Tag Archives: Science Technology and Industry Scoreboard for 2011

Patents as weapons and obstacles

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I’m going to start with the phones and finish with the genes. The news article titled Patents emerge as significant tech strategy by Janet I. Tu featured Oct. 27, 2011 on physorg.com provides some insight into problems with  phones and patents,

It seems not a week goes by these days without news of another patent battle or announcement: Microsoft reaching licensing agreements with various device manufacturers. Apple and various handset manufacturers filing suits and countersuits. Oracle suing Google over the use of Java in Android.

…

After Microsoft and Samsung announced a patent-licensing agreement last month involving Google’s Android operating system, Google issued a statement saying, in part: “This is the same tactic we’ve seen time and again from Microsoft. Failing to succeed in the smartphone market, they are resorting to legal measures to extort profit from others’ achievements and hinder the pace of innovation.”

Microsoft’s PR chief Frank Shaw shot back via Twitter: “Let me boil down the Google statement … from 48 words to 1: Waaaah.”

This was Microsoft’s PR chief??? I do find this to be impressive,but not in a good way. Note: Tu’s article was originally published in The Seattle Times. [Dec.17.11: I’ve edited my original sentence to make the meaning clearer, i. e., I changed it from ‘I don’t find this to be impressive …]

My Sept. 27, 2011 posting focused on the OECD (Organization for Economic Cooperation and Development) and their Science Technology and Industry 2011 Scorecard where they specifically name patenting practices as a worldwide problem for innovation. As both the scorecard and Tu note (from the Tu article),

… technology companies’ patent practices have evolved from using them to defend their own inventions to deploying them as a significant part of competitive strategies …

Tu notes,

Microsoft says it’s trying to protect its investment in research and development – an investment resulting in some 32,000 current and 36,500 pending patents. [emphasis mine] It consistently ranks among the top three computer-software patent holders in the U.S.

One reason these patent issues are being negotiated now is because smartphones are computing devices with features that “are generally in the sweet spot of the innovations investments Microsoft has made in the past 20 years,” said Microsoft Deputy General Counsel Horacio Gutierrez.

…

There’s no arguing Microsoft is gaining a lot strategically from its patents: financially, legally and competitively.

Royalties from Android phones have become a fairly significant revenue stream.

Investment firm Goldman Sachs has estimated that, based on royalties of $3 to $6 per device, Microsoft will get about $444 million in fiscal year 2012 from Android-based device makers with whom it has negotiated agreements.

Some think that estimate may be low.

Microsoft is not disclosing how much it gets in royalties, but Smith, the company’s attorney, has said $5 per device “seems like a fair price.”

Various tech companies wield patents also to slow down competitors or to frustrate, and sometimes stop, a rival from entering a market. [emphases mine]

It’s not just one industry sector either. Another major player in this ‘patenting innovation to death game’ is the health care industry. Mike Masnick in his Oct. 28, 2011 Techdirt posting (Deadly Monopolies: New Book Explores How Patenting Genes Has Made Us Less Healthy) notes,

A few years ago, David Koepsell, came out with the excellent book, Who Owns You?, with the subtitle, “The corporate gold rush to patent your genes.” It looks like there’s now a new book [Deadly Monopolies] out exploring the same subject, by medical ethicist Harriet Washington.

NPR (National Public Radio) highlights this story in their feature on  Washington’s book,

Restrictive patents on genes prevent competition that can keep the medical cost of treatment down, says Washington. In addition to genes, she also points to tissue samples, which are also being patented — sometimes without patients’ detailed knowledge and consent. Washington details one landmark case in California in which medically valuable tissue samples from a patient’s spleen were patented by a physician overseeing his treatment for hairy-cell leukemia. The physician then established a laboratory to determine whether tissue samples could be used to create various drugs without informing the patient.

“[The patient] was told that he had to come to [the physician’s] lab for tests … in the name of vigilance to treat his cancer and keep him healthy,” says Washington.

The patient, a man named John Moore, was never told that his discarded body parts could be used in other ways. He sued his doctor and the University of California, where the procedure took place, for lying to him about his tissue — and because he did not want to be the subject of a patent. The case went all the way to the California Supreme Court, where Moore lost. In the decision, the court noted that Moore had no right to any share of the profits obtained from anything developed from his discarded body parts.

According to the webpage featuring Deadly Monopolies on the NPR website, this state of affairs is due to a US Supreme Court ruling made in 1980 where the court ruled,

… living, human-made microorganisms could be patented by their developers. The ruling opened the gateway for cells, tissues, genetically modified plants and animals, and genes to be patented.

I gather the US Supreme Court is currently reconsidering their stance on patents and genes. (As for Canada, we didn’t take that route with the consequence that it is not possible to patent a gene or tissue culture here. Of course, things could change.)

Organization for Economic Cooperation and Developement’s (OECD) Science, Technology and Industry 2011 Scoreboard

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The OECD Science, Technology and Industry Scoreboard 2011: Innovation and Growth in Knowledge Economies is making a bit of a splash with regard to its analysis of patent quality. From the Sept.23, 2011 news item on physorg.com,

The Organization for Economic Cooperation and Development (OECD) has published its Science, Technology and Industry Scoreboard for 2011 and one section shows that patent quality over the past 20 years has declined dramatically, mainly the authors say, due to excessive litigation by so-called non-practicing entities that seek to exploit patent laws. The result they say, is a glut of minor or incremental patent applications that add little to scientific progress.

Mike Masnick at Techdirt weighed in on the matter in his Even The OECD Is Noting How Dreadful Patent Quality Is Negatively Impacting Innovation posting with an oft-repeated suggestion,

Of course, the real way to fix this problem is to make the bar to get a patent much, much higher. If you do that, you get less [sic] bogus patent apps being submitted, and it makes it easier to reject such bogus patents.

What Masnick means by bogus is clarified in this quote from the Sept. 23, 2011 news item,

The problem it appears has come about due to the rise of non-practicing entities [patent trolls]; groups that form for the sole purpose of applying for patents in the hopes of suing someone else who happens to use the same ideas, rather than as a means for building an actual product; though not all of the rise can be attributed to such entities as large corporations have apparently become much more litigious as well.

Canada’s Research in Motiion (RIM), maker of Blackberry mobile devices,  was sued by a non-practicing entity, NTP, Inc. Here’s a little more about the situation (from a Wikipedia essay on NTP),

NTP has been characterized as a patent troll because it is a non-practicing entity that aggressively enforces its patent porfolio against larger, well established companies. The most notable case was against Research in Motion, makers of the BlackBerry mobile email system.

…

In 2000, NTP sent notice of their wireless email patents to a number of companies and offered to license the patents to them. None of the companies took a license. NTP brought a patent infringement lawsuit against one of the companies, Research in Motion, in the United States District Court for the Eastern District of Virginia. …

During the trial, RIM tried to show that a functional wireless email system was already in the public domain at the time the NTP inventions had been made. This would have invalidated the NTP patents. The prior system was called System for Automated Messages (SAM). RIM demonstrated SAM in court and it appeared to work. But the NTP attorneys discovered that RIM was not using vintage SAM software, but a more modern version that came after NTP’s inventions were made. Therefore the judge instructed the jury to disregard the demonstration as invalid.

The jury eventually found that the NTP patents were valid, that RIM had infringed them, that the infringement had been “willful”, and that the infringement had cost NTP $33 million in damages (the greater of a reasonable royalty or lost profits). The judge, James R. Spencer increased the damages to $53 million as a punitive measure because the infringement had been willful. He also instructed RIM to pay NTP’s legal fees of $4.5 million and issued an injunction ordering RIM to cease and desist infringing the patents. This would have shut down the BlackBerry systems in the US.

There was a settlement made by RIM with NTP in 2006. Simultaneously however, RIM continued to request patent reexaminations and so the patents are still being fought over.

All this makes one wonder just how much innovation and invention could have been stimulated with the funds used to fight and settle this court case.

Intriguingly, RIM was part of a consortium of six companies that during July 2011 successfully purchased former communications giant Nortel Networks’ patent portfolio. From the July 1, 2011 article by Charles Arther for the Guardian,

Apple, Microsoft, Sony and BlackBerry maker Research in Motion are part of a winning consortium of six companies which have bought a valuable tranche of patents from the bankrupt Nortel Networks patent portfolio for $4.5bn (£2.8bn), in a hotly contested auction that saw Google and Intel lose out.

Early signs had suggested that Google might be the winning bidder for the patents, which will provide valuable armoury for expected disputes in the communications – and especially smartphone – field.

The result could give Apple and Microsoft the upper hand in any forthcoming patents rows. [emphasis mine] Microsoft is already extracting payments from a number of companies that use Google’s Android mobile operating system on the basis that it owns patents that they were infringing. Oracle has big court case against Google alleging that Android infringes a number of Java patents, and claiming $6.1bn in damages.

The other two companies partnering in the consortium are EMC, a storage company, and Ericsson, a communications company.

As Arthur’s article makes clear, this deal is designed facilitate cash grabs based on Nortel’s patent portfolio and/or to constrain innovation. It’s fascinating to note that RIM is both a target vis à vis its NTP experience and a possible aggressor as part of this consortium. Again, imagine how those billions of dollars could have been used for greater innovation and invention.

Other topics were covered as well, the page hosting the OECD scorecard information boasts a couple of animations, one of particular interest to me (sadly I cannot embed it here). The item of interest is the animation featuring 30 years of R&D investments in OECD and non-OECD countries. It’s a very lively 16 seconds and you may need to view it a few times. You’ll see some countries rocket out of nowhere to make their appearance on the chart (Finland and Korea come to mind) and you’ll see some countries progress steadily while others fall back. The Canadian trajectory shows slow and steady growth until approximately 2000 when we fall back for a year or two after which we remain stagnant.