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Patent Disputes continue in the Mobile OS and Application Space – Does any of this “Progress the Useful Arts” (Drive Innovation)?

This post, from Greg Stark, Schwegman, Lundberg & Woessner, P.A., addresses some of the issues raised by the recent publicity offensive Google has launched against Apple and Microsoft.

August 4, 2011:

Patent Disputes continue in the Mobile OS and Application Space – Does any of this “Progress the Useful Arts” (Drive Innovation)?

News outlets and blogs have been filled with hyperbole regarding the offensive use of patents (or potential offensive use of patents) in the smartphone wars between Apple, Google, Microsoft, and RIM. The latest volley getting noticed came from Google’s David Drummond who is accusing various organizations, including Microsoft and Apple, of wagging a patent war against Android. This particular post received a great deal of attention when Microsoft released an email indicating that they invited Google to join the group bidding for the Novell patent portfolio. I highlight this exchange only to emphasize the amount of hand waving and misinformation that is being put forth on this issue.

Mr. Drummond does start to get at the real issue, innovation and whether the US patent system (or any patent system) drives or hinders innovation. Mr. Drummond claims to be on the side of the patent system harming innovation (at least when used against Android). As a patent professional, I believe (somewhat self-servingly) in the benefits of the patent system. However, it is admittedly difficult to determine whether the system actually drives innovation.

There can be little dispute that Google is a fast-follower in the mobile operating system business, and until recently Android did not appear to break much new ground. It is also certain that the strong competition from Android has forced Apple, Microsoft, RIM, and others to work harder on multiple fronts. Hopefully, the increased competition has been good for innovation, only time will tell.

What role are patents playing in the smartphone wars? Well if you believe the media patents are being used as the offensive weapon of choice to slow or tax the growth a new entrants, such as Google’s Android. As a fast-follower, it is hard to feel bad for a large well funded organization like Google, when a pioneering competitor attempts to use valid legal methods to maintain its position in the marketplace.  For example, Apple may be attempting to hinder the growth of the Android operating system by asserting its patent portfolio against Google and handset manufacturers, such as Samsung. However, Apple is merely asserting presumably valid intellectual property covering its own mobile operating system and smartphone.

Getting back to the question of driving innovation, did the ability for Apple to receive a limited Government sanctioned monopoly (e.g., a patent) drive early innovation in Apple’s mobile operating system? On some level I am sure that the protections afforded by patent did drive some of the innovation, but it is very difficult to measure. At a minimum one can reasonably assume that companies like Apple and Google obtain patents to assist in obtaining a return on investments in research and development.  Can anyone blame Apple, a company that was hugely influential in driving the multi-touch display smart-phone boom, for defending its turf against what they perceive to be a copy-cat technology?

Defending patents as driving innovation becomes much more difficult when an organization like Lodsys, LLC sues individual smartphone application developers. Lodsys appears to be a typical non-practicing entity (commonly referred to as a Patent Troll) with a business model of developing (or more likely purchasing) a portfolio of patents and then attempting to collect loyalties from potential infringers. Lodsys is hard to defend as a driver of innovation primarily because they do not produce a product, much less a product that would be protected by the patents they are asserting. Additionally, Lodsys does not do or presumably drive any additional innovation to develop new technology.

The primary argument made in favor of organizations like Lodsys is that they help individual inventors and small companies to protect their innovations, and more easily receive value for those innovations even when they are unable, for any one of a number of reasons, to successfully bring their innovations to market. Thus, encouraging individual inventors or small companies to continue to innovate (or so the argument goes). The patents being asserted by Lodsys do appear, to a degree, to fit into this argument (of course records indicate that the inventor on the Lodsys patents first assigned the rights to these patents back in 2005 long after his initial innovation). Additionally, Mr. Abelow, the inventor on the patents being asserted by Lodsys, was probably not encouraged to develop the technology protected by these patents simply to have an organization like Lodsys stop others from allegedly using his invention.

According to Engadget, in at least one of the suits, Lodsys is asserting that application developers using in-app upgrade purchases, a feature of iOS from Apple, are infringing one or more of the patents. A quick review of the patents at issue does not immediately reveal how Lodsys intends to support this claim. However, the patent claims use very broad language and the patents have a fairly early priority date (1994). The issue these patents raise for small organizations, like smartphone application developers, is that it is difficult to judge what the patent may actually cover without engaging expensive legal counsel.  Without conducting fairly extensive claim construction based on the patent’s specification and file history, the exact boundaries of the claims are unknown.

Generally, the downside to an organization such as Lodsys for filing questionable law suits (assuming, solely for the sake of argument, that the asserted patents do not actually cover the accused activities), has been minimal. The Federal Courts have historically been surprisingly tolerant of questionable patent assertions. However, a recent Federal Circuit decision may ultimately force organizations such as Lodsys to think twice about making questionable assertions.

In Eon-Net v. Flagstar Bancorp, the Federal Circuit showed some indication that they are looking to reign in frivolous law suits. The Federal Circuit upheld a lower court decision to sanction and fine Eon-Net for bringing a baseless infringement suit against Flagstar. As a result of Eon-Net’s misconduct, the patentee-plaintiff was slapped with Rule 11 sanctions totaling over $140,000 for failure to perform a reasonable pre-filing investigation. The district court also awarded Flagstar over $489,000 in attorney fees and costs. While this is a welcome outcome for a particularly egregious case, to get to this point Flagstar had to be willing to put up close to $500,000 and risk losing much more!

In the end, I believe patents can assist in progressing the useful arts (e.g., driving innovation), by providing the incentive of a limited monopoly.

Principal & Chief Innovation Officer

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