How To Beat Patent Trolls: Fight

Troll image (© DM7 -

When faced with a lawsuit that has even a slim chance of success, lawyers almost always urge businesses to settle rather than fight. Litigation is extremely expensive, and unless the suit raises an issue of principle that is important to defend, the candle simply isn’t worth the game.

Unfortunately, in the world of patents, this attitude had led to a proliferation of patent trolls, companies that buy up unused and generally vague software patents and then claim infringement against businesses, often smaller companies without big legal budgets, that actually make things. The U.S. District Court for the Eastern District of Texas, which has been remarkably friendly to trolls, is the heart of the racket.

It would be nice if the U.S. Patent and Trademark Office would revoke the thousands of ill-considered patents it granted, especially in the early days after software patents were first allowed. It could be nice if Congress changed the laws to make it harder for so-called non-practicing entities to engage in a legal shakedown. But neither of these things is likely to happen any time soon.

So it is time for businesses to stand up and fight. Patent trolling will persist as long as it is a profitable activity. By raising the cost to the trolls, admittedly at some short-term cost to themselves, businesses can destroy the economics of the shakedown.

Rackspace Hosting, an infrastructure-as-a-service company beset by trolls, is leading the way. Last month it won a signal victory by obtaining summary judgment against a company that claimed a patent on rounding off floating-point numbers. (Rackspace was supported in the case by Red Hat Software, whose Linux implementation contained the allegedly infringing code.)

Now Rackspace has gone on the offensive filing a breach of contract suit against “patent assertion entities” Parallel Iron and IP Nav. The case, described in detail in this Rackspace blog post, is legally complicated. Parallel Iron is suing Rackspace for infringement of  a patent it claims covers the open-source Hadoop Distributed  File System. Rackspace argues the suit violates the terms of an earlier stand-off agreement it negotiated with Parallel Iron and IP Nav.

Rackspace, which says it has seen its legal bills rise 500% since 2010, explains why it has decided to fight:

Patent trolls like IP Nav are a serious threat to business and to innovation. Patent trolls brazenly use questionable tactics to force settlements from legitimate businesses that are merely using computers and software as they are intended. These defendants, including most of America’s most innovative companies, are not copying patents or stealing from the patent holders. They often have no knowledge of these patents until they are served with a lawsuit. This is unjust.

The rest of the tech industry shouldn’t leave this battle to the Rackspaces of the world. In particular, big companies with deep pockets should stop paying trolls to go away, a tactic that makes sense in the short run but is ruinous in the long. As independent software developer Joel Spolsky argues:

In the face of organized crime, civilized people don’t pay up. When you pay up, you’re funding the criminals, which makes you complicit in their next attacks. I know, you’re just trying to write a little app for the iPhone with in-app purchases, and you didn’t ask for this fight to be yours, but if you pay the trolls, giving them money and comfort to go after the next round of indie developers, you’re not just being “pragmatic,” you have actually gone over to the dark side. Sorry. Life is a bit hard sometimes, and sometimes you have to step up and fight fights that you never signed up for.


The Purpose of Design Patents

Much of the initial reaction to the Apple v. Samsung trial was based more on emotion than critical thought in my opinion. The discussion over whether it is good or bad for consumers was interesting but again I felt mostly emotional. In all reality how is a challenge to uniquely innovate bad for anyone? As interesting as that element of the discussion was I thought the debate around design patents was a bit more interesting.

As a part of our market analysis I keep a keen eye on what specific companies do to differentiate themselves in what I like to call the sea of sameness. To get a more holistic understanding on how differentiation may happen in the sea of sameness, I like to study how its done in other industries. Particularly ones that have been around for longer than the computer industry and also ones that are highly saturated and mature. We can make some interesting observation from industries like automotive and consumer packaged goods. It is observations from those industries that help us understand the importance of design patents and more importantly design consistency.

You Can’t Patent Rounded Corners

One of the least thought through elements of the whole trial was the part about rounded corners on specific products. In a post trial statement representatives from Samsung stated:

“It is unfortunate that patent law can be manipulated to give one company a monopoly over rectangles with rounded corners,”

It seems as though there is a fundamental lack of understanding of the purpose of design patents. To explore this thought I think it would be helpful to look at a company with an interesting iconic design in Coca-Cola.

It is not just Coke’s logo which stands out but also the design of both their glass and plastic bottles. Coke owned a patent on the design of their glass bottle design in 1915 and the designs of their bottles have evolved but remained consistent in overall look and feel. It is this specific and unique design of the Coca-Cola bottle that helps it stand out in the sea of sameness.

If you went into a grocery store and looked at a wall of beverage containers, all without the labels, you can easily pick out the one which is a Coke bottle and that is the point. It is iconic, consistent, and easily identifiable.

Round Corners As a Design Philosophy

Now perhaps those engaging in the you can’t patent round corners debate have either no appreciation for consistent design philosophy or never taken a step back and looked at all of Apple’s products. Because when one does take a look at all of Apple’s products you will see that every piece of hardware follows the four perfectly asymmetrical rounded corners design.

This design philosophy has been in place for quite some time. One could argue that the rounded corners on a screen started with the first colored iMac’s. From that point on the four asymmetrical rounded corners began to become a consistent theme of all Apple hardware.

Image Credit TechChunks

The goal again of these “rounded corners” is to maintain a unique, consistent, iconic, and easily identifiable Apple product. To carry on my point about the Coke Bottle, if you were to look at a table full of notebooks, all without logos, Picking out the one that is Apple’s would be easy. This is not something I can confidently say with regards to any other PC OEM with the exception of Lenovo.

Most other vendors who make hardware change their design theme from year to year based on what the trends are. Because of that often they change so drastically from year to year that is it clear no overall design theme is being employed. In fact I would contend that for the average consumer no designed personal computer hardware is more easily identified than Apple’s.

This is true in the smart phone and tablet space as well. That I feel is what Apple was trying to protect with their claims that Samsung’s 10.1 tablet had corners that were rounded identically to the corners on all other Apple products. Apple is deploying a design philosophy that is consistent and intentional. Samsung, with regards to tablets, is not, and that was the point.

Understanding the design philosophy from Apple becomes interesting as we think about future products. The only reason you would defend a design philosophy or design patent for that matter, is if you intend to stick to it for the foreseeable future.

This is clearly one way Apple intends to help its products stand out in the sea of sameness–at least from a design perspective. Sticking to this design philosophy and maintaining the consistency of size, shape, and colors, will continue to make Apple’s products not only be objects of desire but also easily recognized year after year by consumers. Which is all part of the strategy.

Why Google had to buy Motorola

At the end of the year, when I made my predictions for the New Year, I stated that I believed Google would buy Motorola Mobile. And last week, Ben wrote here in Tech.Pinions about why he thought Google should buy Motorola. We had no inside information on this. But as we have studied how a complete eco system of hardware, software and services are critical to the success of a company bringing out tablets and smart phones, it became pretty clear to us last year that Google, at some point, was going to have to buy a hand set maker if they really wanted to control their destiny and the destiny of Android.

With today’s acquisition of Motorola Mobility group by Google, Google has now closed the loop on building out and controlling an entire eco system of hardware, software and services. With it they can now drive Android in the direction they see fit and innovate in all three areas. Like Apple, they now own the hardware, software and services and can become an even greater force in the future of mobile products.

In his comments on the acquisition, Google CEO Larry Page stated that part of the reason they did the deal was to also gain access to Motorola’s patent pool.

This could have an impact on the suit against Motorola as a starter.
And depending on the patents, it could also help them in the multitude of legal suit against Android out there as well, although it is not clear how much Motorola Mobile has that would related directly to these other Android suits.

But as important as this is for Google and Motorola, it is highly problematic for Google’s partners. Now HTC, Samsung and other licensees will be competing directly with Google/Motorola. And this leaves a lot of big questions on the table. For example, Google uses a lead partner with major new versions of Android. We assume it will now always be Motorola? If so, how does that affect the other licensees?

And, although they claim Android will continue to be open, just how much of an inside position will Motorola Mobility have over the competitors? I have already fielded multiple calls from clients who license Android who are, how do I put this, “concerned” about this news.

I believe that the major fall out from this is that there is now room for a third mobile OS to come out that would give vendors a broad solution they can use without having to compete with Google/Motorola. If I were Microsoft I would be touting Windows Mobile as an alternative.

However, here is a more interesting suggestion. If I were HP and Todd Bradley, I would immediately license the Palm Web OS as an alterative. This is by far the best Mobile OS besides Apple’s IOS on the market and it could become of great interest to Android licensees who feel threatened by this move by Google.

There are still a lot of other questions about this deal, like how will they deal with two distinct cultures and who drives the future of Android given Motorola’s greater experience in mobile then Google has?

But no matter how this turns out, we will mark today as the day that the mobile world changed forever as Google has begun to rewrite their history again.

Further Reading:
Why Microsoft WILL Buy Nokia

Also Read:

Google: Set Top Box King?

Time for a Smartphone Patent Pool

Most of the creative energy in the smartphone industry seems to be going into lawsuits, with just about everyone claiming that everyone else is violating their patents. In addition to keeping a lot of lawyers in work, the disputes are having real world consequences, with, for example, Apple blocking the sale of Samsung Galaxy Tab 10.1 in the European Union. It’s time to stop the madness, but any solution is going to have to come from the industry itself, not from Congress or the courts.

A patent shingleIf you are seriously interested in the issue, however, stop right now and read “The patent system isn’t broken, we are,” Nilay Patel’s detailed and incisive analysis of the issues surrounding software patents. In addition to analyzing where we are and how we got here, Patel offers some helpful suggestions for reform.

The problem is that serious changes in the patent system require legislation, a tall order from a Congress that would probably have to break a filibuster to pass a Mother’s Day resolution. (a useful but relatively minor reform bill may pass this fall, but it does not address the fundamental issues.) Courts can impose some sanity, but they are slow moving and constrained by existing legislation.

It seems to me that the best way out of the smartphone mess would be for all the the folks now beating each other up in court and before the International Trade Commission to get together and form a patent pool. Everyone owning relevant patents contributes their intellectual property. Members and others wishing to use the patents pay a reasonable fee for a license and the proceeds are divided among the contributors.

This is hardly a novel idea. Philips and Sony, which each owned key technology behind the compact disk, set up a patent pool that helped launch the enormous success of the CD format. Six companies that owned key DVD technology (later joined by three others) created the DVD6C Licensing Group. The numerous patents behind MPEG video compression technology are pooled into MPEG LA, which licenses their use.

A pooling of smartphone patents would make life a lot simpler for everyone in the business. There are so many patents covering so many aspects of the hardware and software that it appears to be all but impossible to build a phone that doesn’t infringe on something. And right now, it looks like the big long-term winners will be the lawyers. In theory, the issues could be resolved by a series of pair-by-pair patent cross-licensing agreements, but a single patent pool seems simpler and more efficient.

Not that creating such a pool is going to be simple. First, any arrangement would probably need the blessing of U.S. and European antitrust regulators, who tend to see such cooperation as potential collusion. The other pools I referred to were easier because they were created at the onset, before an industry existed to be divvied up. A tremendously difficult issue would be determining how to share the license fees among the contributors, a problem that would probably call for a complex arbitration. The position of Google, a major smartphone player with a relatively puny patent portfolio is particularly difficult, although in fairness, Google also stands to be the big loser if the industry proceeds down its present litigious path.

A key step any patent pool would have to take to be successful is to indemnify its licensees against attacks by non-member patent holders. In effect, the pool would have to say: “A license from us gives you access to all the intellectual property needed to build a modern smartphone. If a third party claims otherwise, we will defend you.” This sort of insurance can be expensive, but certainly within the means of a pool that included Apple, Microsoft, HP, Samsung, and other giants.

One serious concern is that the existence of a pool could cripple innovation. If inventors have to share their creations with competitors. will they have any incentive to innovate? One solution would be to limit the pool to current patents–often the most troublesome because their existence and extent is unknown–and leave companies free to claim exclusive rights to future inventions.  That might set up more problems for the future, but could still deal with the difficulties of today.

Why Google Should Buy Motorola

Article Disclaimer: This is all theory and purely speculative. This is simply a thought exercise.

Motorola has been an interesting company to watch over the past 10 years. They have been a driving force in bringing the cellular industry into fruition and recently Motorola spun out their mobile business and created Motorola Mobility. I find an intruiguing scenario to play out to be one where Google buys Motorola Mobility.

One particular reason this is interetsing is because Motorola Mobility is deeply committed to Android. In fact as of now it appears that the company is solely basing its future on Android. Recent reports indicate an interest in Windows Phone 7 and possibly 8 by Motorola but it doesn’t appear actual product plans exist.

Motorola’s challenge is that they are attempting something that is becoming increasingly difficult in the industry today, namely to make money on hardware alone. To make matters even more challenging they have decided to bet their future on a company who is less interested in helping companies make money on hardware and more interested in free.

In fact I am convinced that Google and the Android team in particular would prefer that Android handsets cost less rather than more.

All of that leads to the first major reason I think Google would benefit greatly from buying Motorola Mobility.

Google Could Practically Give The Hardware Away
Google has already demonstrated an interesting model regarding Chrome that basically presents a hardware as a service model. In this model Google is offering Chrome OS hardware to the business and IT community for $28 a month and to educational institutions for $20 a month. There we have it, a hardware as a service model and Google is already going down this path.

So why not consider this same approach with Android handsets? This is not feasible currently because a company like Motorola needs to make money on the hardware since they don’t get to participate on the services financial upside like a carrier and Google. However if Google bought Motorola they could sell the hardware at a loss and make it up with their backend services.

A strategy very similar to what we think Amazon intends to do with their tablet.

Google needs as many Android devices on the market as possible. And yes they aren’t faring to poorly currently but if they subsidized the cost of the handset with their own longer term services revenue, which Google could do, I believe the market would accelerate even faster. Making the point again, Google cares about the services revenue not the hardware revenue. It behooves them to seed as much of the market with Android devices as possible.

Imagine if you could get one of the latest Android smart phones fully featured for less than $99. The price barrier to high end smart phones would be gone and Google would have even more demand for Android.

The second major reason is patents.

Google Needs Patents
Patent lawsuit frenzy is sweeping the technology industry. The media, analysts, pundits and more have now made it glaringly clear that Google is on the weaker end of the spectrum when it comes to patents.

It is for this reason they attempted to purchase the Nortel patents. Based on recent actions it can be concluded that Google knows they need to secure a more robust patent portfolio. More specifically they need a patent portfolio around mobile devices to help protect Android.

Motorola has an incredibly robust patent portfolio. In fact they have nearly three times as many patents as Nortel. Some have alluded that Motorola’s patent portfolio is possibly the strongest in the mobile field. It could be debated but its possible that Motorola has the best patent defense against Apple’s in this field.

One interesting point from Morgan Stanley analyst Ehud Gelblum who wrote in a research note last month:

“It is interesting to note that Motorola asserted 18 patents against Apple, and sued Apple first, whereas Apple has asserted just six patents against Motorola.”

Scott Moritz from the street remarks:

“Not only does Motorola have far more patents than its nearest competitors, it appears to have more of the key patents that may help the Android camp in a battle against Apple.”

The Big Picture
Although this is interesting to think about I doubt it will happen. A result of Google buying Motorola would be that their other partners like HTC, Samsung, LG and more would become competitors. I doubt Google’s partners would appreciate that and could potentially dump Android in the process. Also as far as I know Motorola Mobility is not for sale.

This patent issue however is a real one and one that if not dealt with tactfully by Google and the Android partners could prove fatal.

What’s more likely to happen, which The Street article points out, is that those in the Android camp band more closely together and leverage each others patent portfolios to protect Android.

Motorola however needs to continue to post solid financial results as they did for the most part last quarter. As I stated earlier making money on hardware alone is going to prove very difficult but Moto can and should continue to invest in innovations that differentiate their hardware allowing them a chance to profit from hardware. It would be wise of them to get more into the services game but not much is being shown there yet.

Tech Patent Fights: What’s at Stake

Recent days have been filled with news about patent disputes. Lodsys, a company that claims fundamental patents on in-application purchases, fired off another batch of suits against alleged infringers. Apple and Nokia resolved a complex legal fight over smartphone patents. Dolby Labs sued Research In Motion. And the U.S. Supreme Court told Microsoft to pay up on a judgment that technology in Office infringed on a patent held by tiny i4i LP. Continue reading Tech Patent Fights: What’s at Stake