Patents. Aren’t they wonderful? Just ask Google, which recently paid a whopping $12.5 billion for Motorola Mobility. While Google might just find those DCT-2000s uber-sexy or see potential in Moto’s once cool Razr franchise (which along with every other Moto smartphone has been in decline since Steve Jobs smothered the world in iPhones), those blinking gadgets aren’t worth more than 12 billion smackers on their own. What added some girth to the sale price? Patents. Moto’s got a lot of them. And defending patents has become a nice business. TiVo, which just won a cool $250 million from Verizon FiOS, can tell you all about how business is-a-booming. In fact, TiVo’s other recent patent settlements with AT&T, DISH and EchoStar have translated to nearly $1 billion in new revenue for this scrappy device and software maker. Interestingly enough for aforementioned Google, TiVo also has patent litigation pending against Motorola Mobility—litigation that will go to trial this Spring. We can only wonder if Google worked a potential settlement into the price it paid for Moto.
Patents have a long history, and it takes a trained patent lawyer to truly understand the ins and outs. (Check back to CableFAX.com later this week for a guest column from IP litigation lawyer George Medlock.) We’ll make no effort to understand the full scope of how they work here, but it’s important to note how much this area of the law has evolved since medieval times when the first patents got handed out in Europe. In our modern world of constantly evolving technology and ever-shifting marketplaces, it can be much more difficult to figure out whether someone has been ripped off than in, say… 1641 when Samuel Winslow got the first North American patent for a new salt-making process. In the digital age, “processes” are much more nebulous and complicated.
Perhaps the most interesting development in recent years has been the use of the “business method” patent, which became especially popular during the dot-com era in the late 1990s as a way to protect innovative entrepreneurs coming up with new ways to sell things online. Amazon and other early Internet firms all have business-method patents for various aspects of how they interact with customers or specifically operate e-commerce businesses. But how many ways are there to order something online? Can someone really patent something so simple as a one-click ordering? Or in the world of devices, is it really fair for Apple or Samsung to hold some kind of dominion over whether pinching a touchscreen allows a customer to zoom in or out? Where does it end? And at what point do these patent fights start hurting rather than fostering innovation? After all, no one wants to condone outright theft. But most people agree that competitors must be able to improve upon existing products or put their own twist on something already established in the marketplace. Subjecting everyone who does anything “similar” to something already out there to expensive patent litigation only distorts the marketplace. It’s a fine line. Courts try to draw it every day. But they don’t always get it right. And that’s too bad because we need to strike a balance here.
Companies that invest billions in R&D to create the “next iPhone” need to be protected, so they have an incentive to spend all that time and effort creating things that improve consumers’ lives. But it’s easy to go too far. Perhaps the settlement route is working. TiVo, for example, is simply using the courts as a way to extract de facto license fees from companies in the form of legal settlements. As far as we know, none of this will bankrupt Verizon, DISH, EchoStar, AT&T or anyone else. In the end, it’s just a business negotiation—albeit one played out in the courts. But everyone needs to be careful here. Things can go too far. And no one should be rooting for that.