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  (Source: New Line Cinema)
Patent reform is crucial or electronics industry will be consumed in self-destructive chaos

It's simple math.  And it illustrates how broken the international patent registration and court system is when it comes to intellectual property.

I. The System is Broken

Microsoft Corp. (MSFT) recently revealed that tentative Google Inc. (GOOG) acquisition Motorola Mobility wanted $22.50 per device for a series of video codec patents.  This request was clearly ridiculous -- as Microsoft states, the typical licensing rate for a collection of standards patents under fair, reasonable, and non-discriminatory (FRAND) terms is around $0.02 USD per device.

FRAND is actually a model system in that it is inherently an exemplar in the world of intellectual property.  It represents fair compensation to innovators, yet opens key developments to the masses, allowing them to push the envelope.

The issue is that FRAND is on the verge of dying.

FRAND patents are for friends
[Original Image: Cayusa/Flickr; modifications: Jason Mick/DailyTech]

The would-be murderer is patent litigation.  Keep that $0.02 USD patent licensing figure in mind.  Now imagine you patent a trivial user interface gesture, which is essentially some sort of variant on drag and drop.  Suddenly you can ban a competitor's device which retails for $200.00 USD.

That's right -- based on recent court decisions, almost trivial non-FRAND patents [1][2][3] are being rewarded with rulings worth 10,000x or more the cost of traditional licensing fees.

This abysmal state of affairs not only encourages patent trolling, it offers a strong financial incentive to stop any FRAND related work.  If your competitors go non-FRAND and your company works cooperatively under FRAND guidelines, your firm will almost certainly be dealt a series of crippling court rulings under the current patent atmosphere.  Try explaining that to investors.

II. Some Suggestions for Improving the System

User interface patents, firmware patents, and their ilk certainly represent a philosophy of protecting software innovators.  That's a noble goal.  However, in the future, it would be good for the patent system to consider a couple of points:

1. The potential for alternatives

Apple recently patented sending an interrupt to a processor in order to underclock it.  Now, interrupts have been used for decades as the fundamental firmware mechanism to deal with immediate events.  And a processor's power circuitry must receive some sort of guidance in order to underclock a chip.

Thus, while Apple's patent may be novel (assuming a lack of prior art), there are few feasible alternatives.  The patent system should note this kind of situation and put a higher pressure to reach a fair licensing situation in this kind of case.  You can't patent the laws of physics, so to speak, and even if you could, the least the system can do is to force you to license it.

2. The importance of a patent

Thus far Apple has secured short bans on Android products for relatively trivial features -- swipe to unlock, fast scrolling algorithms, and a "bounce" animation when performing drags or pinches.

In terms of the iPhone's net worth these represent maybe 1/500th or less of the total software innovation in the device.  Thus it might be fair to charge collectively $1.00 USD per device for them, but seeking a ban or exorbitant fees from competitors who use similar effects/inputs is extremely punitive and unfair.

3. Eliminating repetition

The mobile industry is awash in a deluge of repatents -- companies taking personal computer innovations, putting a mobile spin on them and then filing for a patent.  Apple's swipe to unlock is essential a touch screen version of the time immemorial drag-and-drop.

Motorola unlock
Motorola's forbidden swipe to unlock gesture [Image Source: YouTube]

If such repeats are allowed, the patents should at least be flagged.  Again such a flag could be used as a basis to force a licensing settlement and/or reduce the maximum damages a company can seek to collect in a suit.

4. Force Companies to Reach Licensing Settlements

Barring a handful of patents where the IP describes essentially an entire product, there should be strict guidelines forcing companies to settle software IP disputes.

A reasonable place to start would be to charge x10 the going FRAND rate (e.g. $0.20 USD for licensing a portfolio of IP).  In FRAND terms, this would not be fair and reasonable.  But the approach would bring into line the risk-vs-reward equation of the FRAND-vs-non-FRAND filings, versus the current hyper-inflated value scenario which essentially tilts the value scale in the direction of non-FRAND so far that the balance bar breaks.

III. Don't Want to Fix the System?  Prepare for a Dying Industry

As the industry stands right now, FRAND is on the verge of collapse.  Google and its partners are fast learning that playing fair does not work.  Their FRAND suits illustrate a willingness to play dirty.  And that new perspective will likely soon manifest in a cessation of FRAND work.

This is a horrible state of affairs for the industry.  By allowing injunctions that exceed FRAND payouts 10,000-fold, the global intellectual property sphere is revelling in the creation of an anti-competitive, anti-technology environment.

This system promises an ugly future in which mobile communications are slow (as it would be uneconomical to participate in FRAND communications standard development), there interfaces will be clunky (a company will be limited to a handful of UI elements for fear of infringement), and product quality will be decreased to offset an inevitable slew of licensing fees.

Cavemen fire
Prepare for the future of technology if the patent system is not reworked.
[Image Source: Museum of Natural History]

This is a system where nobody wins.  And this is the system that will result if drastic action is not taken, right now.

Is Google/Motorola/Samsung playing dirty?  Yes.
Is Microsoft milking the licensing system [1][2]? Yes.
Is Apple acting as an anticompetitive litigation abuser? Yes.

In a macroscopic sense, the problem is not these companies.  The problem is the intellectual property system.  This argument must not be lost amid our personal prejudices, lest the increasingly hyperlitigious atmosphere destroy the innovative devices we enjoy today, regardless of who makes them.

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RE: Who is surprised...?
By fhornmikey on 2/29/2012 8:06:04 AM , Rating: -1
I love it when people who don't actually understand what attorneys do say stuff like this. News flash, lawyers do a hell of a lot more than what you see on TV or what you read about on sensationalist news websites like this one.

RE: Who is surprised...?
By Master Kenobi (blog) on 2/29/2012 8:33:40 AM , Rating: 4
I have the unfortunate distinction of dealing with attorneys and their "good ideas" on a near daily basis. I will stand on my earlier statement that they are functionally useless. Lawyers do NOTHING except further saturate a legal system already bogged down by decades of precedent and rules which were generated by yet more lawyers. They are self sustaining at this point and are causing more harm than good. Granted there are criminal attorneys that are unfortunately necessary based on a persons rights, but most other types of attorneys (Tax attorneys, are you kidding me?) really need to be eliminated in an effort to trim the fat.

RE: Who is surprised...?
By Goothry on 2/29/12, Rating: -1
RE: Who is surprised...?
By bug77 on 2/29/2012 10:14:40 AM , Rating: 2
Please, enlighten us.

PS: Not all lawyers are bad. It's just 99% that ruin the reputation for all of them.

RE: Who is surprised...?
By jahinoz on 3/1/2012 2:20:44 AM , Rating: 2
Role of the tax attorney:

1. Hire a forensic accountant to do the work
2. Invoice client half his net assets.
3. Pocket the difference.
4. Drive around in Ferrari with undeserved sense of accomplishment.

RE: Who is surprised...?
By jnemesh on 2/29/2012 11:55:09 AM , Rating: 2
"The Legal System runs much faster now that they have abolished all lawyers!" -- Doc Brown BTTF2

RE: Who is surprised...?
By The0ne on 2/29/2012 3:08:08 PM , Rating: 1
Like Reclaimer77, I think you need to open your eyes and mind to what there are out there. You only have to look no further than the state of Texas to find these type of lawyers, in fake towns, in fake offices and in fake names; all for the sake of being able to sue anyone and any company for rights they have.

Sure there are "good" lawyers out there doing their job but don't kid yourself that there aren't tons more "bad" lawyers that will eat anyone alive given the chance. Your statement almost matches Reclaimers claimed that 10+ million Wii users are idiots for having bought into a fad that is the Wii and is NOT a game system. He has it in his head that he is more special because he has this X instead of the Wii and that 10+ million people are wrong :)

And lastly, he keeps telling people to open their eyes like you are right now. The irony, the stupidity and the igorance!

“Then they pop up and say ‘Hello, surprise! Give us your money or we will shut you down!' Screw them. Seriously, screw them. You can quote me on that.” -- Newegg Chief Legal Officer Lee Cheng referencing patent trolls

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