Apple?s domination of the Smartphone and Tablet market has led to an arms race for patents. Recently Google paid $12.5 billion for Motorola Mobility. This acquisition should allow Google to build their own Android Smartphones. More significantly, they also get to own Motorola?s 24,000 plus patents.
Arming yourself with patents has become an effective way to snap at competition. Correspondingly, the big boys are increasing their use of patents to fight it out in the Smartphone and Tablet industry.
Using Patents to Slow Sales
Early in August 2011, Apple won in getting an agreement from Samsung Electronics to stop the sale of newest version of its Samsung Galaxy Tab in Australia until a patent lawsuit in the country is resolved.
Using Patents to get a piece of the pie
As early as 2006, Creative, the Singapore based Tech company whose only call to fame was creating the Sound Blaster sound card sued Apple for infringing on a patent and got $100 million out of it.
CUPERTINO, California and SINGAPORE ? August 23, 2006 ? Apple® and Creative Technology, Ltd. today announced a broad settlement ending all legal disputes between the two companies. Apple will pay Creative $100 million for a paid-up license to use Creative’s recently awarded patent in all Apple products. Apple can recoup a portion of its payment if Creative is successful in licensing this patent to others. In addition, the companies announced that Creative has joined Apple’s “Made for iPod” program and will be announcing their own iPod® accessory products later this year.
In early 2011, Nokia got a nice settlement from Apple over a variety of alleged patent infringements. Nokia claimed that the iPhone was infringing on 10 patents Nokia holds on the integration of GSM, UMTS and wireless LAN. The result?
Apple has also agreed a one-off payment of around £700 million – to cover the 108 million iPhones sold since its launch in 2007 – and an estimated eight Euros for every iPhone sold.
Notice that in these 2 examples, only a limited amount of patents were cited. Compare this to Google?s arsenal of 24,000 patents and you get the point. This can be a profitable game. Of course there is no doubt that this was caused by an earlier acquisition of Nortel?s patents by a consortium led by Apple.
On June 27, 2011, the Company (Apple), as part of a consortium, participated in the acquisition of Nortel’s patent portfolio for an overall purchase price of $4.5 billion, of which the Company’s contribution will be approximately $2.6 billion.
The consortium included Apple, RIM, Microsoft, EMC, Ericsson, and Sony banded together to buy 6000 patents that related to wireless, wireless 4G, data networking, optical, voice, internet, and semiconductors.
This is going to get Uglier
The big boys have the creative and financial muscle to file and own patents, irrespective of whether they use them or not. This has led some tech pundits (and developers) like Lukas Mathis to say:
It is simply not possible to create any non-trivial piece of software that doesn?t violate hundreds of patents. As a result, you can?t release software without putting yourself into a position where you might suddenly lose all of your money.
Essentially, thanks to the patent system, you can be put out of business at any time, for no good reason.
This is bad news for budding tech entrepreneurs and the great age of innovation that we live in ? unless of course the innovator is Apple, Google or any big tech name.
It no longer makes sense to take great ideas and create, sell and support software products. Instead, at modest expense and low risk you can obtain software patents covering your ideas in all their variations. Then just sit back and wait.
In this particular aspect, I think that the patent system has failed society as a whole. The system was made to protect and reward innovation, not restrict it. Left in the hands of resource rich tech companies and their highly paid lawyers, the patent system has become a game of Monopoly where the big boys reserve all the available properties. In the end there will be no place for anyone else to join in the game without having to pay for it some way or other.
Barring any major changes in Patent law, I do not see a good outcome on this. Like I said, this is going to get uglier.