The Technology Patent System, Stifling Innovation?

In a recent Techdirt blog, when discussing the idea that start up companies should be less open in order to avoid patent trolls, the author opined that “What's stunning -- and depressing -- is that the patent system is supposed to be the thing that encourages innovation. And yet, because it's become totally dysfunctional, one of the recommendations for how to avoid running afoul of it now... is to do the exact thing that holds back and limits innovation. What a shame.”

The United States patent system is in a state of disarray, some say due to patent trolls, while others point to the large technology companies, such as Apple, Microsoft, and Google, using the system's weaknesses to dominate with overly broad patents. Patent trolls, companies that exist to sue over violations of patents, make it difficult for startup companies to gain access to a patent for their technology without getting sued. Trolls collect patents solely for the purpose of attacking companies, making cases that the company infringes their patent. The trolls bring lawsuits as a course of business and the large technology companies seem to be following suit, creating an arms race in the field of patent law. The number of lawsuits involving patents in the United States District Courts has almost tripled in the last two decades, the number of patent applications has increased more than 50% over the last decade, and it seems most of the money is going to the trolls and the lawyers.

Trolls have become very efficient in pushing their claims through and the data from 2002 to 2009 shows that the median award given to patent trolls is $12.9 million, while awards given to operating patent holders dropped to $3.9 million. This is a drastic contrast from data between 1995 and 2001, where practicing entities were getting higher median awards ($6.3 million) in patent lawsuits than non-practicing entities ($5.2 million). Patent trolls bringing these lawsuits to extort money from economically productive companies ties money up in lawsuits and hinders innovation, especially for smaller companies. Some argue that if this continues companies will start being intentionally vague and less open, which defeats the purpose of innovation. Research has clearly shown that what helps innovation is more openness and sharing, which will lead to economic growth.

Large companies are following suit, using their patents as weapons against their rivals. Billions of dollars are being spent on bringing lawsuits and buying patents that will never amount to anything. Apple has used patents as a defensive tool, specifically for the iPhone, essentially trying to patent every creative idea, even if knowing it would never lead to a patent. Although Apple knew that a patent would never be approved for a specific technology, they would apply anyway, preventing other companies from later trying to patent that idea. Large companies such as Apple have been accused of applying for overly broad patents, and that accusation has merit considering the patent applicant wants to cover every aspect of a new technology. For example, there are multiple ways to write the same computer, so by creating a broad patent by intentionally making the borders undefined it is easier to sue accusing others of encroaching on the patent. These overly broad patents also hinder innovation by giving monopolies on specific technology to certain companies. Most of the large technology companies are in lawsuits with one another spending millions of dollars as well as time battling in court, so the question becomes how far will this go?