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
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  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
Currently, Google's biggest patent foe may be Apple, Inc. (AAPL).
Apple has sued all three  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
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
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
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
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
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.
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.
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.
quote: 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.”