September 14, 2014    3 minute read

The Cost of Innovation: Ramifications of Patent Warfare

   September 14, 2014    3 minute read

The Cost of Innovation: Ramifications of Patent Warfare

For Google, Apple, Microsoft and other technology giants, patents now serve as the currency for competitiveness in the race for corporate supremacy. In our information age, the intellectual property of software engineers serve as both an offensive and defensive weapon to protect present and future sales. Highly exploited and costly patent lawsuits act as a deterrent to prevent other corporations creating exciting technologies and products.

In the modern world patents promote expensive lawsuits instead of the protection of innovative ideas. In the last few decades we have observed a global eruption of talent and scientific imagination. Manny Schecter chief patent counsel at IBM described modern patents to be ‘just like financial capital or commodities or labor’. Describing the modern ‘global intellectual property market’ to be ‘a major contributor to wealth and value creation worldwide’.

At present, corporations such as Samsung, Microsoft and Sony prefer to utilise this dated patent system not just for value creation but for legal and financial advantage. The recruitment of scientific talent is now used as a strategic manoeuvre to hoard ideas. Patent litigation is utilised for industry warfare. In 2011, the Economist described how ‘Microsoft and Apple, paid $450m for around 880 patents and applications owned by Novell’. In more ridiculous cases we saw ‘Research in Motion the maker of Blackberry [spending] $4.5 billion on 6,000 patents owned by Nortel’.

Nathan Myhrvold, the founder and chief executive of Intellectual Ventures and former executive at Microsoft Research continues to defend his heavily criticised firm. In order to generate revenue, Intellectual Ventures license out patents from their portfolio, and additionally file litigation to entrepreneurs and corporations who utilise their ideas illegally based on the current framework.Described by technologists to further encourage the culture of ‘patent trolling’, many argue this effectively hinders corporations. Stifling entrepreneurs attempting to generate start-up firms as financially successful as Spotify, WhatsApp and others.

At the 2012 ‘All things digital conference’, interviewer Walt Mossberg formerly of the Wallstreet journal criticised Myhrvold’s comparison of Intellectual Ventures to firms such as Apple and Google. Walt Mossberg stated in contrast to these firms, Intellectual Ventures did not generate any value-based consumer products. He further went to echo Apple CEO Tim Cook‘s sentiments that ‘the patent system is broken’.

The technology industry has truly been a witness to the cost of innovation. The rate of scientific development has dramatically surpassed the rate of political and legal change. In the United States where four times as many patent applications are made in comparison to Europe, technologists wait for glimmers of positive news such as House of Representatives 2013 Patent Transparency and Improvements Act. An act serving to protect corporations and reduce the number of unnecessary patent litigations.

Technology entrepreneurs and corporations will continue to wait in financial agony as they diligently manoeuvre patent minefields. European and US political representatives must react swiftly to ensure politics serves as a catalyst for growth and not technological decline. Lawyers and politicians must work together to reform the legal system. These reforms must ensure the law acts as a catalyst to protect intellectual property and further spur a generation of new disruptive technologies.

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