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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.



Comments     Threshold


This article is over a month old, voting and posting comments is disabled

Length
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


"What would I do? I'd shut it down and give the money back to the shareholders." -- Michael Dell, after being asked what to do with Apple Computer in 1997














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