Friday, November 2, 2007

Patent Extortion v. Innovation

Arstechnica is reporting that Canadian-based company Wi-LAN has filed law suits against 22 different companies over two of its patents. Wi-LAN, which bills itself as "a leading technology licensing company" is part of a new breed of companies that don't actually make anything or offer services of any kind. Essentially all they do is buy and register a portfolio of promising patents and then sit on them in the hopes that someone else creates something that infringes one or more of those patents. I'm sure industry experts have all kinds of technical terms for this business model but for simplicity sake I'm just going to call them a patent leech.

Here is the full list of companies that they are suing:
  1. Acer Inc.
  2. Apple Inc.
  3. Atheros Communications Inc.
  4. Belkin International Inc.
  5. Best Buy Co. Inc.
  6. Broadcom Corporation
  7. Buffalo Technology (USA) Inc.
  8. Circuit City Stores, Inc.
  9. Dell Inc.
  10. D-Link Corporation
  11. Gateway Inc.
  12. Hewlett-Packard Company
  13. Infineon Technologies AG
  14. Intel Corporation
  15. Lenovo Group Ltd.
  16. Marvell Semiconductor Inc.
  17. Netgear Inc.
  18. Sony Corporation
  19. Texas Instruments Incorporated
  20. Toshiba Corporation
  21. Westell Technologies Inc.
  22. 2Wire Inc.
They have wisely chosen to file their suit in a patent litigation-friendly district of East Texas where the local laws are essentially structured to favor the plaintiff in these types of cases. This underscores one of the real weaknesses of a legal system based on precedent. They can go to a court system that favors their case and if they emerge victorious they then have the saber of precedent to brandish against all of the other companies that might ever want to use Wi-Fi or power management features in their products even though the case would have been thrown out in a more reasonable court.

This is such a gross perversion of the spirit of patent law it is sickening. From Wikipedia the rationale behind patents has four main components:
  1. Provide incentives for research and development
  2. Encourage disclosure of innovations into the public domain
  3. Protect products for which the cost of commercialization (testing, manufacturing, marketing) is much higher than conception (research and development)
  4. Provide an incentive for companies to be creative and work around existing patents thus spurring development of new technologies that might not otherwise exist
The insidious thing about an "intellectual property" company like Wi-LAN is that they reap the benefits of patent law without paying any of the cost:
  1. Wi-LAN no longer even does any research and development; they simply hold onto broad patents that they filed back when they were a real company and buy up new patents using the money that they have extorted from others.
  2. Wi-LAN does not actually want anyone to know about their patents, the most lucrative scenario for them is when the entire industry unknowingly steps on one of their overly broad patents and establishes a technology that is useful to everyone (e.g. Wi-Fi). They can simply sit back as the technology matures and is brining profit to the companies actually doing the work then swoop in after the value of that technology is well established and extort an entire industry.
  3. The whole point of providing an incentive for conception is so that said company then moves on to commercialization! By creating a niche for companies that don't produce anything but lawsuits patent law has actually hurt commercialization more than it helps it. I can not emphasize this enough, the companies actually doing the work are the ones commercializing Wi-Fi products, not the engineers at Wi-LAN that snuck "multiplexing over multiple transceivers" (Patent 5,282,222) past the knuckleheads at the patent submission office. Don't be confused by all of the fancy language in that patent, the concepts that we are talking about are ones that any college graduate of the relevant discipline could scribble on a cocktail napkin while downing Yaeger Bombs and hitting on co-eds at a South Padre Island pool bar. In short, these ideas are neither new nor inventive.
  4. By waiting until the technology is ubiquitous "intellectual property" companies totally subvert the concept of fostering creativity. It's a bit too late in the game for us to get creative about Wi-Fi. What are we going to do, shut down the hot spots in every coffee shop and book store in America while we wait for someone to find a creative work around? Obviously making the Wi-Fi cards in everyone's laptops useless while our best engineering minds work out a new way to wirelessly transmit data is really all about creativity.
Lest I be mistaken for a pinko, I am not advocating a total abolition of patents, I simply advocate that we take a long hard look at any legal system that fosters these kind of leeches. After all, the point of the open market is a million financial organisms all competing with each other, not a million financial organisms all being granted their own monopolistic niches based on dubious merits.

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