Patents emerge as significant tech strategy

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.

Not to mention barbed digs and jabs that trade over blogs, Twitter and news releases.

One example:

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 : "Let me boil down the Google statement ... from 48 words to 1: Waaaah."

So what gives? What's up with the spate of patent petulance?

The answer is that they're visible signs that technology companies' patent practices have evolved from using them to defend their own inventions to deploying them as a significant part of competitive strategies in the fast-growing .

And Microsoft serves as a key example of that.

At issue in Microsoft's current patent wrangling is its contention that Android - the mobile operating system developed and offered to manufacturers for free by Google - has certain features that infringe on Microsoft's .

Whether Android does indeed infringe on those patents is up to the courts to decide, said a Google spokesman who questioned whether many of the software patents at issue are overbroad or vague.

One Google attorney has accused Microsoft, along with Apple, Oracle and other companies, of "a hostile, organized campaign against Android," when those companies formed a coalition to buy old patents from two tech companies. (Microsoft countered with tweets saying Google had voluntarily declined to jointly bid with Microsoft for some of the patents.)

In just the past two years, Microsoft has reached agreements with 10 smartphone and tablet manufacturers that use Android on devices they produce, most recently with Compal, a company that designs and makes computers branded by other companies. (It has sued Motorola, after the two sides couldn't come to an agreement, as well as Barnes & Noble over the Nook e-reader and Nook Color tablets, which run on Android software.)

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. 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.

Negotiating license fees or filing a lawsuit is about protecting the value of the company's patent portfolio and ensuring there's respect for them, just as Microsoft respects other companies' patents by paying licensing fees - about $4.5 billion over the past 10 years - the company's attorneys say.

By some estimates, 1,000 to 2,000 of the company's patents are at issue in these disputes over smartphone and tablet technologies - a figure that Microsoft declined to either confirm or deny.

In its case against Motorola, the company alleges infringement of seven patents, including those covering context-sensitive menu systems and behavior and methods and systems for managing changes to a contact database.

In the Barnes & Noble case, Microsoft alleges infringement of five patents, including those that involve natural ways of interacting with devices by tabbing through various screens, surfing the Web more quickly, and interacting with documents and e-books.

Microsoft typically approaches companies it thinks infringe on its patents by first raising the issue in a general way, said Microsoft General Counsel Brad Smith.

"If someone wants to see specific patents, we're prepared to share specific patents with them," but the general understanding during negotiations is that there probably are even more patents involved.

Microsoft's preference, he said, is to reach licensing agreements rather than battle it out in court. The company has negotiated such agreements with major manufacturers of Android devices, including Samsung, HTC and Acer, which together hold more than half of the U.S. Android smartphone market share by units. It's also reached similar agreements with major original design manufacturers that produce devices branded by other companies.

In many patent negotiations, bringing up the larger, vaguer threat of "we have thousands of patents, you infringe on some of them and we're willing to go the distance to sue you" is enough to start negotiations for a settlement, said Andrew Torrance, a visiting law professor at the University of Washington who specializes in intellectual property and patents.

About 1 in 1,000 such disputes reach a final court decision, with most having settled well before then, he said.

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.

Because the mobile market is still so new, companies are "fighting it out in any way they can," with products, marketing - and patent portfolios, said Torrance, the law professor.

The patent issue can also be another way for Microsoft to position itself vis-a-vis its competitors when trying to persuade phone makers to go with Microsoft.

Google offers Android for free, the argument goes, but it really isn't because the phone makers will end up paying royalties to Microsoft. Wouldn't it be better to just pay a licensing fee for Windows Phone?

While "Job 1 is to produce the best phone software in the world," Microsoft attorney Smith said, the company is also "able to offer our partners a strong IP and patent-value proposition for Windows Phone software."

Beyond all that, there may be still another layer at work, surmises David Martin, chairman of M-CAM Inc., a finance company.

What Microsoft is doing, he believes, is playing a long game, trying to isolate Google, both from the best patent lawyers and from manufacturers who could otherwise stand by Google's side should there eventually be a direct legal battle with Microsoft.

Martin sees it like this:

Microsoft has been negotiating with handset manufacturers such as HTC and Samsung in preparation for eventually taking on Google.

If or when it does, he says, lawyers who've been involved in negotiating patent settlements with Microsoft - i.e. some of the best patent lawyers in the country - would likely be unavailable to Google because they would almost certainly have conflicts of interest.

Licensing agreements that Microsoft crafts now could have another strategic legal benefit, Martin said.

"If Microsoft succeeds in getting cross-licensing settlements with a bunch of (manufacturers), it leaves Google with little opportunity to use a class defense," he said.

Under a class-defense scenario, Google would try to reach out to a Samsung or Motorola so that together they can say: "a number of us agree that Microsoft's patents are not that valuable or valid," Martin said. But most cross-licensing agreements stipulate that neither party will claim that the other's patents are invalid.

"The more companies and portfolios are impaired through Microsoft cross-licensing settlements, the fewer companies Google has to turn to," Martin said.

In response to Martin's theory about Microsoft trying to tie up all the best patent lawyers, Microsoft's Smith said: "That one doesn't come close to reality."

Of Martin's second theory, Smith said: "I don't think this is the legal field that's right for class defenses, class cases."

In addition, added Gutierrez, Microsoft generally doesn't include in its licensing agreements a provision that prohibits either party from proclaiming the other's patents invalid.

A Google spokesman said that even if Martin's theories are correct, that wouldn't prevent Google from asking for a re-examination of whether the patents in play are too broad.

And the simple fact is that Android still holds the largest share of the smartphone market and is continuing to grow, he said.

Several experts say they expect these patent battles to sort themselves out over the next few years.

Torrance, the law professor, draws a comparison to the early days of the PC when similar skirmishes over patents eventually settled down to "an uneasy peace" where rivals realized they had enough firepower to harm one another.

"I think we're in the early stages of a similar battle in mobile computing, which will eventually settle down like it did with PC computing," Torrance said. "But it will take a lot more cases."

---

PATENT ISSUES AT A GLANCE:

Here are some details of Microsoft patent actions

-Licensing deals: Microsoft says it has reached 1,133 licensing agreements covering a variety of technologies, including operating systems and networking technologies, not just features used in smartphones.

-Android deals: In its patent battles over Android features, Microsoft has reached with 10 manufacturing companies: Samsung, HTC, Acer, ViewSonic, General Dynamics Itronix, Onkyo, Velocity Micro, Wistron, Quanta Computer and Compal.

-Android battles: Microsoft is in litigation with four companies over Android features: Motorola Mobility, Barnes & Noble, Foxconn and Inventec.

-Other battles: Other continuing patent battles related to devices running on include Oracle's lawsuit against , and Apple's lawsuits against HTC, Samsung and Motorola. (Some handset manufacturers, including Samsung, Motorola and Nokia, have also sued Apple, claiming Apple violated their patents on some its mobile devices.)


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Microsoft reaches licensing deal on HTC phones

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Oct 27, 2011
The increased resources devoted to litigation and patent battles are like a parasite on the economy.

The boards who reward their executives for this kind of parasitic activity are setting up their companies to be long-term losers. In the short term, they may find a few more dollars, but the entire process robs from the corporation's ability to focus on ROI for shareholders.

A philosophy of "sue to gain a source of revenue" simply can't win in the long run and is not consistent with a philosophy of building innovative products and services.

Oct 27, 2011
they are not a parasite on the economy..

do you think that when your house is robbed, that the police and going after the theifs is a parasite on the economy?

the only people who say that, are people who have no ideas to put in the pot and protect!!! ie. they want to be able to take someone elses, so they want the system to facilitate that, and over time, thats what its doing.

now that its first to patent, not first to invent, you save lawyer money the same as when you stop litigating criminals and prisons..

but the result is not what you really want, is it?

Oct 27, 2011
The case of patents indicates the dual aspect of each concept apparently. Although patents were originally proposed as a protection of investors developing the new technologies, they can become a brake of this development easily, when they're sold to subjects. which aren't motivated into application of new technologies. In general, the legal feature, which serves some subject shouldn't be transferred to another subject in any way.

The problem of patent market is similar to carbon tax trading problem: whereas carbon tax itself is essentially a positive thing, its trading with subjects, who aren't involved in fossil fuel replacement denies its meaning completely. The granting of patents to companies, which aren't involved in patent implementation (so called the patent trolls) virtualizes all positive impact of patents to economy.

Oct 27, 2011
"they are not a parasite on the economy..

do you think that when your house is robbed, that the police and going after the theifs is a parasite on the economy?" -ArtflDgr

ArtflDgr: I literally have no idea at all what this means or how anything to do with police, my house, or "theifs" (sic) has to do with patent trolls. It's possible that English is not your first language, in which case I can understand some of the confusing comments.

But, let me be clear: I don't have any problem with patents or the patent system. My comments were specifically about the increased efforts by some ruthless lawyers in some corporations whose intention is to NOT invent anything further at all. Rather, their goal is to simply file and sue their way to profitability. Again, I couldn't understand half of what you said, but we might be on the same page.

Oct 27, 2011
You dont understand the concept of OWNERSHIP and rights to property?

what you complaining about is that someone doesnt do with THEIR property what you would do.

AND what you want is to help big corporations AFTER The fact recover losses for NOT wanting to license and trying to force some guy into a lawsuit.

what you guys dont seem to get is that its THEIR PROPERTY...
and if they dont want to make whatever it is, then you dont get to make whatever it is.

nerdyguy..
we are not on the same page..

the lawyers saw VALUE in what the corporation didnt!!!
then when they realized then need it, they dont want to license it.

are you familiar with Edwin Howard Armstrong?
invented FM radio... but the corporations didn't want to pay him (his wife compromised after he committed suicide, but why did they have to?). they even petitioned the state to move the frequencies!!!


Oct 27, 2011
you see here is where you missing the game, and getting on the socialist bandwagon declaring that property that is not yours, not someone else, or what ever, should be appropriated in some way to some use (in this case by a fascist system of collusion between state and large firms)

usually the small inventor of these patents is happy to get something from the LAWYER who sees the worth. its not like they dont want to make something. but how do they get the capital?

the large company who wants the tech has lawyers on retainer, and they make a bean count bet. the small guy cant afford to prosecute us for theft. so its ok to steal it "what can they do?"

then some lawyer sits there and notices that they are doing this, or realizes the value and the common practice is to taske it if your small.

so he says to the OWNER OF THE PROPERTY, can i buy that? the owner who is being cheated says ok..

the lawyer then owns the property and starts to sue for theft

Oct 27, 2011
the companies call their marketing department (i worked for such companies as did my dad and uncles)... and they start a press thing. they talk together and they paint the picture to you that their theft was really for the good of society.

the lawyers then start to sue for the theft and the licensing fees THAT SHOULD HAVE BEEN PAID TO THE OWNER TOO WEAK TO DEFEND THEMSELVES from a company that has more money than many nations!

you help the thieves

America's largest big tech corporations are now using a business technique called "efficient infringement," which means that they calculate the benefits of stealing someone else's patented technology against the possibility of getting caught, tried in court and being forced to pay damages and penalties. If the benefits exceed the costs, they steal. What makes patent theft so attractive is that infringement is not a criminal act and those found guilty face no jail time. Paying up is the worst that can happen to the infringer.

Oct 27, 2011
but all that is, is holding the door open for the burglars.

The most aggressive users of this business model are fifteen of America's largest big tech corporations. Led by Cisco, Intel, IBM, Microsoft and HP, these giants have spent millions of lobbying dollars over the past five years trying to buy legislation in Washington that would weaken the existing U.S. laws on patent infringement. Their interest is obvious since in the 13 years between 1996 and 2008, patent owners have sued these fifteen corporations 740 times for infringement and have won $4 billion in damages. Not surprisingly, these big tech corporations' political goal is to change the law so patent theft is more difficult to prove, less costly when caught, and willful infringement virtually impossible to prove.

www.huffingtonpos...780.html

4 billion!!!
they were found guilty of theft to the tune of 4 billion
and the little guy they stole from, you dont care about!!!!!

Oct 27, 2011
The principal victims of these big corporations' "efficient infringement" approach are America's independent inventors, small businesses and universities - the source of most breakthrough innovations and the creators of two-thirds of all new jobs in America.

corporate behemoths in the financial services industry are using the technique and ganging up on small patent holders.

DataTreasury's founder invented a revolutionary check-processing system in the mid-1990s and tried to market it to high-level executives at JPMorgan Chase. Instead of partnering with DataTreasury, those bankers are accused of walking off with the idea

the banking industry is now making $2-4 billion annually because of DataTreasury's patented check-processing technology.

and you want him to lose out on his idea so the bankers can make 80 billion dollars over 20 years for tech tney didnt pay for, nor even pay to research for!!!

why?

Oct 27, 2011
Um, ArtflDgr, I don't actually "want" anything. And, I'm, if anything, a bit too far to the right for most people. You literally could not be more off track here.

Again, to clarify, because it's clear from your voluminous rants that you are desperately in need of clarification (not to mention education in language, grammar, logic, law, etc.): patent trolls are NOT a healthy or admirable part of a forward-thinking corporate entity. Their one and only goal is parasitic in nature. And they cost us all in terms of innovation, invention and technological progress.

Oct 27, 2011
an by the way, belittling my spelling, accusing and other bs of an arrogant ass is not how you debate...

that's how losers debate when they don't have any substance to actually debate with...

ie... you dont have any real argument that would stand up, so you draw attention away from the fact your bag is empty, and bring up my spelling.

you remind me of the actor that said mozarts music was not good as it had "too many notes"!!!!!!!!!!!!!!

Oct 27, 2011
it's clear from your voluminous rants...
go complain to huffington for producing rants and expecting money for it.

so far you have stated the conclusion a few times but have given NO argument as to how they do so...

and i dont care if your on the right... or left
you take a socialist position it is still a socialist position... regardless of what you think you are!

how many patents have been stolen from you?
two of mine stolen, 1 went to Beijing institute
they will make over 100 million i will get zero

i have other tech, but cant bring it to market
i am afraid a company will steal it
its MUCH more likely that a company will take it from me!!!

if a patent troll offered me capital for my work, i would sell it to them.. THEY WOULD THEN BE PAYING THE OWNER

if i present it to those companies they will steal it
so which do you think is stopping things?

the company who steals, or the attorney who pays?
at least if you get paid there is a reason to work on it!!!!

Oct 27, 2011
most people are afraid a company would steal their work... not a patent troll who would pay them for it

Oct 27, 2011
It's selfish to deny the majority of the population access to a technology that could benefit them, simply because you can't market it to them. I'm a scientist, at my institute we negotiate the transfer of many technologies to new companies. Most of the time there are no patents involved.

Of course some chinese company may eventually reverse-engineer it and sell cheap copies. But for their money the company gets the advantage of a big headstart, and they usually make sure the tech is hard to copy.

If your "innovation" is a navigation tab for a tablet, you suck at inventing. Real technological innovation is not trivial to copy.

It does not require unlimited protection with patents, the R&D investment is more than offset by the company being the first to market it. More than that is undue privilege.

Oct 27, 2011
Jotaf - First to market is a huge advantage only for a company with enough production capacity and marketing budget.
I hold several dozen patents and have started four companies so far to launch products based on them. I would not have been able to raise the launch capital without patents.
I'm not fond of trolls, but the better trolls actually do help to keep companies honest.
There are three real problems with the patent system:
1) once granted a patent is assumed valid by the courts, even if the patent office overturns the patent, until all appeals are exhausted; money should go into escrow until the final decision (RIM had to pay NTP ~$600M on invalid patents due to this).
2) Knowingly infringing can lead to treble damages, so companies generally don't look at competitors' patents, negating half the purpose of patents (patent means 'open' for people to see).
3)Artfl's right that knowingly infringing is theft and should lead to jail.
However solving 2 makes 3 worse and vice versa.

Oct 28, 2011
I suggested before somewhere that I feel that patents should get a new, obligatory section: amount of money spend to aquire it. There should be a detailed explanation of all money spend on aquiring this patent. Then when this money has been earned back plus a reasonable margin (a percentage of the investment costs) it will become as if published: Everyone can use it for free. It is just too silly for words that some companies (or worse, patent trolls) can exist solely because they hold a patent that they have earned back many times over. As is the fact that a company can buy patens. You didn't even invent it and can force other companies to pay you?!?! This is against the very nature of progress if you ask me.

Oct 28, 2011
Ryan - sounds good, but there are flaws.
Roughly one patent in one hundred makes money, so the payback rate would have to be several hundred to one to make nay sense. And some research is very risky, so if one pegged the 'payback' for tame research then it would still discourage risky research.
Lone inventors are also generally not good at paperwork, so the detailed accounting of all money would be a significant burden on them.

Oct 28, 2011
I'm lacking the public feedback in the system of patent granting. The problem is, both lawyers, both the grant agencies aren't motivated in quality of patents, only quantity which they're payed for (actually, the more fringe the patent is, the more lawyers are happy about it). Many patents are granted to publicly well known or even used solutions, especially at area of software solution patents. The grant agencies are taking money for issuing of each patent, so they should take the risk and they should be punished and charged for issuing of fringe and duplicate patents with no mercy.

Oct 28, 2011
Nerdyguy
The boards who reward their executives for this kind of parasitic activity are setting up their companies to be long-term losers. In the short term, they may find a few more dollars, but the entire process robs from the corporation's ability to focus on ROI

Microsoft's preference, he said, is to reach licensing agreements rather than battle it out in court.
Microsoft, at least, has already considered your proposed flaw. Rather than focus on short term profits, as would be the case of a court battle, they instead focus on ROI in the form of a licensing agreement.

Nerdyguy
A philosophy of "sue to gain a source of revenue" simply can't win in the long run

This is why they prefer to enter into a licensing agreement, which is a long term source of revenue. Suing is simply a means of showing intent to act, with the likely result being a settlement in terms of a licensing agreement.

Oct 28, 2011
Nerdyguy
and is not consistent with a philosophy of building innovative products and services.
If fairyland had a philosophy, I'm sure that would be it. The corporations mentioned however, go by the philosophy of, "Profits at all costs", which is consistent with their actions.

Oct 28, 2011
ArtflDgr
they are not a parasite on the economy..

do you think that when your house is robbed, that the police and going after the theifs is a parasite on the economy?

They are parasites. Ideas and physical items are two distinct entities and as such your analogy fails.

Oct 30, 2011
The understanding is that are other patents they may be infringing on..

So you begin negations with the other company guessing what else you might have. Something like a poker game with the not too scarey cards showing and leave the other attorneys guessing what is in your hand.

Concessions are made if they guess correctly.

Oct 30, 2011
As usual, a well-meaning system has been turned around to gain power/money. Patents, the stock market... Just another puzzle to crack, another set of rules to abuse.

People are smart and they adapt. If we don't reform these systems periodically, they're all eventually corrupted. We shouldn't let companies use public court rooms to extort money from each other. The patent wars are a ridiculous waste of effort.

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