Friday, April 08, 2011

Forbes blog: the lack of a direct link between patents and innovations is not a surprise

Within a post about the Google/Nortel business titled Google’s Conundrum: Buy The Patents Or Pay The Lawyers?, one has the text:

At $150,000 per unexamined patent the cost may be negligible. Lawyers are costly and the delays in selling innovative products due to legal threats cost even more.


Managements found that patents are a good criterion for compensating their R&D teams. While management may have no doubt about the scientists’ motivation, they still must direct their creative efforts in ways to benefit the company. They can measure these while even acknowledging distortions.

As in academia, so in the patent business, once you pay for research measured by some number, researchers find ways to increase that number. The “quality” of the patent, or the publication, is harder to judge. Thus, it is not surprising that the link between number of registered patents and innovations is far from clear.

Of some (questionable) history:

Reducing the life of patents when combined with the legal and regulatory changes might not diminish the rate of innovation at all. During the 19th century, Belgium attracted investments by operating the laxest corporate law in all of Europe and did not enforce patent laws. Switzerland did not have a patent law until 1887, which is the reason that German chemical and aluminum companies opened plants there.

Phillips’ initial success in Holland and throughout Western Europe was due to copying Edison’s lamps without paying any royalties to the Edison interests. And just few years ago, Israel was called the “one-diskette” country. Now it is an IT powerhouse. Belgium, the Netherlands, Switzerland, and Israel all attracted capital and investment and developed fast even though they did not enforce patent laws.

**Recall, patents are about invention, not about innovation. Patents may be a step to innovation, but most patents do NOT change the way we live.

A different take on the Google/Nortel business is the post titled Google: The First Lemming Into The Nortel Patent Canyon at gametimeip, which includes:

In reality, however, what lies at the bottom of the Nortel patent canyon is most likely a black hole, and when you dump your money in, you’ll never see it again. Ever. So why is Google volunteering to dump $900 Million into this mystery canyon? Good question.


But, whatever the number, the real question is, what value do the patents have? That’s a question that can only be answered if you read the patents, and I’ll be honest with you. I haven’t read them. Sure, I’ve glanced at a few over the years, but I haven’t studied them by a long shot. And that’s exactly what Nortel (and anyone who ends up with the portfolio) is counting on. The sellers are betting that everyone else will be so overwhelmed with the numbers, that they will sacrifice all reason and logic, opting instead to keep tossing their money into the canyon.


the smart money knows that the dumb money falls for the numbers every time.

And the more interesting paragraph:

So why is Google falling for the numbers? As its been pointed out on GametimeIP, and elsewhere, Google’s patent situation is abysmal. They’ve spent the better part of 10 years building up an enormously profitable advertising business, tied largely to the popularity of its information retrieval technology. Unsurprisingly, many of the patents it does have are in these areas. But along the way, Google has also run its own R&D department as a way to legitimize itself as a “technology” company (despite the fact that anyone who pays attention could have told you years ago that Google is an advertising company). Of course, Google has taken a strange approach to R&D by evidently failing to secure any IP around even its (arguably) most successful technologies (i.e. Android and Chrome). Thinking about the historically successful R&D ventures (Bell Labs, GE Global Research, Kodak, IBM Research, Xerox PARC …) the one thing they all have in common are troves of patent assets. Of course, those that don’t understand the value of being able to actually capitalize on intellectual capital speak through a logical mirror.

Did Xerox PARC have a trove of patent assets? Or is Xerox PARC the poster child for "good ideas that slipped through fingers"? Kodak, as to photography, was a trade secret kind of place, and, now, as with Polaroid's technically brilliant instant movie film, who cares? Recall also SuperGlue originated with Kodak but the patents ran out before significant commercialization. We wait to see how the ITC event will turn out. Bell Labs did have patents, but how much money was made off the transistor patents, related to the most fundamental innovation to arise from Bell? And, how did Lucent v. Microsoft turn out?

***Some relevant IP posts:


IP in Switzerland, Netherlands:


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