PublishedJanuary 14, 2013

Patent Flood Continues

The patent arms race continues to expand.  In 2012, the U.S. Patent and Trademark Office (USPTO) saw a record 253,155 new patents issued.  Not only that, it also just set a record on January 8, 2013 when 5,633 utility patents were granted in one day.  At its current pace, the USPTO will come close to 300,000 patents in 2013.

IBM is still #1 on the list of receiving the most patents (6,478 patents in 2012!) with Samsung in second place at 5,081 patents.  The number of patents granted to Google and Apple in 2012, 1,151 and 1,136 respectively, seem like small potatoes in comparison to IBM and Samsung.  However, there is a cost to obtain these patents.  There are the direct costs – most of which are patent prosecution attorney costs.  There are also indirect costs – like the lost money for research and development, the jobs that would have been created, and the potential creation of patents that in the wrong hands will become fodder for the next generation of patent assertion entities (PAEs).

There is not a broader societal benefit to “promote the progress of the useful arts” from this patent arms race, and certainly not from the extensive competitor vs. competitor litigation that has stained the smartphone landscape in recent years.  Additionally, what will happen to these patents 10-15 years down the road when their use to the granted company in product development has long passed its prime and they become more valuable as an asset for litigation/licensing?  The more patents issued the more likely they end up in the hands of a bad actor, no matter how well intentioned the initial application was.  We are currently at a crossroads in the patent system where the issuance of this amount of patents is clearly less about innovation and more about marketplace competition and litigation.  And that is no longer the promotion of the progress of the useful arts.

To be fair, not all companies are using these patents for aggressive litigation to try and harm competitors.  As an example, Google’s 1,151 patents in 2012 are mostly a result of the completion of Motorola Mobility applications and Google has been using these patents in a defensive posture against the flood of lawsuits against the Android ecosystem.  However, in doing so Google is creating the potential that trolls will get armed in the future, and is perpetuating the problem of too many patents and too much litigation.  One way to get patents but avoid these problems is the approach Twitter has taken.  In 2012, Twitter announced it would subject all its patents to an Innovator’s Patent Agreement, which commits to only using patents for defensive purposes.

Patent hyperinflation is clearly well underway.  And it’s global.  America has successfully exported its patent hyperinflation to China:

China has overtaken America again. Its patent office received more applications than any other country’s in 2011. . . . Is this because China has suddenly become more innovative? Or is it because government incentives have prompted people to file lots of iffy patent applications, which the local patent office has a tendency to approve?

This patent paper blizzard in China will eventually either hurt innovation globally, or, paradoxically, simply make the entire patent system (at least in the software context) collapse under its own weight.  Perverse incentives to grant patents reduce overall patent quality and harm the economy.  Rather than celebrating China and the USPTO’s paper blizzard we should be concerned about the quality of the patents being issued and the effect this will have on innovation and competition.

Despite the concerns, some, like the United Nations’ World Intellectual Property Organization (WIPO) are celebrating China’s entry into the world of endless patent grants as a sign of China’s new found respect for intellectual property.  This argument that torrential patent grants correlate to an innovation-respecting culture is nonsense — China remains a land where piracy is so brazen entire buildings are ripped off.

The Chinese patent grant numbers are a big show for public consumption.  The recently launched Chengdu province television ad campaign prominently features the number of patents granted in Chengdu in recent years and then follows that number with an assertion that Chengdu aims to be “the next Silicon Valley.”  However, given the history we have seen in the U.S., it might just become the next Marshall, TX, home of the infamous patent litigation friendly Eastern District of Texas (E.D. Tex.) court.  They certainly must be smiling in Marshall about the patent application records in the United States — as the two groups who are certain to benefit are the patent bar and the hotel/tourism industry in the Eastern District of Texas.

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Josh Lamel

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