“Motorola has a strong patent portfolio which will help protect Android from anti-competitive threats from Microsoft, Apple and other companies,” Larry Page, CEO of Google told reporters and analysts during a conference call the day Google announced its $12.5bn acquisition of Motorola Mobility.
While Google executives played down the argument that patents were the primary motivation, the cat was out of the bag. Google, like Apple, Microsoft and Research in Motion has fuelled a technology Bull market as the pursuit of patents as a defensive end in themselves has really taken off in recent months – in July a consortium fo these players paid $4.5bn for 6,000 patents from the now liquidated Nortel Networks.
This latest patent hoarding – substantially added to by Google’s acquisition of Motorola’s 17,000 patents – has reaffirmed a point I made in one of the first posts I wrote to this blog in September 2009 titled ‘Patent Pragmatism: A Threat to R&D and Innovation’ which argued that patents had become ends in themselves, rather than as part of the realisation of innovation. Now Google, one of the few companies innovation adherents have pointed to as a beacon of innovation, has joined the bandwagon of accumulating patents as a defensive strategy.
THREATENING THE FOUNDATIONS OF INNOVATION
Although some of the recent patent hoarding activity can be put down to some high-profile court battles (Apple versus Samsung, Oracle versus Google over Android royalties, Microsoft suing Motorola) the secular trend is to treat patents as a short-term defensive hedge against countersuits. Patents are increasingly being seen as a way the legal system can be used to threaten competitive rivals and extract concessions.
The focus on the present is bad enough. But what is worse is that many of these patents include ‘foundational’ technologies – basic innovations that all subsequent similar devices would have to rely upon – which are used to secure market positions. In fact, for the past ten years the large technology vendors have been pursuing this strategy by securing the most patents.
Intellectual property is being used as a legal weapon in the battle to maintain market share and the real loser is the innovation pool. The ease with which patents are being granted has only fuelled this zero-sum game. Patents have truly become an end in themselves rather than a means to innovation.
There has been some recognition of the danger of this. On 8 September, the US Congress passed the America Invents Act which aims to make the patent application process more efficient as well as providing increased funds to the overstretched US Patent and Trademark Office (USPTO). The act which President Obama is expected to sign into law means the US will use a ‘first to file’ system rather than ‘first to invent’ system for registering patent applications.
While this will bring the US into line with other developed countries, the overall defensive pursuits of patents could incentivise an even greater rush to accumulate foundational patent portfolios. David Hsu, a management professor at Wharton asks a key question: ‘Will people have the incentive to innovate if they aren’t given patent protection?’ Kevin Werbach, a legal studies and business ethics professor also at Wharton, building on Hsu’s concerns makes the following key points:
‘If you tweak any complex system, it becomes a design exercise in incentives. You have to start with the question of what incentives the system is designed to create. Obviously you want to promote innovation…the reality is patents operate differently in various contexts…’ (Ref)
The context is precisely the problem: short-term pragmatism where patent hoarding is being used to defend market positions means the incentive is to accumulate foundational patents as an end rather than as the basis of promoting innovation. The new law will only increase the number of patents being applied for while the legal strictures these embody will inevitably narrow the field for innovation even further. As Google’s behaviour already confirms, we are witnessing the institutionalisation of patent instrumentalism and the de-incetivisation of innovation.