, it's not good form. You hate to unilaterally disarm here, but we haven’t in our history."

HTC did countersue Apple and has already won, in effect, via a separate suit filed by a recently acquired hardware unit.

II. Poor Outlook for Google on the IP Front

Overall the outlook for Android is murky.  While two of the three top manufacturers -- Motorola Solutions Inc. (MSI) and Samsung Electronics Comp., Ltd. (SEO:005930) -- have strong IP portfolios, Google's portfolio is quite weak.

Google has 728 U.S. patents, according to the U.S. Patent and Trademark Office.  By comparison, Apple has over 4,000 and Microsoft has over 18,000.  In short, Google's rivals have a lot more IP than it does -- including in the mobile realm.

Some say Google has been too sluggish at acquiring and filing for intellectual property.  Part of this is due to the company's late arrival in the mobile devices market.

Google lost a bid for a portfolio of 6,000 patents from defunct Nortel Networks.  That portfolio was scooped up by a coalition of Microsoft, Apple, and others for a cool $4.3B USD -- much more than Google's initial $900M USD bid (Google's bid would eventually reach $πB USD).  The portfolio would have been a powerful defensive tool for Google -- now it becomes yet another weapon for Apple and Microsoft to litigate Google's partners with.

Google does have $39.1B USD of cash on hand, so it may seriously consider InterDigital, Inc.'s (IDCC) portfolio of 1,300 patents.  InterDigital, a research and development firm, is reportedly cash strapped and may look to sell its IP.  As many of the patents pertain to wireless applications -- for example, Wi-Fi -- the portfolio could help Google beat back its litigious rivals.

Another potential IP acquisition target would be Eastman Kodak Comp. (EK), another cash strapped company with a wealth of IP.  Kodak holds many key patents on mobile imaging, though the value of that portfolio has declined with a judge ruling that a key mobile imaging patent was invalid for reason of obviousness.

Mr. Walker claims Google will be okay with or without acquired IP.  He states, "We’ll be fine. We have the resources to balance the scales here."

One key resource would be to funnel money to U.S. federal politicians -- contingent on them forcing a reexamination of software patents.  Federal politicians in the U.S. have shown themselves more than willing to write legislation for companies willing to give them enough money to get elected.

III. Allies, Enemies Accuse Google of Hypocrisy

Google's increasing vigor in attacking the state of the U.S. patent system -- particularly software patents -- is drawing criticism from several fronts.

Will Stofega, a program manager at researcher IDC Research Inc., a market analytics firm, says Google should have known what it was getting into, when it launched Android.  He said there was a wide assumption that Google would run into IP trouble.

He states, "It is about innovation and competition. Doing basic research to bring new products to market is something quite distinct from their [patentable] core capabilities. A patent is a patent and you may not agree with it, but it’s the law. It's a weakness for Google and everyone’s acknowledged it. The competition is so fierce and so brutal, any perceived weakness is going to be found out and you’re going to pay for it, in court or wherever."

FOSS Patents' Florian Mueller, a prestigious patent reform player in the open source movement and self-proclaimed critic of software patents, also recently ripped on Google in a blog.  He calls Google's efforts to buy patents -- something some have criticized -- a "non-issue".  But he does take issue with other parts of Google's stance.

First he says that Google was built on the "PageRank patent”,  U.S. Patent No. 6,285,999, a generic internet patent.  He admits that Google did a lot of unpatented server farm work to grow huge, also, and that it didn't use the PageRank to litigate.  But he accuses, "The broad PageRank patent may also have helped deter competitors from matching Google's quality especially in its critical early years."

He complains that Google has had a "taste of sour grapes" and is only now becoming a fair-weather critic of software patents.  Further, he says that some of Google's behavior appears to approach willful infringement -- something he has a disdain for.  He says that while software patents generally counter to innovation, opposing intellectual property as a whole is a bad idea. 

He comments:

When I was campaigning against software patents, the kinds of allies I was most uncomfortable about were those who were not only against software patents but had a broader anti-IP agenda. There were some in that movement who hoped that doing away with software patents would be the beginning of the end (or the end of the beginning, if you will) of a wider-ranging effort to weaken intellectual property rights. Not only did they have plans that would put me at loggerheads with them sooner or later (since I'm clearly in favor of copyright, and I'm not against all patents, though against many) but they also adversely affected the whole movement's ability to gather political support. A broad anti-IP agenda works only far left of the center. Center-left and (even more so) center-right politicians abhor it.

He puts Google in that "far left" category, pointing to what he believes to be willful infringement in the case of Google Books.

He also criticizes Google for not defending Android app makers against Lodsys, a firm he labels as a "patent troll".  Lodsys has sued seven mobile app makers, the biggest of which is Finnish app maker Rovio, who produces the Angry Birds app.

Surprisingly, Apple has sprung to its app developers' defense, but Google's executives have remained silent, even as its developers are sued.  Developers have pleaded with Android chief Andy Rubin to address the issue, to no avail.

It's clear that many aren't impressed with Google's new-found thirst of IP reform on both the reformist and the litigious sides of the spectrum.  Ultimately that just makes Google's position that much tougher.  At least it has a whole lot of cash.

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By 2bdetermine on 7/27/2011 4:18:52 PM , Rating: 5
Patents killed innovation, just what I had been said all along.

RE: Patents
By nafhan on 7/27/2011 4:59:02 PM , Rating: 2
Wrong. Patents can be a driver of innovation - just not under our current patent system. Under our current patent system, companies are rewarded for:
1) patenting generic or obvious processes
2) spending large amounts of money on patent defense

I think those are two of the biggest problems, and I'm not certain of the best way to combat them. However, better review of patents before awarding them would certainly help (although, that may not always be practical).

RE: Patents
By Reclaimer77 on 7/27/2011 5:11:19 PM , Rating: 5
Also the concept of "intellectually property" was much less the rule of the day when our patent system was being written. The patent system was set up so goods and products could be delivered to the market under patent protection. It was NOT designed to protect vague concepts, general ideas, and intangible technobabble for patent trolls.

RE: Patents
By TSS on 7/27/2011 7:39:04 PM , Rating: 2
The problem is duration. No patent should last longer then 5 years. If you can't profit off your own invention in 5 years, tough luck. You'll still have a 5 year head start on the competition. If that isn't enough... well the world isn't going to stop turning.

You're right in the fact that if there was no patent law, an inventor could spend alot of time, money and effort inventing something that could then be copied for next to nothing by somebody, who can then undercut you and take all the profits. That would be extremely damaging to innovation.

But in any other case, Patents serve to stifle innovation, in order to solve the moral dilemma of copying information for next to no effort relative to the effort taken to create the original item.

James watt delayed the industrial revolution by 25 years holding onto his patent for the steam engine and fighting competitors through the legal system. IMO that's what everybody should be thinking off when talking patent reform: How long would you delay an industrial revolution for the sake of a single person's finances, taken into account that "never" isn't right either.

RE: Patents
By Wiggy Mcshades on 7/28/2011 1:50:40 PM , Rating: 2
Not every industry moves at the same pace. 5 years could be the golden number for one and a death sentence for another. A big part of this problem is from trying to use one set of rules for wildly different circumstances. For example: software patents shouldn't exist, but patents on hardware need to exist to make producing it profitable. I don't know the right answer, but maybe patent laws being based on what is actually being patented would be worth a try.

RE: Patents
By wifiwolf on 7/27/2011 9:28:41 PM , Rating: 2
The big issue about the patents system is that those who evaluate don't know anything about those technologies.

It's better having patents than not but it's just going the wrong way. You can't be a judge if you don't know the laws.

RE: Patents
By Jeffk464 on 7/27/2011 11:27:40 PM , Rating: 3
So if google looses and android is forced out of the market what is the consumer to do? I for one can't tolerate apple's slow product cycle and their lock the customer out of the phone tendencies. So is the hope that windows phone will become popular and eventually get hacked into a more open platform? The entire draw for android is the constant release of new cutting edge phones with easily hacked software.

RE: Patents
By Jeffk464 on 7/27/2011 11:31:50 PM , Rating: 2
Now wouldn't it be funny if android went away and HP phones become popular with palm's web OS making a come back.

RE: Patents
By Jeffk464 on 7/27/2011 11:36:03 PM , Rating: 2
Only one windows phone on verizon and its a small screen, single core processor, and no LTE. Apple really has the potential to screw up the smart phone industry with this stuff.

RE: Patents
By sorry dog on 7/28/2011 1:35:21 PM , Rating: 3
I wonder if Apple has thought about the large backlash it will have to deal with if it actually wins.
I already un-recommend Apple to friends and family by citing their evil business practices and disdain for user freedom/control of their products, but it's a weak argument for someone who has already been sold on the Apple is cool factor.

BUT...if my argument also includes they personally killed some of the best phones on the market for the sake of bogus patents, then my argument against buying Apple will be much much stronger...AND I will become much more vocal about it.

...In fact part of me wants them to win...
1. I already have an Android phone that I like and likely won't need another for a year or two
2. There might be a business op importing "illegal" Android phones from other countries
And 3. Gives me and a bunch of other folks a reason the REALLY hate Apple...the hacker/ script kiddie community will likely take a new interest in Apple.

RE: Patents
By vision33r on 7/28/2011 11:02:00 AM , Rating: 2
So wrong, only someone who isn't innovative would say this.

By dcollins on 7/27/2011 6:18:20 PM , Rating: 2
Two simple changes that I think could go a long way to fixing patents.

1) Dramatically reduce the length of software patents. Developing a brilliant software idea should allow you at most 2 years to put that idea in practice before other companies can take advantage of your ideas. Software moves much faster than traditional industries and has significantly lower startup costs. A 2 year lead is enough to reward innovative ideas.

2) Add an "intent to commercialize" clause to all patents. That is, the patent owner has to demonstrate that they made a clear effort to turn their patent into a viable commercial product within a fixed amount of time from the patents filing. Any patent not put into use within that fixed time would ruled invalid. This would prevent patent trolls from buying old patents from companies that never used the patent.

The patent system was created to encourage innovation and reward innovators. Patents no longer serve that purpose so clearly the system needs reform.

RE: Length
By bug77 on 7/27/2011 6:58:21 PM , Rating: 2
3) Make the patent non-transferable. Rewarding the creator and nobody else.

RE: Length
By dcollins on 7/27/2011 7:17:59 PM , Rating: 2
That sounds like a good idea, but it could be a problem in practice. Consider a chemist who patents a new synthesis route for producing a commercial drug. That chemist may not have access to the manufacturing capability necessary to take advantage of his patent. He should be able to sell his idea to a chemical company and that requires his patent be transferable.

RE: Length
By spread on 7/27/2011 7:21:36 PM , Rating: 2
In that case have a limit on the number of transfers. You transfer it once and once only. This way companies won't be able to gobble up patents with mergers and buyouts and whatever.

If you can't make use of your patent or you refuse to make use of your patent and sit on it, it becomes invalidated after a period of time. Let's say 5 years. You have 5 years to get your ass in gear from idea to production.

RE: Length
By Taft12 on 7/27/2011 9:57:48 PM , Rating: 2
Uhhh, no it doesn't - it requires it to be licensable. Just like it is right now.

RE: Length
By sorry dog on 7/28/2011 1:54:52 PM , Rating: 2
What if the patent inventor dies and he/she wants to will the patent to his family or friends.

...or what if the patent holder is a company that goes bankrupt...and the patent is of value to the creditor...or the patent holder is company that is bought or merged to create a new entity.

I think wholesale changes in the law like non-transferable clauses create as many problems as they solve.

But... even small changes in the language might do enough to partially fix the problems...such as modifying the language to put more emphasis on the patents having to be non-obvious would have likely killed Apple's case against HTC.

Also, adding/modifying the statute of limitations on time the holder has to sue after discovering the infringement (or reasonably should have discovered the infringement) would allow the issue to be settled before it snowballs into a billion dollar issue such as with Apple/HTC. If Apple had 6 months to file then this suit would have had to have been filed 2-3 years ago before there were umpteen android sets and several more billion at stake, and Apple's injury to their sales would not be near as large.

This would also greatly reduce the patent trolls would wait until a product become quite successful before waiting to sue just to increase the size of their injury.

But even

Great listen...
By Iaiken on 7/27/2011 4:14:02 PM , Rating: 3

Excellent breakdown of where most patents lay and how they are being used.

RE: Great listen...
By Trugentleman02 on 7/28/2011 6:56:36 PM , Rating: 2
Awesome find. It makes me sick to know that companies like Intellectual Ventures exist just to sue and not actually do any innovating.

I dont care much about
By icanhascpu on 7/27/2011 4:14:31 PM , Rating: 5
Google, Apple, MS, IBM patents. Work it out, guys.

What really matters is patents to Monsanto. Those guys need to be utterly destroyed. Those patents effect humanity on a much deeper level in my opinion. So if we reform it. make sure that BS is fixed before anything else.

Protecting innovation...
By bug77 on 7/27/2011 4:24:45 PM , Rating: 3
It's like saying prehistoric man needed patents to invent the spear.
If he waited for someone to protect his idea first, we would be extinct by now.

RE: Protecting innovation...
By Daemyion on 7/29/2011 5:34:51 PM , Rating: 2
I would think that the first man with a spear would be more of a deterrent to copying the spear than, say, a patent office.

The real reason Google is so worried
By Tony Swash on 7/28/2011 6:43:41 AM , Rating: 1
The real reason Google is so worried, their business model is about the past not the future.

See this article which contains a video extract from the referenced presentation but I urge you to watch the full presentation video (there is a link) as it very interesting.

RE: The real reason Google is so worried
By gooing on 7/28/2011 11:51:16 PM , Rating: 2
Ok so lets just visualise a world where Apple has supplanted and vanquished the Google/Microsoft nexus. What then?

In a vacuum, what faith have you that Apple will continue to innovate, and more importantly not seek to maximise the returns from their newly acquired monopolistic position? Apple products (perhaps with the sole exception of the iPad) are already priced at a premium, imagine what they would do without the discipline of healthy competition?

This applies to all markets - monopolies do not empower the consumer. That's why the whole basis of fanboyism is flawed. Roll on the 1980's when innovation moved slowly (by comparison) and the price of real computing power was beyond the pocket of the average household.

Do you really yearn for a return to that?

Surely better that we have choice. In anycase Apple don't seem to be faring too bad?

By Tony Swash on 7/29/2011 4:12:28 AM , Rating: 2
I think you may misunderstand my position. I am a fan of Apple and their products and I do wish for them to succeed. I don't particularly want anyone else to fail. What provkes me to comment here are things such as::

Apple phobia leading to false ,stupid and mendacious reporting or commenting


Google worship leading to false, stupid and mendacious reporting or commenting

Plus people saying obviously silly things

What I would liike to see around here is a more rational discussion about the momentous changes taking place in the world of technology

Article update
By DanNeely on 7/27/2011 4:19:39 PM , Rating: 2
Google's initial bid was $900M, but in bidding war they went up to Pi Billion before bowing out.

By vision33r on 7/28/2011 11:12:31 AM , Rating: 2
Google is on the principal that since they have leverage with their name, they can abuse IP by simply claiming patents are not innovations. Then goes on to take IP from people especially those who are smaller than they are and start using it for their own goals.

How does that foster innovation? It's exactly what the Chinese does except they do it in an exploitative way.

By superstition on 7/28/2011 1:55:11 AM , Rating: 2
I think a bit too much space is given to Mr. Mueller's opinions. Counterpoint from another "prestigious" source would be helpful.

By Tony Swash on 7/28/2011 5:33:14 AM , Rating: 2
They would say that wouldn't they given the evidence emerging in Oracles Java legal case. The evidence rad aloud by the judge and the judge's comments are now available and they pretty strong stuff. Details here

This is the killer quote from judge Alsup:
Indeed — particularly if Rubin has to explain it on the stand. “You know what they used to say about Joe Alioto,” Alsup said, referring to the successful antitrust attorney. “In a big case like this, he only needed two documents: He needed a document like this, the one I just read, and the Magna Carta. And he won every case. And you are going to be on the losing end of this document with Andy Rubin on the stand. … If willful infringement is found, there are profound implications for a permanent injunction. So you better think about that.”

Patent reform is a fraud on America
By staff on 7/28/2011 10:41:06 AM , Rating: 2
The patent bill is nothing less than another monumental federal giveaway for banks, huge multinationals, and China and an off shoring job killing nightmare for America.

Just because they call it “reform” doesn’t mean it is. Even the leading patent expert in China has stated the bill will help them steal our inventions. Who are the supporters of this bill working for??

Patent reform is a fraud on America. This bill will not do what they claim it will. What it will do is help large multinational corporations maintain their monopolies by robbing and killing their small entity and startup competitors (so it will do exactly what the large multinationals paid for) and with them the jobs they would have created. Yet small entities create the lion's share of new jobs. According to recent studies by the Kauffman Foundation and economists at the U.S. Census Bureau, “startups aren’t everything when it comes to job growth. They’re the only thing.” This bill is a wholesale slaughter of US jobs. Those wishing to help in the fight to defeat this bill should contact us as below.

Small entities and inventors have been given far too little voice on this bill when one considers that they rely far more heavily on the patent system than do large firms who can control their markets by their size alone. The smaller the firm, the more they rely on patents -especially startups and individual inventors.

Please see for a different/opposing view on patent reform.

Am I being paranoid!
By Tony Swash on 7/28/2011 6:55:58 PM , Rating: 2
I just went to FOSS Patents and discovered it had been removed!

So I had a look at the cached version and I find the latest article prior to closure was about how Google's WebM (VP8) allegedly infringes the rights of at least 12 patent holders. The cached version is here

Has the blog been shut down by Google? Is this just a coincidence? Am I being paranoid?

I genuinely don't know what is happening but it was a very, very good blog so I do hope it returns

Patents don't kill innovation...
By msheredy on 7/28/2011 11:35:36 AM , Rating: 1
...what kills innovation is when company A owns a patent and hasn't made use of it. Then company G decides to go ahead and use it without consent. Company A gets pissed and sues company G. Company G gets all pissed and says they want a reform—really? Just license the technology from company A and you can continue to innovate. It's really not that hard.

By kleinma on 7/27/11, Rating: -1
RE: hmmm
By semo on 7/27/2011 5:26:00 PM , Rating: 4
Software engineers should make their living of supporting their creation rather than mooch off of them.

The ideology of using good practices and making everything idiot proof so that everything just works perfectly is tired and old. Systems need maintenance, repairs, modifications and updates. Turning a piece of code in to a solution that works for someone is just as important as the code itself.

RE: hmmm
By kleinma on 7/28/11, Rating: 0
RE: hmmm
By adiposity on 7/28/2011 1:10:57 PM , Rating: 4
If I made some really cool piece of software, and it starts to gain decent traction, and then a company like google comes in, makes the same product, throws millions behind it in marketing, then I am f*cked.

Yes, but why are you f*cked? Because the company with all those resources can service more customers than you can. Because they are better equipped to offer updates and new features. Etc.

Now, I'm not saying you don't deserve credit for your software, but just having an idea for a program doesn't seem like it gives you the right to prevent others from making similar software.

If all spreadsheets, word processors, and presentation programs were made by one company, that would seem pretty ridiculous today (in spite of the fact that MS does control at least 75% of those markets).

By the way, I am a software developer, and I definitely don't like it when my work is stolen, or my code is copied. But if someone makes the same program independently, I think that's fair. Just having the idea for a program doesn't entitle me to anything.

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