The Android operating system is developed by Google, but Samsung pays $15 per device to Microsoft and HTC is paying $5 per device to Microsoft.
It really doesn’t make any sense for Samsung to pay $15 per Android device sold to Microsoft, does it?
For a good proportion of people this makes perfect sense. These things which are making companies pay other companies are called patents. This is how intellectual property is protected. This is how a developer’s work isn’t stolen too. This is how ideas are respected. Or that’s what we were told. Welcome to the world of patents or as we now call Patent troll.
Software patents can be best described by a IBM-Sun Microsystem’s story :
Bunch of blue suits from IBM has apparently walked to the then startup called Sun Microsystems and told Sun engineers that Sun has infringed on 7 of IBM’s software patents. Those 7 patents aren’t something which Sun hasn’t infringed. Sun engineers vehemently rejected. That’s when the blue suits of IBM made this polite gesture :
Â maybe you don’t infringe these seven patents. But we have 10,000 U.S. patents. Do you really want us to go back to Armonk [IBM headquarters in New York] and find seven patents you do infringe? Or do you want to make this easy and just pay us $20 million? Â After a modest bit of negotiation, Sun cut IBM a check, and the blue suits went to the next company on their hit list.
That IBM-Sun story pretty much sums up what we are now seeing. The color of the suits might differ but the patent trolls and the threat remain the same. Last two months have seen a bunch of patent stories.
- Apple has agreed to drop all lawsuits against Nokia and also Â agreed to pay royalties.
- HTC is paying Microsoft for using Android which infringes on Microsoft’s patents.
- Velocity Micro, Onkyo and General Dynamics have all agreed to pay royalties to Microsoft for using Android.
- Lodsys, a patent aggregator, is suing more than 30 companies for infringing on a patent which they own. The patent : Purchases made from a smartphone app Â
Some of the patents are outrageous and down right ridiculous.
Did you know that there’s a patent for the pop-up which you see when you hover your mouse on a particular link? There are more than 5000 patents for the concept of a balloon tip popping up on your computer which says that you have a new version of software available. Now, probably, get the idea how dumb patents can get.
There’s no way every company would have the knowledge of all the patents. True. That’s the reason why companies like Lodsys and Oasis research exist. Companies like Lodsys have only one agenda : Â Accumulate as many independent patents as they can and sue as many big companies as they can. Â Oasis Research has amassed a whopping 30,000 patents to just to sue companies every day. All of this cannot be good for software developers.
Startup companies are the ones who are mostly affected by this patent troll. Â You can’t write 50 lines of code to do something without actually infringing on a patent. Â That’s how ridiculous this whole patent game has gotten to.
Patents which are supposed to protect and foster innovation are hindering it. Big companies will survive the patent onslaught because they either have the money or a patent chest to deal with them. Smaller companies and independent developers have to either fold up or sign silly agreements and share the profits. That only means one thing : There will not be any hot tech startups, just hot patent aggregators. Lodsys and Kootol will go for an IPO instead of Groupon and LinkedIn.
What/Who is a Patent Troll
A patent troll is a patent holder who uses patents in a way that is damaging to the supposed purpose of the patent system, encouraging new inventions and the advancement of technology.
The origination of the term is attributed to Peter Detkin, at the time an in-house patent lawyer at Intel. He used the word in the narrower sense of companies that purchased low value patents, which they then used in nuisance law suits.
The usage of the work Âtroll here appears to come from its usage as a description of annoying participants in on-line discussions who deliberately provoke others by falsely claiming controversial or ignorant opinions.
The current usage of the term patent troll has become much broader and vaguer. It is often used of companies that purchase patents, but do not have any related business. This puts them in a much strong position because they cannot be threatened with counter suits (that are usually then settled through a Â cross-licensing Â agreement).
The term patent troll is also used more generally of companies that make extensive use of techniques such as stockpiling Â submarine patents.
If a company that shows signs of becoming a patent troll (i.e. it relies less on its original core business, and more on patents for future profits), this may be a signal that its core business is failing. If the value of the core business is declining, it means that neutering patents though cross-licensing (which helps keep the core business running smoothly) becomes less attractive. It is still difficult to assess how valuable a signal this is, but investors should probably keep it in mind.
Patent troll specialists can be extremely profitable. their main costs are acquiring patents and litigation, the potential returns, if they can buy a patent that blocks an important technology or product, are huge. However most of these are private companies and not easily available to investors. Investors may have ethical qualms about investing in technology companies that impede rather than contribute to progress.
Is a Big bad world out there, before, I might have infringed one of the patents by writing this article, I would never know, until I get an email or call from someone stating that. 😉