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3Qs: The ‘arms race’ for patents

Photo by David Leifer.

The months-long legal battle that has been raging between Samsung and Apple over patent infringement on Apple’s iPad is just one example of the patent wars being waged throughout the technology industry lately. Last month, Google acquired Motorola Mobility largely to obtain its slew of patents. We asked Susan Barbieri Montgomery, executive professor of law and business in Northeastern’s School of Law and College of Business Administration, to explain why these tech giants are so determined to build a “war chest” of patents. 

Why is it so important for technology giants like Google and Apple to develop large patent portfolios?

Technology giants, such as Google and Apple, are especially vulnerable to patent litigation for a number of reasons. First and foremost, the IT field is notoriously patent intensive, with multiple patents implicated by a single device or software product. Technology companies also compete in a field of rapid innovation. When companies are working feverishly to develop new products and features, it is not unlikely that a company would release a feature without being aware of a patent or before the patent issues. On top of the general patent environment for technology companies, the size and status of companies like Google and Apple add to their vulnerability. Large companies are targeted for their deeper pockets, and when damages for patent infringement are based on units sold, the patent owner’s potential return on a lawsuit is much greater.

The advantage of building a large patent portfolio is primarily the benefit of exclusivity, which may be used offensively or defensively. A large patent portfolio can be a tool to manage a company’s risk and liability for patent infringement. A large, diverse collection of patents can give a company more opportunities to license or to exclude others from using a wide variety of technologies and features. Beyond exclusion, a large patent portfolio can act as a hedge against litigation.

Is the stockpiling of patents an effective defense against patent lawsuits?

Stockpiling patents can be an effective defense to discourage or efficiently manage patent suits by companies actually involved in product development, manufacture and sales. Recently, however, the technology industry has a seen a rise in non-practicing entities (NPEs), sometimes referred to as “trolls.” These companies do not make or develop any products or technologies and have no intention to. Their business model is simply to own and acquire patents and collect royalties for licensing those patents. NPEs regularly file lawsuits against companies that don’t accept their licensing fees.

Even so, for companies like Apple and Google, the defensive use of a large patent portfolio, sometimes referred to as a “war chest,” is most effective in protecting against lawsuits from competitors.

What future changes in patent law might affect the defensive value of large patent portfolios for technology giants?

Congress just passed the “America Invents Act”, which will reform patent law and introduce a number of significant changes of potential value for technology companies large and small. For example, the act provides an opportunity for anyone to submit information about prior inventions and known technology to the patent examiner before a patent is approved. Secondly, there will be a new opportunity for anyone to challenge the validity of a recently issued patent without suing or waiting to be sued.  These new procedures will improve patent quality by blocking patents on ideas that are not truly new and innovative.