As many people expected, Kodak has officially moved to sell off its patents to whoever can abuse them the most. Since the company is in bankruptcy, it needs permission to do this, but that's the easy part. These days, thanks to a totally broken patent and legal system, the patents are incredibly "valuable." Not because they represent any kind of actual innovation, but because they represent a magic tollbooth that lets the holder force other companies to pay. Of course, some of that magic wore off last month when the ITC noticed that one of Kodak's key patents -- one that it had used to score nearly a billion dollars in licensing revenue, was blatantly obvious and never should have been granted in the first place. Kodak claims it's going to appeal, but the patent sale will likely happen prior to any appeal going through. Either way, like other companies who failed to keep up with a changing market (hello, Nortel!), Kodak's final legacy may be supplying weapons to yet another battle in the era of technology patent nuclear war. It's not something to be proud of.

You may recall last summer that Apple, Microsoft, EMC, RIM, Ericsson and Sony all teamed up to buy Nortel's patents for $4.5 billion. They beat out a team of Google and Intel who bid a bit less. While there was some antitrust scrutiny over the deal, it was dropped and the purchase went through. Apparently, the new owners picked off a bunch of patents to transfer to themselves... and then all (minus EMC, who, one hopes, was horrified by the plans) decided to support a massive new patent troll armed with the remaining 4,000 patents. The company is called Rockstar Consortium, and it's run by the folks who used to run Nortel's patent licensing program anyway -- but now employs people whose job it is to just find other companies to threaten:

But Widdowson is a specialist. He's one of 10 reverse-engineers working full time for a stealthy company funded by some of the biggest names in technology: Apple, Microsoft, Research In Motion, Sony, and Ericsson. Called the Rockstar Consortium, the 32-person outfit has a single-minded mission: It examines successful products, like routers and smartphones, and it tries to find proof that these products infringe on a portfolio of over 4,000 technology patents once owned by one of the world's largest telecommunications companies.

When a Rockstar engineer uncovers evidence of infringement, the company documents it, contacts the manufacturer, and demands licensing fees for the patents in question. The demand is backed by the implicit threat of a patent lawsuit in federal court. Eight of the company's staff are lawyers. In the last two months, Rockstar has started negotiations with as many as 100 potential licensees. And with control of a patent portfolio covering core wireless communications technologies such as LTE (Long Term Evolution) and 3G, there is literally no end in sight.

The article admits that Nortel got most of these patents because it wanted them for "defensive" reasons. And now look at how they're being used. Remember that the next time you hear a company promise to only use its patents defensively. There's also a ridiculous quote from Rockstar's CEO, John Veschi:

“A lot of people are still surprised to see the quality and the diversity of the IP that was in Nortel,” he says. “And the fundamental question comes back: ‘How the hell did you guys go bankrupt? Why weren’t you Google? Why weren’t you Facebook? Why weren’t you all these things, because you guys actually had the ideas for these business models before they did?’"

The real answer, of course, is because patents are meaningless. Ideas are worth nothing by themselves. Ideas only matter if you execute, and anyone who's ever actually executed on an idea will tell you that the original idea almost is never reflected in the final product. The process of going from idea to actual product is a process by which you learn that what matters is not what you thought mattered. And yet, for reasons that make no sense to anyone who has ever actually built a product, creating monopolies around the ideas only serves to create a massive tollbooth towards actual innovation. And that's what we have here -- and it's funded by Apple and Microsoft.

Once again, we see that these two large companies are using the patent system not to innovate, but to stop up and coming competitors from innovating. The patent system isn't being used to encourage innovation but to protect incumbents from an open market.

Oh, and worst of all, the reason that the antitrust effort was dropped was because Apple and Microsoft promised to license the key patents under "reasonable terms." But... Rockstar is not subject to that agreement.

But the new company — Rockstar Consortium — isn’t bound by the promises that its member companies made, according to Veschi. “We are separate,” he says. “That does not apply to us.”

That seems quite problematic, and perhaps worthwhile for the government to reopen its investigation...

A lot of people are pointing us to Google's latest blog post on patents, in which it very aggressively talks about the danger of bad patents, specifically when it comes to hindering future innovations around Android. Most of the article focuses on theNortel patent purchase, and notes the oddity of Apple and Microsoft actually working together on something (an issue that is raising some Justice Department interest). This follows on Google recently becoming more vocal about problems with the patent system:

A smartphone might involve as many as 250,000 (largely questionable) patent claims, and our competitors want to impose a “tax” for these dubious patents that makes Android devices more expensive for consumers. They want to make it harder for manufacturers to sell Android devices. Instead of competing by building new features or devices, they are fighting through litigation.

This anti-competitive strategy is also escalating the cost of patents way beyond what they’re really worth. Microsoft and Apple’s winning $4.5 billion for Nortel’s patent portfolio was nearly five times larger than the pre-auction estimate of $1 billion. Fortunately, the law frowns on the accumulation of dubious patents for anti-competitive means — which means these deals are likely to draw regulatory scrutiny, and this patent bubble will pop.

A few years back, there were some stories about how Google's legal department was willing to take on big important issues, not just because they would help Google, but because it would strengthen the overall internet and innovation. That obviously would help Google too, but there was a sense that the company would fight for issues beyond just those that impacted Google. In recent years the company seemed to shy away from some of those fights, so it would be interesting to see if fighting against bad patents brings Google back around.

Of course, as some are noting, even as Google is getting vocal, it appears to be pulling some punches -- focusing on the specific patent problems it faces, rather than speaking out against the fundamental problems of the patent system itself. In fact, nearly a month ago, Glyn Moody wrote an excellent piece explaining how Google's best line of attack here would be to go after the very concept of software patents, something the company hasn't shown a willingness to do just yet.

My guess is that the company would certainly be behind an effort to do away with software patents, but that it recognizes that it's a massive uphill battle at this point. Tim Lee, in the Forbes link above, argues that it actually makes a lot of sense for Google to "stick its neck out" on software patents being a problem. Not only would an awful lot of developers (both inside and outside the company) support Google if it came out against software patents, it would also help to establish Google's overall position in its legal battles. Many patent lawsuits are about just getting companies like Google to pay up. If Google takes a public stand that it doesn't believe any software patents are valid, then it also sends a signal that it will fight such shakedown attempts in court as far as it can go. That can help scare off the trolls, who are just hoping for a quick payout.

In the end, I don't think Google will take such a step, but I think it would be a welcome addition to the discussion. In the last few weeks, with the This American Life patent episode and the Economist's recent worries about patents, it seems this issue is finally getting some mainstream recognition. A push from Google might help it go even further, and finally breakthrough the clutter.

Reuters has put together a nice recap of what happened inside the Nortel patent auction, which resulted in Apple, Microsoft, EMC, RIM, Ericsson & Sony getting the patents for $4.5 billion. There are a bunch of interesting bits of information in there, but one of the most bizarre is that rather than bidding round numbers, like pretty much everyone else, Google bid weird numbers that only geeks would recognize:

At the auction for Nortel Networks' wireless patents this week, Google's bids were mystifying, such as $1,902,160,540 and $2,614,972,128.

Math whizzes might recognize these numbers as Brun's constant and Meissel-Mertens constant, but it puzzled many of the people involved in the auction, according to three people with direct knowledge of the situation on Friday.

"Google was bidding with numbers that were not even numbers," one of the sources said.

"It became clear that they were bidding with the distance between the earth and the sun. One was the sum of a famous mathematical constant, and then when it got to $3 billion, they bid pi," the source said, adding the bid was $3.14159 billion.

Yes, they bid pi. Really not quite sure what to make of this. It could be Google hoped that they'd be able to "signal" to geeks their feelings about the whole process (which the company had been pretty clear about all along -- it didn't want to buy the patents, and seemed to think the whole process was stupid, but it felt compelled to, because it would be even worse if the patents ended up with someone else). However, it certainly does come off as pretty damn cocky -- an attitude that Google is frequently criticized for. Still, it also suggested the level of seriousness (i.e., not much) with which Google treated this whole process. It had to bid a lot of money, but the numbers acted as a bit of a protest for the mess which put them in a position where they felt they needed to do so.

The other interesting bit in the tick tock was how the groupings came about, with coalitions forming as different companies dropped out. Apparently, Intel bid heavily, and when it dropped out, there was a fight between Apple (who put together the winning coalition) and Google over who it would team up with. Intel eventually chose Google.

Of course, that setup makes the whole process seem even sillier. Once they get down to two "teams" why not then just all join forces and set the bid lower (divided among more partners), rather than continue to use each other to drive the bid higher. Well, there's one reason: if the winning bidder intends to use the patents against the losers... Google (with Intel's help) wasn't willing to go to $4.5 billion, but it seems likely they'll end up paying one way or another, down the road, thanks to the new "winners" of the patents.

Well, it wasn't too difficult to see this one coming. A year ago, all that was left of Nortel was a giant patent portfolio that everyone knew would result in a bidding war. At the time, people predicted the portfolio was worth an astounding $1.1 billion. Back in April, Google made news by placing a $900 million "stalking horse" bid for the patents, which had many people shaking their heads at the size of the bid. Google had made it pretty clear that it was seeking to buy the patents to keep them from being used by others to sue and block Google. Of course, Microsoft whined and complained to the government about how unfair it would be if Google won the patents. The government was apparently unconcerned.

So, Microsoft apparently got together with Apple, EMC, Ericsson, RIM and Sony... and coughed up an insane $4.5 billion. It's kind of brilliant in a nefarious way. With six companies together, they could each spend less than the $900 million initially pitched by Google... and then just all agree not to sue each other, but leave open the option to sue anyone else. And, given just how aggressive these companies have been with patents lately, you can rest assured that "license" demands will be made and there will almost certainly be lawsuits. Progress via the courtroom, apparently.

When former telecom giant Nortel was reduced to just a pile of questionable patents, we knew there would be a fight over who got them. Google made a lot of news a couple months back, by placing a $900 million stalking horse bid on those patents. The company has made it pretty clear that it's mainly looking to buy those patents to keep them out of the hands of someone else who might shake down innovation in the mobile ecosystem. Obviously, Google would prefer that the Android ecosystem not be slowed down by patent trolling.

However, there is one company that's quite worried about all of this: Microsoft. Even though it's not clear who will win the bid for Nortel's patents (and many expect Google to be outbid), Microsoft has officially objected to Google's attempt to buy the patents, saying that it has a perpetual royalty-free license to those patents, and under the terms of the sale, any buyer could end that deal.

And here's why Microsoft is a steaming pile of hypocrisy on this subject: Microsoft has ramped up its own anti-Android patent trolling efforts, lately. It's been demanding licensing fees and/or suing all sorts of companies who use Android. In fact, some reports suggest that thanks to all this effort, Microsoft makes significantly more money from Android phones than from its own mobile platforms. Clearly, shaking down others with patents is good money.

And Microsoft doesn't think it's fair that someone else could do the same thing to it:

For Microsoft to complain is pretty rich, of course. Here it is, using patents to attack companies employing Android in an attempt to slow down the uptake of that rival to its own Windows Phone smartphone system. That's a clear abuse of the patent system to dissuade companies from signing up with a competitor (which, interestingly, it doesn't attack directly), rather than to protect real innovation (an aim that was thrown out of the patent system long ago.)

After all, those deeply innovative ideas that Microsoft is claiming that companies are infringing include “natural ways of interacting with devices by tabbing through various screens to find the information they need, surfing the Web more quickly, and interacting with documents and e-books”. Tabbed screens - yeah, right.

And yet when there is the prospect that Google might be able to threaten in exactly the same way, by pulling existing licences - not, admittedly, a very nice thing to do, but all's fair etc. etc. - Microsoft suddenly wants the government to intervene to protect it from this bullying.

I mean, let's be consistent here: if you want to abuse the patent system, expect to be on the receiving end of similar abuse. On the other hand, rather more laudably, why not stop abusing, in which case you can take the moral high ground when others start abusing the system to attack you?

If you follow patents in the tech world, a good site to watch is LatestPatents.com, which highlights a few big tech companies, listing out the number of patent applications published each week and patents granted each week. What always strikes me is the differences in numbers between the companies. For example, last week, Google had seven patent applications published and seven patents granted. Compare that to Microsoft, which had 35 patent applications published and 40 patents granted. Apple had 21 applications published and 21 patents granted. IBM is, of course, king of them all with 122 patent applications published and 118 patents granted last week alone.

The numbers are pretty consistent, really.

Anyway, Google's patent policy is getting some attention as it's announced that it's bidding on Nortel's patents almost entirely as an attempt to keep them out of the hands of patent trolls. As we noted last year, all that's left of Nortel is a big patent portfolio, which we expected to end up with Intellectual Ventures or some other patent troll. However, Google is hoping to step in and explained its reasoning, noting that it would prefer real patent reform, but it recognizes that it may need to buy this portfolio as a defensive move to keep it from getting sued and hopes that it allows greater innovation.

Amazingly, patent supporters are interpreting this as being Google having to "catch up" on "patent ownership," as if the company has made a huge mistake in not going patent crazy in its early years. That entire article seems to take the position that not patenting everything was a "mistake" on Google's part, rather than a recognition that patents aren't necessary for innovation, and actually may be a hindrance to innovation. Now that Google is being pushed to shell out close to a billion dollars just to get some patents it doesn't really seem to want or need, shouldn't that be evidence that the patent system has a Google problem, in that Google didn't (and doesn't) really need patents to innovate, rather than Google having a patent problem?

It looks like just about all that's left of former telco equipment giant Nortel is a whole bunch of patents, that are now expected to sell for somewhere in the range of $1.1 billion. The big question, of course, is who ends up with those patents, and what they do with them. Generally speaking, you don't see companies spend $1.1 billion on a bunch of patents, unless they're planning something big. It's entirely possible someone will buy them for defensive purposes, but equally likely that they're used to sue lots of other companies (or, perhaps by the likes of Intellectual Ventures, to scare people into paying up to avoid the possibility of being sued). Either way, it's yet another example of why patents can be dangerous even if the original patent holders didn't use them to shake down other innovative companies. Those patents may later get sold to the highest bidder...

We've covered in too much detail how it's some sort of "open season" on Vonage when it comes to VoIP patents. After dealing with ridiculous and expensive patent lawsuits from companies who failed to actually innovate in the same way Vonage did, the company was pressured by Wall Street to quickly settle the various patent lawsuits filed against the company. Of course, rather than settle matters, that simply opened the door for other companies to go searching through their patent portfolios to see if there was anything they could sue Vonage over. Indeed, following those settlements it didn't take long for AT&T to dig up a patent and sue -- which was quickly settled as well. Thought things were over? No such luck. Nortel just showed up last month to sue and it took all of about a week and a half for Vonage to settle that case as well.

The Nortel case is slightly different because Vonage actually already had a patent infringement lawsuit going against Nortel, but it wasn't really initiated by Vonage. Instead, it had been initiated by a patent holding firm that Vonage bought in 2006. The end result of the settlement doesn't involve money changing hands, but just a cross licensing agreement for the patents. So what's the big lesson that Vonage and others have learned from this? It's certainly got nothing to do with innovating. It's to hoard as many patents as possible so that you have your own nuclear stockpile for when someone else sues you. Want to know why the USPTO is overwhelmed? It's not because there aren't enough examiners (as some will claim) or that there aren't enough funds. It's because the way the system now works is that you are supposed to file patents on every tiny little advancement so you can use it to protect yourself against lawsuits from everyone else. That's not about innovation. It's about waste. In the meantime, since it's still open season at Vonage, who's going to be next? There are a ton of other patents in the VoIP space that can surely be used in a lawsuit, right?

A "patent thicket" is when so many different entities claim patents on a particular space or product, it becomes nearly impossible for any company to actually put a product out in that space without either having to pay ridiculous patent license fees or face a series of patent lawsuits. There are plenty of patent thickets out there -- and a big one is in the VoIP space. The concept of using internet protocol for voice communications has been out there for ages, and there were lots of attempts to get such a service working in the late 90s. While technically it was possible, the real problem was that most users didn't want to go through the hassle of setting things up to use VoIP. Vonage was the first company to get past that hurdle by making things easy: you plug a box into your modem, and then you plug in a phone -- and everything works just like your current telephone. It was this simplicity, combined with a big advertising campaign, that made VoIP popular. It certainly wasn't the basic technology advances that almost everyone in the space had figured out well before. Yet, Vonage's ability to attract users made lots of other firms jealous, leading to a series of patent lawsuits. Earlier this year, under pressure from Wall Street, Vonage agreed to settle such patent lawsuits from Verizon and Sprint, as well as some tiny patent holders. As we noted at the time, this was simply flinging the gates wide open -- and anyone who had any kind of patent related to VoIP should probably sue Vonage as fast as possible.

AT&T couldn't resist and dredged up some VoIP patents itself. And, sure enough, Vonage quickly settled. Of course, that wouldn't be the end. Now along comes Nortel, who has also sued Vonage for infringing on nine separate patents. To be fair, Vonage may have also brought this one on itself, having first sued Nortel over its own patents, leading Nortel to retaliate. You would have hoped that Vonage would have learned its lesson that patent battles aren't particularly helpful, but it appears that the company took away the wrong lesson, and is hoping to get in on the patent dollar bonanza. All we're really seeing is a blatantly clear explanation of how patents are holding back innovation, rather than promoting the progress of useful sciences. Update In the comments, someone from Vonage notes that the company did not quite initiate this, as the lawsuit actually came from another company that Vonage acquired.