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Posted at 06:00 AM ET, 07/27/2011

Is U.S. innovation experiencing death by patent?


Motorola co-CEO Greg Brown (Charles Dharapak)
Patents have been popping up in the news quite a bit over the last few weeks. As the economy continues to stumble along, companies and investors are working even harder to find ways to make a profit. This includes enforcing their patents. And these patent enforcement efforts have ensnared technology companies both large and small.

The Associated Press reported on July 21 that activist investor Carl Icahn started pushing Motorola, which holds 17,000 patents, to start enforcing them in an effort to boost profits. After the news of Icahn’s recommendation surfaced, stocks for Motorola jumped.

The AP report reads:

There’s a scramble for patents by technology companies as they seek to shore up their litigation defenses. Nearly every maker of smartphones is suing another manufacturer over patents.

Enter, the National Public Radio program “This American Life,” which broadcast a report Sunday on “patent trolls,” companies that do not produce the products for which they hold a patent but sue other companies once they eventually do. Think “Three Billy Goats Gruff.” During the broadcast, the analogy to the children’s story was suggested by Intel’s former director of patents, Peter Detkin who coined the phrase “patent trolls. ” Keep that in mind, since we’ll get back to Detkin later.

The dissatisfaction with the current patent system in Silicon Valley is well known. Publications such as Technology Review and TechDirt write frequently about patent trolling. And the company that has received the most attention in the patent troll debate is Intellectual Ventures, which was founded by Microsoft’s former chief strategist and chief technology officer Nathan Myhrvold. The company owns a number of patents and has been vigilant in pursuing individuals and companies they deem to be in violation of them. Intellectual Ventures’s investor list is a who’s-who of influential tech companies and universities, including eBay, Apple, Brown University, Cornell University, Cisco Systems, Adobe Systems, Intel and Microsoft — just to name a few. (PDF)

Myhrvold, of course, objects to the term “patent troll,” writing this in a column for Bloomberg:

Once upon a time in the clubby atmosphere of corporate America, hostile takeovers were rare; gentlemen just didn’t do such things. Then, in the 1960s, the hostile takeovers came to be accepted as a legitimate business tool. Similarly, the strategic use of patents now appears to be accepted in the technology industry.


A man walks past a company sign at a Nortel Networks office tower in Toronto. (NATHAN DENETTE - AP)
In the column, he cites the sale of bankrupt Canadian telecommunications company Nortel’s patent library for $4.5 billion. The portfolio was bought by a consortium that includes Apple, Microsoft, Research in Motion and Sony. Now photography company Eastman Kodak is considering a similar sale with its 1,100 patents. Remember Peter Detkin — the person who coined the phrase “patent trolls”? Detkin has since joined Intellectual Ventures.

Given this, it is no surprise that Intellectual Ventures was at the center of the report by “This American Life” — to the annoyance of the company. After the broadcast, Intellectual Ventures released a statement to the publication Geek Wire saying the report “distracted listeners from the real issue” and that “some of their characterizations of patents in general and of [Intellectual Ventures] specifically were colorful and dramatic, and some were just absurd.”

Gizmodo senior reporter Mat Honan disagrees, arguing that patent trolling is suffocating America’s ability to innovate, particularly in the technology sector. Honan wrote on Tuesday, “These are the tapeworms crawling through the nutrient-rich belly of American innovation, full of bile and [expletive], slowly starving us to death.”

Who said patent law was boring?

Patents are such a fundamental part of the U.S. economic fabric that their existence is codified in the Constitution. But the framers of the Constitution weren’t writing with the Internet in mind. Lawmakers, recognizing this, crafted a patent reform bill, which the Houseof Representatives passed. The bill would change the law from granting first patent rights to the “first to invent” to the “first to file” — a boon for companies in the business of buying, selling and enforcing patents.

It’s clear there is deep disagreement on this issue. Some fear that current patent law, and the changes that could come about as a result of the patent reform bill, could choke off the very same innovation that led to Silicon Valley’s boom. Others, as has been noted, disagree, saying that patents are a necessary and integral part of a healthy and robust marketplace of products and ideas.

— What do you think? Is America experiencing death by patent, or just a shift in focus? We'll be following #patentdebate for your feedback.

More on innovation:

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Five myths about entrepreneurs

Opinion | Invitation-only innovation is the way to go

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By  |  06:00 AM ET, 07/27/2011

Categories:  Business, Entrepreneurship, Invention, Morning Read, Research, Technology

 
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