Transfer Pricing Associates

A Broken Patent System

post Tuesday September 25, 2012


According to Herbert Blankesteijn from the trade newspaper NRC, the patent system no longer functions and seems to be halting innovation as opposed to stimulating it. Specialists are calling for a reform of the patent system.

A small device such as a mobile phone nowadays can consist of thousands of patents, making it almost impossible for any producer not to be infringing on patents while producing cell phones. Hence companies keep their guard up in case another company infringes on their patents so they can shower them in lawsuits.  

With the development of the patent system, the link between protecting inventions and rewarding inventors has been lost. Small garage inventors can not possibly afford the high costs of applying for patents, let alone sue large companies for the infringement of them.

Companies are further required to hold large portfolios of patents, not to earn a return on investment, but to be able to protect themselves in case of a patent war.  Some companies buy other companies for the sake of their patent portfolio, like what Google did when it bought Motorola for its 17,000 patents and 7,500 pending patent applications for $12.5 billion in 2011.  Other companies simply buy the patents from innovators, for example when Facebook bought 650 patents from Microsoft for $350 million.  The hundreds of billions of dollars spent by different companies in building their patent portfolio for the sake of retaliation, could have otherwise been spent on producing more innovative products or investing them in small inventors to further spur innovation.

The patenting system is in urgent need of a reform. Patents should not be granted as easily, and less patents should count for one product at the time. Also, banning others from producing a patented product should not be allowed, anyone who wants to produce that product should be able to do so after paying a decent licensing fee.  Why do patents even exist? Their initial purpose, which was the protection of inventions, is no longer served.

Source: NRC

Image courtesy of: FreeDigitalPhotos


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Comments on 'A Broken Patent System' (2)

I find it problematic to extrapolate from IP litigation issues in one technology area to a generalized statement on the patent system as a whole. In the vast majority of all technology areas the allegedly "broken" patent systems serves its purpose very well and also the mobile device / internet / IT field will calm down as its technological maturation progresses.

Geplaatst door Conrad Eckhardt op Wednesday 3 October 2012

Founder, WiseHarbor

Herbert Blankesteijn and others cite the mobile phone as an example in the allegedly broken patent system, but facts and figures do not support the various false assertions. On the contrary, rapid growth to 5 billion subscribers, vigorous competition with dramatic and rapid market share changes (e.g., Nokia decline versus Apple rise) and a dazzling pace of innovation in radio technologies (e.g. 3G and 4G with LTE), multi-core processors, HD multi-touch displays, OSs and apps illustrates the system is working very well indeed. With licensing among hundreds of companies for 3GPP-standardised technologies subject to many thousands of patents there is no evidence any of this dynamism is abating. I have also rebutted the arguments of Judge Posner and Professor Hargreaves on these issues in one of my contributions to the IP Finance blog:

Geplaatst door Keith Mallinson op Thursday 27 September 2012