High tech patent meltdown threatens the industry
COMMENTARY And another round of the new high tech game, Patent Wars, is in full swing: Yahoo (YHOO) has sued Facebook for alleged patent infringement, citing at least ten of its patents in the action. And now an analyst, who predicted this move back in November, told Fortune that he expects Facebook to countersue Yahoo in turn. (Little surprise this happens only as Facebook readies itself to go public, as Yahoo has gone after pre-IPO companies before, as Kara Swisher of All Things D remembers.)
It's just the latest in a whirlwind of legal maneuvers that started in the smartphone arena; spread through such companies as Apple (AAPL), Samsung, Motorola (MMI), Google (GOOG), Microsoft (MSFT), and Oracle (ORCL); and now threatens to engulf everyone and everything. Big companies sue little ones. Little companies sue big ones.
What's going on?
Heavy competition in limited markets, investors drooling for increased revenue, bruised egos of inventors, allegations of outright theft of work, the smell of money, and the growing realization of how big a legal club patents can provide. There doesn't seem to be an end in sight, which is troubling, as the constant fighting threatens to put a screeching halt to the innovation that drives the industry.
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The underlying problem with the number of patent lawsuits in play is that high tech is one of the most intellectually incestuous arenas you can find. One thing quickly builds on another and the quality of the "inventions" gets so thin that many wonder whether there's anything worth legal protection. For example, over the last year or two, Apple got patents on using apps during calls (even though it was late with multitasking) and paying for media items with system credits rather than a credit card. Facebook gained patents on social gift giving and digital media tagging.
Microsoft, a veritable patent machine, has successfully pushed to get royalties from virtually all the big names in Android hardware. That's aside from Motorola, which not only is still in court with Microsoft, but might as well have its law firm move in with Apple's, given the number of suits and counter suits.
Apparently Motorola wanted to license Apple's full patent portfolio in return for making its so-called standard essential patents (ones that govern the use of international standards) available in return. That might be the real reason Apple had claimed that Motorola was not offering reasonable terms.
But consider the state of the industry today. Motorola, Samsung, HTC, Microsoft, Google ... and now Yahoo -- everyone wants to use patents as a monkey wrench they can toss into the cogs of a competitor's business engine. Even something as trivial as sliding your finger from one point of a screen to another to unlock a mobile device has become a subject of patents.
So, how extensive has the term standard essential patents become to be reasonably free to practice innovation without worrying about being sued by any company looking to expand its revenue, hinder any and all possible competition, or take revenge for perceived slights when its own work is based on what others had done?
Sir Isaac Newton, in a letter to Robert Hooke, wrote, "If I have seen a little further it is by standing on the shoulders of giants." Even he wasn't the first to say it. Unfortunately, in the current commercial atmosphere, we now have pygmies trying to trip each other on the road to El Dorado. But, as they make it impossible for each other to do anything, they may find that their own city of gold becomes as much of an unproven legend. And, in the process, they may stomp out a lot of small companies that would otherwise grow into the major businesses of tomorrow.
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