Saturday, February 24, 2007

The Los Angeles Times flames the patent system

A Los Angeles Times editorial on 24 Feb. 07 begins with the text: The patent system in the United States is so dysfunctional that it can even generate sympathy for Microsoft.

The editorial includes the text:

The purpose of patents, like copyrights, is to promote innovation by giving inventors exclusive rights to use and distribute their creations for a limited time. There's no requirement that a patent holder create products based on the invention; to do so would give big companies an unfair advantage over small players with good ideas. But lately there's been a trend in the opposite direction: Patent holders stay on the sidelines while large companies build the market for a technology, then the patent holders claim that their rights have been infringed and demand compensation.

As noted in an earlier IPBiz post: On the issue of whether the purpose of the patent system is to promote innovation (as distinct from promoting the disclosure of information), one might review Edward C. Walterscheid, The Nature of The Intellectual Property Clause: A Study in Historical Perspective (Part 1), 83 J. Pat. & Trademark Off. Soc'y 763:

Yet on its face the purpose of the clause is to promote the public interest through an increase of the public domain or commons of intellectual ideas and thought.

In the patent system, the public gets disclosure of information and the patent holder gets a right to exclude for a limited time. The patent holder takes his right to exclude into the free market and businessmen conduct business. It's the free market, not the patent system, which is in charge of innovation.

The LA Times also wrote:

High-tech products typically involve multiple patented ideas, many of them combined into technologies that are industry standards. As new standards emerge, the companies holding the underlying patents often form pools to simplify licensing and encourage use. But lately, a growing number of patent holders have stayed out of these pools, waited for the standards to gain popularity, then launched their claims for royalties. As a result, manufacturers can't be sure that they've obtained all the necessary licenses before bringing a product to market.

Lucent and Bell Labs worked on audio compression technology in the 1990s, but their focus wasn't MP3. Instead, two other patent holders, Fraunhofer Institute and Thomson, promoted the technology to standards bodies, then sold licenses starting in the mid-1990s. It wasn't until well after MP3 had become the compression technology of choice that Lucent started claiming that its patents applied to MP3 software. And the royalties that Alcatel-Lucent sought — about $5.50 per computer — are far above what the market has already established MP3 technology to be worth (Microsoft's MP3 licensing agreement with Thomson cost $16 million, not $1.5 billion).

The threat posed by this trend is that technology companies will limit their products' capabilities to minimize unexpected patent claims. That's the exact opposite of what patent law was designed to do.

**Separately -->

In the Qualcomm Broadcom patent saga, which had, in part, been misreported by the Los Angeles Times, the Times (through Bloomberg) stated on 24 Feb. 07:

Qualcomm Inc. and Irvine-based Broadcom Corp. agreed to drop some patent claims over their mobile-phone chips, helping them avoid two jury trials that were scheduled for later this year.

The agreement dismisses one lawsuit from each company against the other for patent infringement, including one that was scheduled to begin trial March 5.


Blogger said...

I understand the patent system encourages disclosure, but doesn't "Promote the Progress of Science" imply it is thereby meant to promote innovation?
Innovation is defined as "introducing new things or methods." Isn't that the same as "promoting progress," assuming progress implies "new things."
I fail to see the distinction you are making. I do see that innovation comes from the marketplace using the disclosure, so the patent system doesn't "create" innovation, but it sure looks like it "promotes" it.

8:57 AM  

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