Are patents stifling innovation?

Barely a day goes by without some headline referring to an ongoing or new patent dispute in the smartphone arena. Motorola, Nokia, HTC, Apple, Google, Research In Motion (RIM) and Samsung are all currently involved in one or more patent lawsuits relating to their smartphones.

Google has recently agreed to purchase Motorola Mobility, and the prime motivation behind this is said to be the acquisition of Motorola Mobility’s patents.

Earlier this year, a consortium including Apple, Microsoft and RIM acquired the patent portfolio of Nortel Networks at auction. The 8,800 mobile phone patents owned by InterDigital are also up for sale.

Patents are meant to encourage innovation. They are granted for inventions that are new, not for obvious developments of previously known technology. They reward the inventor with a monopoly to prevent others from using the patented invention for a period of time, typically up to 20 years.

The premise behind patents is that by providing the monopoly a patent gives, inventors will reap the rewards of their efforts, thereby providing not only an incentive to invent in the first place, but also to invest the sums necessary to produce and market the invention once it has been developed, and to share the details of the invention publicly, thereby furthering the dissemination of knowledge.

Many industries will argue that the patent system is necessary, enabling them to afford the investment required to progress their products. For example, the pharmaceutical industry will say patents enable them to make the significant investments needed to develop new drugs.

Even in the smartphone arena, significant research and development and commercialisation investment can be required to, for example, design and install the mobile phone networks in the first place and continue to develop them to keep pace with consumer demands.

But has this gone too far the other way? Does the sheer number of patents filed and the potential cost of infringing them mean patents are in fact stifling innovation rather than encouraging it?

One argument would be to say that because there are so many patents, and it seems large companies are prepared to take action over their patents, that can only mean innovation is being hindered and there could be too much risk associated with innovation. However, there is another way of looking at this.

Many of the companies in the current smartphone disputes have been involved in designing and developing the mobile phone networks and systems the smartphones rely on for many years and will have legitimately filed patents for the inventions they have made during that process.

Should these companies that have invested time and money in designing and developing the mobile phone networks and systems be expected to allow competitors access to the inventions they made during that process for nothing? Or, should they be able to use their patents to protect the value of their innovations?
Could the current smartphone patent disputes therefore be seen as demonstrating the effectiveness of the patent system and encouraging, rather than stifling, innovation? Do they indicate that large companies in these exciting technology sectors value innovations and the patents that protect them?

Driving innovation

Technology startups should therefore be encouraged to innovate, as competition in the smartphone market is being driven by, and based on, innovations and the patents that protect them.

It is also necessary to look behind the headlines. For example, although statements that large companies have been found to infringe one or more patents may make good headlines, it can often be the case that the commercial reality is not so significant as the headline might suggest. In many cases, the findings of patent infringement relate to product lines that may be relatively minor and have limited commercial significance, such as models of phones containing one particular version of a microprocessor, or some particular feature that may not be present in all the companies’ products.

The patents in question may also, for example, relate to implementation features of the phone or operating system, that while potentially beneficial are not essential to the operations of the phone or operating system and so can be omitted or redesigned to avoid infringement.