Protecting property or impeding innovation?

Several recent high-profile court cases over intellectual property rights have sent waves through the channel. Doug Woodburn asks if anyone wins when it comes to patent wars

Apple's landmark $1.05bn (£661.3m) courtroom victory over rival Samsung has reignited the debate over whether or not patent litigation is stunting industry innovation.

According to analysis from Reuters, there were no fewer than 18 vendors in the mobile device and components space alone involved in at least one patent battle last summer.

That is a pattern repeated across the industry, with Oracle and SAP, Juniper and Palo Alto, and Quantum and Overland among the other high-profile vendors currently going toe to toe over their intellectual property. And, more worryingly, this rising culture of litigation has spawned a sub-industry of businesses formed to acquire IT patents purely to sue other companies.

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With Apple ploughing upwards of $2bn a year into R&D, the Cupertino-based manufacturer and other high-profile vendors looking to protect their intellectual property (IP) have their fair share of sympathisers.

But others are worried that patent litigation is increasingly being used as a tool by rich and powerful vendors to nobble emerging competitors.

Setting a dangerous precedent

Yuri Pasea, managing director of distributor Prianto (pictured), was concerned that the Apple-Samsung ruling could set a dangerous industry precedent and even pave the way for Apple to pursue the top Ultrabook makers.

"[Going after the largest player in the market] sends a message to smartphone challengers to be wary of anything they invent or add to their phones in case it infringes a ‘patent'," he said. "Sadly, in my opinion, this is a disaster for innovation and inventiveness. In the long term it could backfire on Apple, whose consumers may start to see them as the bad boy of the IT industry."

Ian Kilpatrick, chairman of distributor Wick Hill, argued that vendor patent wars are often less about the result than the sales and marketing benefits a vendor can achieve by hauling a rival through the courts.

Most - but not all - boil down to a larger vendor wanting to protect its market against an innovative competitor, he said.

One of Wick Hill's vendors is currently facing legal action from a larger rival and Kilpatrick said he fully expected the aggressor's sales staff to use the case to stir up fear, uncertainty and doubt among customers. This could include unsubstantiated claims that the customer will have to take their rival's software off its machines.

"In the past, we have found larger vendors' sales staff making unsubstantiated statements to customers. We have then gone to senior management at the vendor and told them, ‘your staff are making these statements - either substantiate them or confirm they will not be repeated'."

Patent-holding firm NTP possesses more than two dozen patents, many in wireless email technology, but apparently has not developed any new technology of its own for years, leading some to brand it a "patent troll". In 2006, it reached a landmark $612.5m settlement with Research In Motion following a dispute over ownership of the email "push" technology in its BlackBerry devices. In July, it settled patent suits
with 13 mobile technology firms including Apple, HTC and Google.

Troll hunting

Paul Emerson, chief executive of firewall vendor Global Technology Associates, said his firm had been on the wrong end of an -albeit flimsy - infringement challenge from a patent troll a few years back.

He received a letter from a Chicago law firm acting on behalf of a client whose software GTA had supposedly infringed. It requested a payment of $250,000.

"I contacted my IP attorneys and did some digging myself," he said.

"It turns out the client was a company from Finland that did no business but held two patents, which were the only thing left of a previous company. These were US software patents for some VPN technology over mobile phone networks."

Emerson said his research quickly exposed several fundamental flaws in their position.

"Our attorneys provided this evidence to the law firm in Chicago and never heard another word," he said.

"This type of patent trolling is all too common. Throw a load of fishing lines in the water and see what you can bring up. It's basically blackmail, 'if you pay a certain sum of money we'll forget about all this'. Since small companies know that it could cost them millions of dollars to defend themselves they just pay up. Also these trolls seek out jurisdictions in places that will rule favourably for them."

Kilpatrick said: "In the case of people protecting their legitimate, innovative IP it is crucial to have protection, as without that, it is anarchy. But it is a matter of balance. There are firms out there buying up companies just for the code so they can fight patent wars - that is vulture capitalism."

Referring to the Apple-Samsung case, Eddie Pacey, channel veteran and director of EP Credit Manage­ment, joked that he "didn't recall this level of legal action in the days of transistor radios".

"There is a limit to how much innovation one can apply to basics such as ‘taps' or ‘finger slides'," he added.

"I do not believe this will necessarily stifle competition, indeed I think it will liven it up. What does irritate, however, is to see actions commenced and judges' rulings in locations where you know the ‘home' team will triumph. I have no doubt some of it is political, with the aim of favouring local manufacturers and market share, more so given current economic pressures."

Do the right thing

By definition, resellers and other channel firms do not tend to have their own IP,
but some of those that do expressed sympathy with Apple's position.

Richard Eglon, marketing director at channel services firm Comms-care, revealed his firm had recently taken action against several of its competitors to protect its IP.

"In the past 18 months we have noticed more up-and-coming channel firms getting very close to our own proposition," he said.

"I can understand why the larger vendors protect their IP as it is a big investment for them. They have worked hard through the downturn and so for another company to pinch their attributes is wrong. From our perspective it is reassuring if a larger vendor is [enforcing its IP] as it makes it easier for us to. We are all for innovation, but it has to be done in the right way."