Sunday 14 November 2010

Software Patents: Are They the Real Threat to the Smart-Phone Industrry?

It is seldom that I focus on a Letter to the Editor. But I cannot resist the letter from Joshua Bloch, who is identified as Chief Java architect at Google, which was published in the November 6 issue of The Economist. The background to Mr Bloch's letter was an article that appeared in the October 23 issue of the same magazine. Entitled "The Great Patent War: Smart-Phone Lawsuits", here, the article discussed the various strands of the increasing reliance on patent litigation by the various actors in the smart-phone industry. So first a word about the article.

The article pointed to the change of the composition of patent litigants in this space, changing from patent trolls and patent owners from other industries (e.g., Kodak) to the handset manufacturers and developers of software for the smart-phone industry (e.g., Microsoft, Nokia, Apple and HTC). If all the various patentees with a possible claim with respect to the smart-phone industry check in with a lawsuit, we could reach the situation described by sometimes IP- skeptic professor Josh Lerner of the Harvard Business School, whereby '[i]f 50 people [each] want 2% of a device's value, we have a problem."

Not for the first time, Google's position would appear to be idiosyncratic, because its business model focuses on making its Android software available to manfaucturers for free, and then garnering revenues through advertising activities by users of the smart-phones. As such, Google may be a less appropriate object for suit because, in the words of the article, Google "will be hard to pin down. Google does not earn any money with Android, which makes it difficult to calculate any potential damage awards and patent royalties" -- although, as also noted, Oracle has filed suit against Google regarding the use of Java by the Android system (for more on this lawsuit, see here and here .)

My immediate interest is not to comment on the article itself, but to focus on the letter from Mr. Bloch, who wrote as follows:
"Your article on the patent wars in the smart-phone market left out one key player: the consumer ("The great patent battle", October 23). The flourishing competition among mobile platforms, devices and applications directly benefits consumers. In contrast, exploiting vague software patents to try and block open-source innovation neither helps consumers nor promotes the development of new technologies.
Innovation and competition, not ligitation, are the keys to providing the new generation of products and services that is changing the lives of billions of people around the globe."
So what do we make of these comments? Let me suggest the following:

1. Mr. Bloch's comments refer only to software patents. I am bit puzzled about this.
If Google's interest is promoting "innovation and competition [that] are the keys to providing a new generation of products and services" on behalf of consumers, should not his concern be with the applicability of the patent system generally in the context of a product and eco-system such as the smart-phone industry? After all, to recall Prof. Lerner's concern, it does not matter what party of the smart-phone device--hardware or software--is subject to the "50 times 2%" nightmare. Lockup is lockup, and 100% is 100%, whatever the source.

2. Indeed, judged by his silence, Bloch's implication seems to be that that patents are okay, and may even contribute to innovation, unless they are being employed against open-source (read Android) software. After all, doesn't Google also own patents in various areas? As long as the patent owners are suing the makers of smart-phone manufacturers and, presumably, developers of proprietary operating software for smart-phones, such as Microsoft, innovation and competition are fine. It is only when "vague software patents" are brought to bear against the open-source community that there is reason for concern.

3. We understand why Google is better off if no one person controls the smart-phone operating system in the manner in which Microsoft controlled the operating system for the PC world. With no single person able to control the operating system, the source of profts in the smart-phone industry can be enjoyed by others, including Google, it as the leading purveyor of online advertisements.

4. There is nothing wrong with Google, or any other person, earning profits in the smart-phone space. What is a bit troubling, however, is the attempt is to couch one's business model within an appeal to consumer welfare, competition and innovation. After all, even if we solve Google's problem and free its operating software from the threat of software patents, we still have the proverbial 50 other patentees, each still seeking to obtain its 2% interest in the device. If Google really wants to contribute to consumer welfare, competition and innovation in this industry, it should offer a solution for that problem.

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