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Patents, Patents Here, Get Your Patents

August 25, 2011 1 comment

While I have no aspirations to be a patent lawyer, patents and patent strategy has interested me since I started business school. Lucky for me, there has been a lot of news in this area providing me with ample reading material lately. Scrolling through the your favorite tech website, currently Engadget in my case, or any news portal and you will inevitably find headlines dealing with patents. Even the blogs I read at The Economist or New York Times will frequently speak about them from different perspectives (here, here, and here). My habitual visit to the Economist’s homepage today revealed a home page story on patents, called Inventive Warfare, which summed up some of the issues making news:

A scramble for patents had already begun. In December four companies, including Microsoft and Apple, paid $450m for around 880 patents and applications owned by Novell, an ailing software firm. In July those two and four others, including Research in Motion, maker of the BlackBerry, spent $4.5 billion on 6,000 patents owned by Nortel, a bankrupt Canadian telecoms-equipment maker. Before its latest deal, Google bought 1,000 patents from IBM. Firms are also suing each other. Apple claims its technology has been copied by Samsung and Motorola in their Android phones. Oracle is suing Google for up to $6 billion, claiming that Android infringes its patents. Microsoft is suing Motorola over Android too. Nokia recently settled a similar quarrel with Apple.

If The Economist were to have expanded its scope to the tele-communications industry as whole their list of lawsuits and patent deals would have made that paragraph above much larger. Further into the article the case is made that firms are beginning to be valued based on their patent holdings to a much greater extent, making the example of various companies’ stock prices rising after the Google deal. I am not certain if that is only in the mobile phone space, were companies are using patents to defend market share, or the industry as a whole; regardless, patents are not just becoming a bigger part of the game in the just mobile phone space.

China, notorious for failed IP protection in the past, is changing its position on patents. An article by Rachel Armstrong at Reuters.com starts off:

China’s telecom giants are building up a war-chest of patents to help give them an edge in the legal battles raging between the world’s smartphone makers, aided by Beijing’s push to transform the country from workshop to innovator.

It’s part of the country’s plan to increase innovation and make it a high-tech powerhouse, where the government subsidizes patent applications and has been increasing IP protection. The article provides a useful statistical summary of what is going on, as in China’s patent applications rising 83% since 2006; which places it in third place behind the US and Japan with 313,854 patents. Big filers from China being ZTE and Huawei. Subsequently, also on the rise is the demand for IP lawyers with cases in this area increasing 37% last year to 41,718 and salaries increasing.

The belief that patents are going to spur innovation aren’t only held by China’s central government. Another Economist article  contends that budget reductions at the US Patent Office are going to further hurt economic growth by limiting the number of patents granted in the US, and that patents have at least a marginal relationship with job creation and economic growth.

While I don’t doubt that, I feel there are a great deal of other issues with patents that have economic impact. Just as an example if Google truly is buying Motorola for its patents, that deal along with the others listed above equals $17.45 billion spent on IP alone. I, along with others, ask the question how many other ways could jobs or the economy been improved with that level of spending? Now I understand it’s the business environment they are responding too, but with substantial reforms to patents and IP could that money have been spent on actual new innovation?

I’ll save some thoughts on patent reform and innovation for another post.

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