This week, as I do occasionally, I want to focus in on one specific topic.
For regular readers, the topic of technology innovation and patents is nothing new; it’s a problem that is frequently covered in this space. But this week, there were two important occurrences in the world of intellectual property that highlight just what a mess we’ve gotten ourselves into.
The first is an unexpected turn of events down in scenic Tyler, Texas, home of the world’s most litigant-friendly patent infringement juries. How friendly? Well, biased enough that Eolas relocated its corporate HQ to Tyler just to be close to the courts. Eolas, as you may recall, is the pesky gadfly that’s been buzzing around giants such as Microsoft for years, claiming broad patents over, well, the entire Internet. Rather than continuing a costly court battle it might lose in the end, the House of Redmond settled, and a host of other high-tech cash-cows followed suit.
As Eolas continued to threaten to sue the pants off everyone, a ragtag group of plucky companies like Adobe Systems, Google, Yahoo, Apple, eBay and Amazon.com said enough is enough. And this week in Tyler, following testimony by luminaries such as Sir Tim Berners-Lee, a jury agreed, invalidating the infamous ‘906 patent.
You’d think that this would make Google, one of the main defendants, a big hero and confirm its status as Not Evil. But in the very same week, Google refused to budge on its licensing requirements for patents it acquired from Motorola, patents that are required for any company that wants to play in the 3G cell phone space.
When a standard is adopted by governmental bodies (such as the FCC) or standards-setting bodies like IEEE, it should ideally be free of any intellectual property restraints. After all, that’s the purpose of a standard: to provide a common framework that competing companies can use to produce interoperable products. Standards such as GSM and CDMA are why you can use your iPhone in Europe (if you’re rich).
The problem is, most modern standards come with a bundle of patents attached to them. In the 3G space, Google (through the Motorola acquisition) and Samsung own a lot of them. As part of the standard-making process, these companies are supposed to agree to offer use of the patents under Fair, Reasonable and Non-Discriminatory (FRAND) license terms. The idea is that all companies using the standard pay the same license fees to the patent holders, so no one gets an advantage. The problem is, who decides what is Fair and Reasonable?
This is especially pernicious when the company licensing the patent is also a competitor in the space. Obviously, Samsung doesn’t pay itself a license fee to use its patent, so it doesn’t matter how expensive it makes the fee, as long as Samsung doesn’t incur the wrath of the standard-setting body. In the case of Motorola/Google, the license fee is set at 2.25% of the total selling price of the phone (which would come to around $13.50 on a $600 iPhone). Apple, et al., are screaming to the moon that that kind of licensing is not in the spirit of FRAND, but it’s up to groups such as the European standards body, ETSI, to determine if the patent holders are really playing fair.
Of course, Google has fallen victim to the same issues. Although it doesn’t pay the piper directly, phone manufacturers using Android end up reportedly paying $5 per phone to Microsoft to avoid patent issues. It’s worth noting, however, that at least Microsoft is using software-related patents that it claims Android infringes, not patents directly related to the underlying standards used by the phone.
There’s a simple solution to this problem, of course, which is not to allow patent-encumbered technologies to become standards. The software world has (mostly) been free of this kind of nonsense, and it’s a good thing. Can you imagine having to pay a license fee to use SOAP, or AJAX? The worrisome thing is that this could become the model used for software patents, and it would basically kill smaller companies trying to be innovative.
Oh, and before you count Eolas out of the game, remember that this is just a single trial it lost. It can try again with another jury and another set of companies. Unless the USPTO invalidates the underlying patent, Eolas is still out there, waiting to strike.
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