THE BLOG
01/10/2013 07:23 pm ET | Updated Mar 12, 2013

Patents: A Shield or a Sword?

A variety of notable patent cases have filled our legal hearts and minds, though not our consumer pockets, in 2012. Outside of the technology industry, many consumers are familiar with what have become "epic" legal battles between companies like Apple and Samsung. I am sure there is an apropos Game of Thrones analogy here that I will avoid. The technology media, their adherents, or perhaps as you would find in the publication comments, their cadre of dissidents, continue to debate the utility of the patent litigation that continues to consume companies that create consumer technology products and software.

As recently as December 6, 2012, the presiding judge in the Apple/Samsung dispute made a statement, or rather, an invocation to the parties that distills the purpose of intellectual property protection to its essence. Perhaps noting the utility of wrapping the dispute up, from a legal and resource perspective, presiding Judge Lucy Koh stated this of a resolution: "I think it would be good for consumers and good for the industry." Her statement begs a series of important questions to be asked: What is good for consumers? What is good for industry? And finally, with today's technology, how should patents and their enforcement fit into this system? What are the appropriate mechanisms? Who are the appropriate players? What is the appropriate forum for resolving these issues?

Patent litigation often involves major industry players. Another recent litigation example in the smartphone space is the dispute between Apple and MobileMedia, Inc., a patent licensing firm that is owned in part by well-known companies Nokia and Sony, and non-practicing entity MPEG-LA. On December 13, 2012, a Delaware federal court found in favor of MobileMedia, Inc. in a case concerning three patents that cover a variety of functionality that we use everyday in our smartphones. This case is important for two reasons. First, it highlights that many of these cases concern patents filed that are very broad and could be applied to a variety of smartphone functionality and applications that utilize such functionality. Second, it demonstrates that it is not just the companies themselves enforcing patents that they have obtained, they are utilizing third party entities, merely owners of patents versus the creators themselves, to fight not in the marketplace, but in the courtroom. While many may not care that large companies are spending their millions (and, in some cases, billions) of dollars fighting with each other in court, there are, and will be, continued downstream effects.

Back to the questions of what is best for consumers and industry, healthy competition necessitates some freedom to operate within the marketplace without fear of patent enforcement becoming a wholesale deterrent -- we speak of the Apples and Googles, forgetting smaller companies and individuals that may be trying to make a play in the hardware and software spaces. What happens to the application developer who violates one of these patents? Patent protection, by its very nature, is supposed to operate as a deterrent to protect inventors from getting their novel inventions stolen or misused, but defects in both the granting of this protection and modern litigation devices created for enforcement run askew of this goal.

What are the spoils when it comes to these protracted and costly patent litigations? When the dispute is company versus company, "artful" legal calculations arrive at an amount of damages the company may have incurred by virtue of their competitor utilizing their patents in their own product or application offerings. When the dispute is a non-practicing entity versus a company (or individuals), many of these entities have made it clear, at least the ones who take on an aggressive legal strategy, that they seek to accomplish through the courts what they could not accomplish through other means: getting the patent licensing fees that the company being sued refused to pay in the first place.

Since most startups and individual developers are just trying to 1) build cool stuff, 2) build cool stuff that hopefully people will use and 3) build cool stuff that by necessity accesses the everyday features and operability of smartphones, it is scary, in fact overwhelming, to think they are facing a similar legal position as these larger companies, just absent the deep pockets. Inevitably with these debates and examinations, we arrive back at the purpose of the patent system and its current state of affairs. The patent system has a utilitarian and noble purpose. It was meant to let inventors know that they could create and profit within a scope of protection. It let everyone else know that after this scope of protection ceased, there would be a public benefit.

Is patent protection to be a shield or a sword? According to a recent paper by Santa Clara University law professor Colleen Chien, 61 percent of patent litigation cases are brought by non-practicing entities, a 16 percent increase from 2011. Startups are also starting to be pursued by these non-practicing entities. While many agree that patent reform is sorely needed to resolve a variety of issues being faced both in the marketplace and the courtroom, the number of cases being brought by those who neither develop the technologies nor bring products to market is startling.