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Why Apple and Samsung are "patent trolls"

(MoneyWatch) In a minor victory for Samsung, the International Trade Commission has banned some iPhones and iPads for patent infringement. Why minor? Because the affected devices are older and no longer sold by Apple (AAPL).

Patents are top of mind lately, and not only among techies. President Barack Obama on Tuesday took aim at "patent trolls," companies that acquire patents explicitly to force others to pay for licenses to use the tech and to avoid litigation. Such trolls have become part of industry's mythic narrative of would-be innovators being oppressed by evil patent holders. The problem with that view is that it deflects attention from a larger issue -- how giant corporations use intellectual property.

Are there abuses of the patent system? Of course, just as there are abuses of any bureaucracy when the practice can deliver profit to some. Whether it is a company suing coffee shops, restaurants and hotels for offering Wi-Fi Internet access to patrons, or an attempt to get money from small businesses emailing documents they had scanned in, there are some ridiculous practices.

But the fixation on patent trolls mistakenly assumes that such obnoxious practices are chiefly the result of small firms exploiting the law to buy and enforce patents. The real problem is the patent system system, and the biggest abusers are often large corporations.

Many patents are overly broad. Of course, the inventors or the companies behind them want to get as generous a set of legal protections as possible. Why? Because that lets them either more effectively block competitors or demand money from businesses they deem to have infringed the patent. Meanwhile, facing a surfeit of patent applications and and with limited resources, the U.S. Patent and Trademark Office misses many chances to more sensibly constrain patent holders. 

One reason there is so much attention on patent trolls is that large corporations have seized on the term as a PR tool. It reportedly was created at Intel (INTC) in the late 1990s as a way to bring attention to small companies that owned patents, did not make anything incorporating what the patent covered and still wanted to be paid for them. (Apparently management wanted a term other than "extortionists," which could lead to successful libel suits.)

The chief complaints against trolls can be summarized follows:

  • They don't make the products that the patents cover
  • They buy the patents or technology
  • They are willing to slow innovation and commerce to enforce their patents
  • They sue small companies that can't afford to defend themselves

However, many large corporations also exhibit these characteristics. For example, in the 1990s, Unisys was allegedly threatening websites of all sizes for incorporating GIF files (a common image file format on the Web) into web pages.

More recently, patents Apple has invoked in suing competitors comes from technology that it gained through acquiring other companies. Both Samsung and Apple have shown themselves ready to shut down each other's businesses -- and reduce consumer choice -- in a quest for market dominance. Big companies with thousands of patents are also increasingly working to identify the ones that aren't in practice so they may be licensed to other companies.

Again, there is no doubt that some patent trolls abuse the legal system. But ignoring how bigger, and ostensibly respectable, companies exploit that system in ways that harm innovation and consumers is akin to saying, "Don't look behind the curtain."

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