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For $12.5 billion, Google’s acquisition of mobile phone manufacturer Motorola Mobility bought the online search giant a hardware home for its Android software platform and a windfall of one the summer’s hottest commodities: 17,000 patents. Other spoils aside, Google has positioned the big buy as a defensive play for Motorola’s patent portfolio. The purchase follows the $4.5 billion June auction of Nortel patents, which Google lost to a bidding consortium led by rivals Apple and Microsoft. Only a couple weeks ago, Google’s chief legal officer, David Drummond, published a heated blog post that said rampant patent claims and licensing fees have amounted to an attack on the hyper-successful Android operating system. (It has also been revealed in recent months that Microsoft makes a ton of money off of Android licenses.) But in this season of a cooling global economy and a thirst for growth, do the rising price tags on high-tech patents bode well for the future of innovation? Not a bit, say intellectual property scholars Michael Meurer and James Bessen, authors of Patent Failure: How Judges, Bureaucrats, and Lawyers Put Innovators at Risk (Princeton University Press, 2009). “I think it’s pretty disappointing—[patents are] valuable because they’re being used as weapons, not as storehouses of technology,” says Meurer, a law professor at Boston University, on the soaring payments for patents. “The patent system is imposing bigger costs to the innovators than it’s returning to them in terms of benefits.” Bessen and Meurer were initially intrigued by the explosion of patent litigation that took place in the early 1990s, which reached three times the volume of the previous decade. The smartphone patent battles are but the latest illustration of the issues highlighted in Patent Failure, which was first published in 2008. The authors argue that patents should be viewed more like demarcated property. The crux of their treatise is that the current patent system fails to achieve what a functioning system of property rights should: to clearly convey who owns the idea and what the boundaries are, so that others may steer clear of that territory or else negotiate the rights to use it. What we have instead is a mess, and, says Bessen, “smartphones are one area where the mess is particularly out of hand.” Thus the multi-billion-dollar price tag companies like Google, Apple, and Microsoft are paying in defensive patent acquisition. Competing claims to ownership and the resulting litigation have a far-reaching impact, not only as a tabulation of lawyers’ fees, but because anyone in the value chain—including retailers—can be sued. Threats of litigation also make customers uneasy and they may shy away from maintaining a relationship with a brand. “The big cost is the way business activity gets disrupted,” says Meurer. As Bessen and Meurer continued their investigations, they found that patents do have the intended impact in the chemical and pharmaceutical industries. For one, barriers to entry are higher, and only a limited number of players can afford to invent in this field. The inventions of formulas and medicines are also discrete, and described in very clear language that serves a patent’s true purpose: recognized exclusivity. By contrast, the pair argues, patents for software, computers, and more pedestrian items—say, a plastic box for disposing of medical waste—are typically written in vague, ambiguous language. These kinds of patents tend to describe what the invention does, but not what the patented invention actually is. Meurer says that it’s like the difference between a pharmaceutical company saying, “I’d like to claim all drugs that treat high cholesterol,” versus laying claim to a specific medicine that is a treatment for high cholesterol. The “fuzzy boundaries” of software and computer patents held by the likes of Motorola and Nortel have allowed for overly broad interpretations by the courts, and hence more litigation. In the smartphone arena, these issues converge and boundaries overlap, says Bessen, a fellow at the Berkman Center on Internet and Society at Harvard. Previously, the phone industry used to be limited to big players who cross-licensed their technology. “It was a very well-defined industry and litigation was contained,” he says. Now that computer and software companies have entered the telephony mix, “it’s a dynamic market where things are shifting very quickly,” Bessen says. With the Android mobile operating system, for example, Google became a market leader within only two years. But the company didn’t enter the fray armed with patents, nor, says Bessen, did they make their engineers sit down and write them along the way. “You have an innovative company playing catch-up,” Bessen says. That game of catch-up is now commonly considered an arms race. To reach a détente, Meurer says, the patent system needs a stronger doctrine against the use of indefinite claim language. Bessen and Meurer’s ideas have gained some traction in this regard. Notably, Meurer points out, the idea of “notice,” a linchpin of property law, was incorporated into a Federal Trade Commission report on how to improve patent law, “The Evolving IP Marketplace: Aligning Patent Notice and Remedies with Competition.” (Interestingly, the FTC’s lead author on that report—Suzanne Michel—was recently hired to join Google’s legal team, in a move announced August 3.) Meurer laments the costs imposed on firms and society alike by the current system. “I think both [Bessen] and I are optimists about technology,” he says, citing the technological advancements as the key to economic growth. “People were unrealistic to think that accumulating lots of patents was the key to stability or peace.”

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