The Curious Case of Patent Warfare
There has never been a better time for technological innovation than now. There also hasn’t been a better time for being a patent lawyer. As new and groundbreaking hardware and software products launch every day, transforming technology as we know it, disputes about who came up with the idea first are mushrooming at a similar pace.
But where the concept of patents was once created to protect the interests of a smaller company from a potentially predatory one, lawsuits these days are continually thrown around among organizations of all shapes, sizes, and business plans. There are companies whose sole business is to try to make money off patents they own, but do not use.
The recent case in which Yahoo (NASDAQ:YHOO) sued Facebook for allegedly using ten of its patents, for functions such as web advertising, is a prime example of the absurd claims that bigger companies are throwing at each other. Facebook hit back with a lawsuit of its own, claiming Yahoo was infringing on ten other patents it held. Yahoo was accused of simply targeting the social network at an opportune time, as Facebook is planning to launch its initial public offering soon. “Look at what it is they’re suing Facebook over,” wrote MG Siegler, a journalist turned venture capitalist. “It’s things that nearly all social services use. It’s obvious things — things that existed before Yahoo patented them.”
Apple (NASDAQ:AAPL) has grown notorious for similar actions, having sued several makers of equipment that runs on competing Google (NASDAQ:GOOG) Android software. It sued HTC, Samsung, and Motorola (NYSE:MMI) in multiple courts in the U.S., Europe, and Australia. It managed to block sales of Samsung’s Galaxy Tab in Australia and Germany, but its efforts have otherwise mostly been ineffective.
Recently, Microsoft (NASDAQ:MSFT), which is fighting against Motorola’s patent claims in Europe, spent $1.06 billion on buying 800 patents from AOL (NYSE:AOL) as it builds its arsenal to better defend itself, and attack, on the litigious front.
In February, a small company called Eolas and the University of California lost a suit in which they were claiming to have invented technologies related to images and streaming video on the Internet. The two were asking for a cut from companies including Google, Amazon (NASDAQ:AMZN) and Yahoo, but the result would have affected millions of other organizations, as well as small developers and website creators.
The U.S. Patents and Trademarks Office has always been pretty fast and loose when it comes to issuing patents. While Europe does not allow a patent application to go through unless the technology includes a “technical effect,” or a physical result, the U.S. will hand out patents for just software.
That has led to smaller software companies and app developers constantly being under threat of getting sued by some unknown entity that may hold a common software patent. Lodsys, which owns several patents related to in-app purchases, threatened to sue developers of apps meant for iOS and Android platforms using that common technology. Developers often choose to pay entities like Lodsys, a “non-practising entity” that exists only to earn money off its patents, rather than get into a lengthy and more expensive lawsuit.
While the very fact that most technology used on the web and the Internet is not proprietary has encouraged development, exponentially growing profits are raising the stakes. Now patents threaten the open web, Yale Law School postdoctoral associate Christina Mulligan told The Guardian. “By locking up the basic building blocks of the internet and obvious software processes, patents hamper the free flow of information and increase the financial risks associated with simple activities, such as having a website,” she said.
Unfortunately, the trend has showed no signs of stopping, or even slowing down.