Patent Wars: A Market Solution

There have been numerous articles complaining about patent lawsuits such as those being filed against Google and the Andriod apps developers.[1] For instance, see Mobile Computing Giants in Patent Free-for-All, in the Silicon Valley MecuryNews.  These articles often complain about the cost and time involved in litigating patents.  In this article, I will propose a market oriented solution to resolving these issues.

The solution involves creating a voluntary association of manufactures and inventors involved in a market space, such as the Andriod marketplace, that will quickly and inexpensively clear patent rights.  The Association would operate somewhat like a Standards Organizations, such as the IEEE P1394 (Firewire) Working Group that covers the IEEE 1394 High Speed Serial Bus.  These standards organizations often divide patents into various groups such as “essential” and “nonessential.”  The term essential patents usually means a patent that contains one or more claims that are necessarily infringed to practice the standard.  The members of the standards organization generally have to agree to license all essential patents on fair, reasonable, and nondiscriminatory terms to all members or to anyone.

The Association would also divide all patents of the members into “essential” and “nonessential.”  All members of the Association would be able to license the essential patents for the Andriod marketplace for a fixed percentage of their sales, such as 6%.  The Association would then rate the essential patents and each member of the Association who had essential patents would receive a portion of the royalties received based on the number and value of patents that are part of the essential pool.  The Association would also keep a list of nonessential patents and the terms that members were willing to license them under.  Members would be strongly encouraged to license all patents or fair, nondiscriminatory terms, under the theory that they will generally make more money emulating the VHS model than the Betamax model.

If a non-member of the Association asserted a patent against any of its members that was determined to fit in the essential category, the Association would undertake an independent analysis of the claim.  If it were determined that the asserted patent covers an essential part of the standard and is valid, then the Association would undertake to license the patent for all members and/or the Association would start developing a design around.  If the asserted patent was believed to not be infringed by practice of the essential part of the standard, but it was asserted that the patent does cover the essential part of the standard, then the Association would undertake the defense of against asserted patent.  The Association would also begin an effort to design around the asserted patent.  If practice the patent is not alleged to be essential, then the Association would only undertake a defense if a significant number of the members would be affected if they were found to infringe the patent.

If there is a patent contention between two members of the Association about a patent(s) mainly related to the Andriod market space, then the members would agree that the case would be resolved based on limited discovery rules, limited defenses, literal infringement only, limited times to present your case, and strict timeframes (3-6 months) in which a ruling is made.  The panel adjudicating the case would be made up of 3-5 judges selected from members/employees of the Association.  The judges will include both technical people and patent attorneys.  All technical people serving as judge will have to take a course in the basic principles of patent law.  The judges would only decide whether infringement existed, not damages.  The parties could appeal the decision in federal court, but members would have to agree not to retry issues unless new evidences was presented and a strong presumption would apply to the Association decision.

Other functions of the Association would include performing basic clearance searches and opinions for members, providing technical advice on how to implement the standard, helping Members explain the technical aspects of their non-essential patents.  The technical employees of the Association would also create interoperability guidelines so that software and hardware inventions can easily be integrated in with existing products.  This should increase the speed at which new inventions are integrated into the marketplace.

The Association would be funded with a one-time membership fee and with a percentage of the royalties collected.  For instance, the Association might keep 1% of the 6% charged for the essential patents.  As a result, the Association would have only a minor impact on the cost structure of the market at worst and most likely would reduce the overall costs of Association members.  The Association would also charge fees for adjudicating patent disputes between members.

This article provides an outline for a market oriented solution to the patent wars in the wireless market place.  Clearly, the details of how the Association would operate would have to be further defined.  However, this outline clearly shows that a market oriented solution to reduce the costs and time associated with patent disputes can be achieved.


[1] I have written on this issue before, but this post was inspired by my interview with Maisie Ramsay, Associate Editor, Wireless Week, on the patent wars in the wireless space.