The patent is indeed mightier than the sword

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This morning I read a rather extensive piece in the New York Times by Charles Duhigg and Steve Lohr titled “The patent, used as a sword“. The Apple/Samsung battle has kept tech news sites especially busy with content with suits and counter suits, injunctions and unbannings. It’s been a busy 18 months for journalists on the Samsapple beat.

The piece is part seven of the New York Times’ iEconomy series, a series exploring the American economy through the lens of Apple and other technology firms. Four of the pieces have focused on Apple, taking an in depth looks at the company’s business dealings in the US and China.

A few things about the piece by Duhigg and Lohr struck me: first, this paragraph that explains how much money has been spent on patents and patent related battles in last two years in the mobile industry.

In the smartphone industry alone, according to a Stanford University analysis, as much as US$20-billion was spent on patent litigation and patent purchases in the last two years — an amount equal to eight Mars rover missions. Last year, for the first time, spending by Apple and Google on patent lawsuits and unusually big-dollar patent purchases exceeded spending on research and development of new products, according to public filings.

So we could have discovered new planets and probably made advances in medical research such as a cure for cancer and other dangerous incurable diseases? Interesting.

The piece sets the scene for patent battles with the story of Michael Phillips, a man who was building a voice recognition software that allows computers to understand human speech. Things seem to be going well until Apple announced it was launching Siri. Then his issues began. After a brief period where Phillips was in talks to partner with tech giants like Apple and Google, he found himself in court.

…in 2008, Mr. Phillips’s company, Vlingo, had been contacted by a much larger voice recognition firm called Nuance. “I have patents that can prevent you from practicing in this market,” Nuance’s chief executive, Paul Ricci, told Mr. Phillips, according to executives involved in that conversation.

Mr. Ricci issued an ultimatum: Mr. Phillips could sell his firm to Mr. Ricci or be sued for patent infringements. When Mr. Phillips refused to sell, Mr. Ricci’s company filed the first of six lawsuits.

After one court battle which left Phillips US$3-million poorer he eventually sold his company to Nuance, a partner of Siri Inc — which was later acquired by Apple in 2010. Nuance’s stock went through the roof when the Siri-enabled iPhone blazed through the market. Win win for everyone… except Phillips.

In a forthcoming interview with Nathan Martin, founder of Deeplocal, a post digital innovation studio, he talks about “patent trolls”: companies that exist to solely buy up patents from young entrepreneurs.

“These companies go to court to defend their ideas and even if they win, they still have legal fees to pay, which most of the time kills a company before it gets started,” says Martin.

Apple is well on its way to patenting almost every feature on the modern smartphone with suits out against Samsung, HTC and Motorola Mobility, which is now owned by Google. One has to ask, is the American patenting system flawed?

“When I get an application, I basically have two days to research and write a 10- to 20-page term paper on why I think it should be approved or rejected,” Robert Budens, a 22-year patent examiner and president of the examiners’ labor union told the New York Times. “I’m not going to pretend like we get it right every time.”

According to the New York Times:

To receive a patent, an invention must be novel (substantially different from what exists), not obvious (one can’t patent a new toaster simply by expanding it to handle five slices of bread), and useful (someone can’t patent an invisibility machine if invisibility is impossible).

According to a recent survey of US smartphone consumers conducted by Morpace, Apple has come out looking pretty good during this patent battle. “Consumers feel that the court ruling will have a ‘net’ positive effect for Apple,” says the survey.

Unfortunately, not the same can be said about Samsung or the Android platform. “Samsung’s brand image has taken a hit for financial viability and product category leadership,” says the market research firm.

“Consumers feel that the Technology market as a whole, especially for Android devices, will experience a ‘net’ negative effect.”

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