Guy Cranswick August 30, 2012
Phoney wars: Big business patent feuds may well create a barrier for newcomers.
Much anguish has been expressed over the Apple/Samsung patent court battle. It's not that this run of patent wars is new. They have been a feature of the technology business for over a century.
One of the nastiest feuds was between Thomas Edison and George Westinghouse. Apart from being a brilliant inventor, Edison was a consummate litigator. One of the reasons the movie business took root in California was to evade Edison's patent police. He owned the major patents on movie cameras and pursued anyone who reverse engineered his product.
It is a suitable irony that copyright violation is one of the foundations of the American film industry. Edison's struggle with Westinghouse over alternating current versus direct current was typically bitter. By 1900 Edison's legal costs were $2 million, equivalent to $52 million in today's money.
Exponential legal fees are still a cause of dismay. In the ongoing Apple/Samsung battle it is alleged that all those fees and penalties will be borne by consumers, but that is unproven.
The bigger question is: Is this the end of innovation? Is the patent system and ensuing legal struggles a barrier for newcomers, meaning only the biggest and wealthiest corporations can compete? These are good questions, certainly as we know that the recording industry has used copyright as a means of preventing innovation.
A 2012 study of copyright and innovation by Professor Michael Carrier of Rutgers School of Law interviewed industry executives who testified that copyright was a deliberate weapon to stop innovation, and thus maintain the status quo.
It is feared that the patent system is being used similarly. The patent system is nearly broken or at the very least, severely unworkable.
Apple's suit itemised, among other similar details, that Samsung's products were rectangular in shape, and white; and that the product is rectangular in shape and black. This looks exasperating and vexatious, an abuse of the aims of the patents system. Interpreting ideas is what spurs creativity. Steve Jobs apparently went ballistic when he saw Microsoft's Windows, conveniently erasing his own poaching of the interface etc from his visit to Xerox PARC.
Whether this suit and many similar suits prevent people from inventing, and entrepreneurs takings risks, is unclear. Take Robert Kearns, for example, who fought the Ford motor company over his windscreen wiper patent. The feud lasted years and cost him a lot personally. He emerged victorious.
People like Kearns and Edison, and dozens of other inventors and engineers, have been the driving force of prosperity.
Whether the patent system prevents people like them from entering the market with their inventions is unknown. They are more than likely to continue working because they are optimists chasing a dream of seeing their invention realised; of being rich, or just creating something that serves a purpose.
The barriers to them achieving their goals for themselves and how they are shared to all must be removed. That means renovating the current system to enhance the opportunities for innovation.
Easier said than done. It will require legislators with the will to change the rules and protocols in the face of opposition from vested interests. It is possible, but the motive may not originate from a wish to assist the corporation - like patents which were conceived to underwrite investments in innovation - but to serve the wider interests of society.
This will take time to evolve. It will be necessary to show consumers have been badly affected, that entrepreneurs cannot realise their works, that even some forms of predatory activity are inhibiting the potential for small companies to reach markets. All that to drive changes in the context of highly complex laws. Only legislators with endurance need apply.
In the end, Edison's dispute with Westinghouse was resolved for him. By 1890 there were three major lighting and electric companies: Edison-General Electric, Westinghouse's Consolidated Electric and Thomson-Houston, which had, like Westinghouse, also infringed Edison's patents.
A serious bank failure made finance harder and new solutions critical. The directors of the companies looked to settle the patent wars, and merge. Initially Edison refused on the principle of the patents but by 1892 a new company was formed with Thomson-Houston, called just General Electric. Ultimately bigger commercial reasons broke the circuit on the feud and the company was able to get back to business.
Guy Cranswick is an IBRS analyst who covers Google, broadband/NBN, Web 2.0 technology, and government and channel strategy, including areas of business productivity.