Does the Software Industry Really Need Patents?

Aug 21, 2012

By Kerrie Spencer, staff writer – August 21, 2012

Patent trolling has been a hot topic recently, as has the obscene amount of money that stands to be gained by companies that do not even make the product they are suing over. With so many patent infringement cases going to court, the backlog is growing out of control. This is a drain on the courts’ time and resources. And yet, patent trolls keep on snapping up patent rights and skirting the rim of honesty by alleging something they may or may not have made is being infringed upon. And so it goes to court – again and again and again. Where does the race to make a buck stop?

The patent trolling business has grown exponentially over the last few years. The term “patent troll” is becoming so well known, many intellectual property lawyers only have to see a case cite to know who is trying to dig for gold. But to be honest, if someone wants to file a lawsuit and has a reasonable enough case, chances are it will go to court. However, judging (pun intended) by the latest news about 7th U.S. Circuit Court Judge Richard Posner, the court(s) are getting sick and tired of hearing case after case of companies wanting something for nothing. (1) (2) (4)

A closer look at Judge Posner’s actions could provide insight into his thinking. He threw out Apple’s software patent suit against Motorola Mobility, making June a banner month for stunning remarks from the bench, when Posner stated that he questioned whether patents should apply to software or even most industries. (3) His point of view is that the technology industry is ripe for patent litigation because every lawsuit carries the potential to seriously maim and/or wound the competition.

Apparently, he is not the only one who feels patent trolling has to stop; just four weeks after his ruling, two members of Congress proposed the Saving High-Tech Innovators from Egregious Legal Disputes Act (SHIELD). The aim of SHIELD was to make it somewhat more difficult for patent trolls (non-practicing entities) to snap up patents and sue for alleged violations. The Act would have required the trolls to pay defendants’ legal fees. (1)(5)

Posner is a well-known and highly respected federal judge, with a string of books penned under his name, including one that deals with intellectual property law and economics. If anyone understands the machinations and underpinnings of the technology and smartphone industry as it applies to intellectual property law, it’s Posner.

In his latest case, Apple versus Google’s Motorola Mobility, one he volunteered to hear, he turned down the iPhone maker’s demand for an injunction, aimed at barring Motorola from selling its products that allegedly used Apple’s patented technology. (3) He feels strongly about the pointless proliferation of patents in the tech industry, as each smartphone and other similar devices have thousands upon thousands of components, all with legal protection. It borders on insanity to try to sue someone over several thousand components, using several thousand patents that happen to be similar and do almost the same thing.

Does the technology industry really need patents? This may be the question de jour and worthy of some respectful analysis. Posner’s postulation is that some industries, for instance pharmaceuticals, have a more realistic claim to intellectual property protection because of the billions of dollars they invest in making drugs. (3)

On the other hand, developments in the software industry are far less costly and happen in almost the blink of an eye in an effort to rush them to market. Those first to the marketplace get the benefit of a nice profit for their time and creativity, a benefit that would exist whether or not there were software patents.

The idea of not having patents for the software industry is just coming into its own and making the rounds in various university classes on intellectual property rights. “The idea is a mainstream one,” said John Allison, professor of Intellectual Property Law at the University of Texas. Although mainstream and with merit, classifying various industries according to whether they could or should have patent protection would be highly impractical, leaving the door wide open for manipulating the system. (3)

On reflection, would either approach—no patents for the technology or other industries, or implementation of the SHIELD Act—really work? That would be hard to ascertain, unless there was a completely clean slate to work with in the first place, and “all” patent wars were booted out of court.

While many of the patent infringement lawsuits do not get to court, it does not mean the trolls did not make money for doing zip. The fact is just about 85 percent of the technology companies sued by trolls settle out of court. Why not fight it? Why bother, when settling could cost less than a judgment.

Patent trolls cost companies more than $500 billion in legal fees and also result in hits to share values, settlements and awards. It’s not just huge corporations fighting the good fight. Most of the lawsuits trolls launched were against medium-sized or small companies that do not have the deep pockets to go through lengthy litigation. (1)

For now, the battle(s) continue, largely based on a desire to make money and destroy the competition in any way possible. For those who grew up in a kinder, gentler world, the one we have now is not that appealing, unless fighting tooth and nail for something that does not belong to you floats your boat.