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Edward J. Black

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Patent Balance Needed to Help End the Smartphone Patent Wars

Posted: 12/22/11 04:41 PM ET

Smartphones are at the center of a new series of "patent wars," in which technology companies are spending billions to stockpile patent arsenals. Consumers are the biggest losers in this war, as tech companies focus on costly litigation strategies instead of innovation. Some are acquiring patents to attack competitors, while others are trying to bolster their defenses.

Congress recently passed a patent bill but it hasn't stopped a slew of billion-dollar lawsuits and aggressive efforts by several large companies to block competitors' products. While Apple and Research in Motion (RIM) have been the subject of some suits, the most frequent target to date has been Android phones, which have relied on open-source technology to make smartphones and mobile devices available to an ever-wider range of consumers at lower prices.

Expecting a flood of questionable lawsuits against various open-source technologies including Android, the U.S. Justice Department last April was forced to intervene and impose conditions on the sale of a valuable portfolio of Novell patents to a consortium of companies that included Apple, Microsoft, Oracle and EMC. In its investigation of the deal, the U.S. Justice Department found a significant threat to open-source software and concluded that for continued innovation and competition, it was "critical to balance antitrust enforcement with [...] appropriate patent transfers and exercise of patent rights."

The Justice Department is currently investigating the more recent acquisition of Nortel patents by another consortium that included all of the major mobile phone operating system companies that are locked in fierce competition with Android phones. The American Antitrust Institute has indicated that collective control over the Nortel portfolio could be used by these Android opponents "to suppress mobile device competition generally and open-source competition [...] in particular." The auction witnessed a bidding frenzy between competing parties over the patents of a defunct company and was ultimately the most costly patent sale of all time. Why did these companies agree to pay $4.5 billion for Nortel's patents, billions over the expected price? It is doubtful they needed access to the information they contained.

The campaign against Android-based phones is widely acknowledged to be one of the reasons behind Google's bid for Motorola Mobility, concluding that it needed its own patent portfolio to defend Android and the hardware makers that use it. Motorola Mobility's patents might be used to achieve a balance of litigation power in the patent system if all the main players wind up having their own, roughly equivalent arsenals.

Although this is not as helpful as real patent law reform, it might result in a welcome truce among the current established competitors. Unfortunately, far from enabling innovation, patents are increasingly proving to be a barrier to it.

Hopefully, all of the companies involved in the "patent wars" can return their focus to innovating and competing on the merits of their products. Seeing as the mobile industry is as competitive as ever as Apple, Google, RIM and Microsoft all now have compelling mobile platforms, it is time for the marketplace (and not the courtroom) to determine the balance of power in the mobile world. The vigorous, on-the-merits competition we've seen in recent years among smartphone hardware and software companies has been great for consumer choice, prices and innovation. As mobile devices become more pervasive, it is important for this competition to continue.

Antitrust authorities in Europe, the US and around the world should focus on how the patent system works in practice, and they should endeavor to prevent it from being misused to undermine healthy competition. Authorities acted wisely with regard to the Novell patent sale and as they respond to developments in the mobile device sector, they need to keep in mind the importance of patent balance. We simply can't let the patent wars snuff out one of the brighter spots in the global economy.

 

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