Monday, October 15, 2012

Of tablets and men

October 14, 2012

The word 'fascinating' doesn't do justice to either the spectacle or the stakes involved. In the past few months, a pair of multi-billion dollar patent infringement cases has sparked an unprecedented war between Apple and Samsung. Tech giants such as Microsoft and Google are locked in litigation that has resulted in devices like the Galaxy Nexus being banned and unbanned from sale. Taken in pairs, these tech majors freely exchange supply chains and billions of dollars, while at the same time fiercely fighting each other.

This particular turn of events started with a landmark judgment in August where after two and a half days of deliberations, a U.S. jury found that Samsung owed Apple $1 billion for copying the latter's intellectual property. To be specific – the jury decided that all of Apple's software patents were valid and infringed by a long list of Samsung devices. On the other hand, Samsung lost nearly every part of its case against Apple. For the people, media and companies who interact with the patent system as part of international business –an ominous precedent had been set.

However, on Friday, a U.S appeals court repealed the injunction on the Samsung Galaxy Nexus – which was initially awarded back in June in a different case. The judge had concluded back then that Apple would be hurt if the Galaxy Nexus continued to remain on shelves, as Samsung had infringed on a 'universal search' patent. This repeal, however, could be a check on the trigger-happy nature that corporations have increasingly adopted when it comes to patents.

What was most revealing, perhaps, was the Appeals Court's comment on Apple's practice of using lawsuits to wholly block competitors from the market, saying that it is necessary to determine if the claims of harm are relevant or "whether the patentee seeks to leverage its patent for competitive gain beyond that which the inventive contribution and value of the patent warrant." In plain English: Although you may be entitled to damages, you are not allowed to use one minor feature to completely eliminate your competition. These passing remarks are a warning to all players who have chosen to 'play the patent system' like a fiddle.

While the "market" may not be as broken as many would claim, regulatory systems which include patents have shackled it to the extent that, when one does business globally, it can become more profitable to engage in legal assaults against your competitors – than to actually produce something new for sale. It has long been understood that free markets cannot exist if the government distorts them. The international patent system has now become a type of market distortion, which when first introduced seemed as a beneficial trade-off, when it was only manufacturing techniques that were being patented.

The patent barrier

Business, innovation and society do not benefit when information which was naturally (going to be) public information is given exclusive use. They both only benefit in the case where what would have been trade secrets is made public through these government –enforced incentives of limited exclusiveness.

In the case of Apple and Samsung, both are guilty. Most of Samsung's complaints are specifically about the coding, it's not merely that you can save battery-life by prioritising data, but rather how you do sections of it. The problem, here, is that there only a limited ways of doing so. For Apple, it is more of user-interface issue. It believes, rightly, that Samsung copied a lot of graphical design from its operating system – which add up to make the Galaxy product line resemble the iPhone. In both these instances, however, it is not trade secrets that are trying to be protected, but rather a quick dash to the patent office to see who can legitimately hoard public information first.

What adds to the farce is the extra wrinkle of companies heading to different countries to file the same lawsuit. Suppose Country A (such as Japan) has laws that are intended to encourage new businesses. These laws would make it hard for old businesses to claim "hey, we did that first, you can't do that!". Similarly, there exists a Country B (such as Australia and the United States) which has laws that are meant to protect cheap foreign imitators from coming in and running well-established firms out of businesses. Australia's laws make it easy for old companies to claim "hey we already had that idea!"

Dividing the spoils

It then becomes apparent that newcomers to the smartphone scene such as Samsung would flock to places like Country A, copycat and set up shop. Well-established firms such as Apple would prefer Country B-esque destinations, effectively dividing the world between themselves. Where then is the room for business to be fairly conducted in a globalised economy?

While it would be easy to laugh and point from an Indian perspective –there are lessons here as well. Recently, domestic manufacturer Micromax beat out Apple and Samsung in the Indian tablet market – in large part due to its inimitable budget-style line up. How easy would it be for Micromax to compete at an international level, if it doesn't have a legal budget to match? Will there be a rush to patent the techniques and designs used in budget tablets, which arguably present the best chance at capturing emerging markets?

One thing is certain, however. If "overusing the patent system" is a lazy cheat, the demand that "patents shouldn't be allowed" is an intellectual cop-out. It's time to convert each individual's scepticism about the worst of corporate practices into patent reforms that truly represent modern-day business and technology innovation.
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