The tech industry may have had its attention focused on gadgets this week due to the annual hullaballoo at the 2012 International CES show in Las Vegas, but at least a few people were thinking about the patented inventions that make those electronics work.
Kodak filed complaints against Apple and HTC with the U.S. International Trade Commission on Tuesday alleging the companies had violated a handful of its multitudinous patents on digital imaging. The fact that Kodak is trying to find a buyer for its patents to save it from having to file for bankruptcy – and that successful lawsuits prove the value of its patents and raise their net worth – was not mentioned in the suits.
On Thursday, Ericsson announced it had decided to "strengthen its focus" on patent licensing and put intellectual property chief Kasim Alfalahi in charge of the new plan. Ericsson already licenses out its 27,000-strong patent portfolio to 90 companies, but its main business has always been the gear that makes networks run.
The tone of a line at the top of Ericsson's press release said it all: "Any company using cellular connectivity needs a license." With the intellectual property market booming and the tech industry rife with litigation, why not cash in on the trend?
Hours after Ericsson's announcement hit the wires, Openwave said it was changing the course of its business to focus on patent licensing and would pursue what it euphemistically described as "strategic alternatives" for its mediation and messaging business. In plain English, Openwave is streamlining itself to focus on its most potentially lucrative assets: patents.
Openwave did a poor job of leveraging its patents on the mobile Internet in the past. It's now addressing that, and like everyone else in the industry, it's not above turning to the courts. It filed suit in August against Apple and Research In Motion for allegedly infringing on its intellectual property rights.
After Openwave's announcement, the patent news kept rolling. Microsoft put out a press release announcing that it had signed a patent agreement with LG covering all of the South Korea electronics maker's Android and Chrome OS devices.
Somehow, "agreement" seems like a bit of a misnomer given Microsoft's aggressive pursuit of licensing agreements with just about every Android manufacturer out there. I picture the talks between Microsoft and LG actually went something like this: "Sign up for a license or we'll sue you and make you pay even higher royalties, and don't bother turning to Google for help because they have patent protection like the Sahara has water."
Microsoft says 70 percent of all Android smartphones sold in the United States are "receiving coverage" under its patent portfolio. Another way of putting it would be that Microsoft is gleaning royalty payments from 70 percent of all Android smartphones sold in the United States.
Android may be open source, but it's being heavily taxed.
The last piece of this week's patent news – well, maybe not the last, something could break before midnight on Sunday – came from Nokia. The Finnish handset maker said it sold a sliver of the 30,000 patents in its portfolio to European patent licensing firm Sisvel. The deal included 350 patents Nokia "declared essential" to GSM, UMTS/WCDMA and LTE. You know what that means: Pay for a license from us, or we'll see you in court.
It's not like the tech industry has never seen patent wars before. My editor rightly reminded me today that there were major legal battles between companies like Qualcomm and Nokia not too long ago. Much of what went down this week is par for the course in any rapidly-evolving field that’s still sorting out who owns ideas and can charge other people for using them – just look at the glut of lawsuits during the early years of the automotive industry.
What strikes me about the state of licensing and litigation in the industry today is the potential impact on the wireless ecosystem, particularly for Android devices.
As more and more companies seek to exploit the weaknesses of their competitors on the patent front, particularly for Android, how will that affect manufacturer's decisions about what platforms to use and what technology to include in their devices? Just how expensive will it have to get to make Android devices before companies decide to explore other, less heavily taxed options?
Microsoft is reported to have demanded a $15 royalty fee on every Samsung Android handset while the two companies were duking it out in court last summer. HTC is estimated to pay Microsoft $5 on each of its Android devices. Then there are fees that manufacturers have to pay to other companies that hold patents used in Android – could this result in the increase in retail prices for Android smartphones that has been predicted by some?
Google won't get significant patent protection until it closes its $12.5 billion acquisition of Motorola Mobility and its much-needed trove of 12,000 patents and 7,500 patent applications. I wonder how the litigation over Android would play out if Google had won Nortel's patents, instead of Apple, Research In Motion and Microsoft.
Google has repeatedly claimed that Apple and Microsoft are out to get Android and are using patents as the missile that will destroy the platform's meteoric rise. The late Steve Jobs construed it somewhat differently, saying Android amounted to “wholesale theft” of Apple’s ideas. In his biography, Jobs was quoted as saying he would "destroy Android, because it's a stolen product." It seems likely that Jobs' successors will pursue Android with the same amount of vitriol.
If CES highlighted anything this week, it was the power of ideas. Patents are about protecting those ideas, making sure that no one steals them.
Casting aside the question of who's right – the courts can sort that out – it's clear that Google's longstanding policy of being lax on the patent front has come back to bite it. Apparently, it somehow thought that failing to properly patent its technology or secure licenses would have no consequences.
Well, those consequences have come home to roost. Only time will tell what impact they have.