The $120 Smartphone Patent Tax: Patent Royalties Cost More Than The Actual Hardware In Your Phone
from the innovation-tax dept
Obviously, there have been an awful lot of patent lawsuits in the past few years concerning smartphones and various software and hardware associated with smartphones. The folks over at law firm WilmerHale have now released a paper, which conservatively (and thoroughly) estimates that the patent royalties that need to be paid by smartphone manufacturers currently exceeds $120 per device — which they note is right around the price of the components themselves (found via FOSS Patents, which notes that the estimates in the paper almost certainly lowball the patent royalties, so they may be much higher). Basically, more than half the cost of making a smartphone these days is in paying off patent holders.
Talk about a massive tax on innovation — that all of us are paying for.
And, of course, many of these fees are going to pure trolls, who have contributed nothing to making actual smartphones. The paper highlights the explosion of troll lawsuits in the past few years:
Either way, this should be seen as a massive problem. Rather than going towards innovation and better, more affordable products for the pubic, money is going to lawyers and patent trolls who have contributed nothing to society. It’s a massive dead weight loss to the economy.
Filed Under: innovation, patent trolls, patents, smartphones, tax
Comments on “The $120 Smartphone Patent Tax: Patent Royalties Cost More Than The Actual Hardware In Your Phone”
Is that any different from a case where there’s only one patent holder, but they want to make a profit? In this case there’s 62 owners and they all want to make a profit.
Moto E is scheduled to ship at $129. I don’t believe Motorola is expecting $9 or negative left.
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No, they are certainly not. I can’t believe anyone would actually believe these numbers.
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I agree, I sense that these numbers don’t seem right or don’t tell the whole story or something is wrong. Maybe $120 for more expensive phones but how does that explain the cheaper phones that have these features? and I’m usually here skeptical of IP laws.
Might also depend on what is being defined as a ‘smart phone’ here but more clarification of some sort would be helpful.
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Perhaps many of those phones require set contracts (ie: one year contracts) to get them for the discounted price and that’s how they make their money back.
USPTO
United States Private Tax Organization.
Microsoft tax
The only one that really angers me is the Microsoft Tax that MS is increasingly leveling against Android. It’s not really a royalty payment as Microsoft hasn’t asserted a patent claim. It’s only threatened to, and won’t even reveal what patents it’s talking about (although it’s fairly clear it’s the FAT patent).
I was fortunate that my last smart phone purchase (a Samsung) happened before Samsung gave in to MS and started paying them. I’m not sure which phone my next one will be, but it won’t be one that gives MS a cut.
Re: Microsoft tax
it won’t be one that gives MS a cut
It will probably have to be rotary dial.
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There are still some options on the market, but worst case is that I’ll be using my current phone for many more years. I’m still happy with it after 3, so that’s not such a great burden.
Re: Microsoft tax
What’s really outrageous is that Microsoft makes more money when you buy an Android phone then when you buy a Windows phone.
Under what kind of an economic system does that make any sense?
Re: Re: Microsoft tax
Under the weird interpretation of capitalism we all currently sport, obviously.
Re: Microsoft tax
“The only one that really angers me is the Microsoft Tax that MS is increasingly leveling against Android. It’s not really a royalty payment as Microsoft hasn’t asserted a patent claim. It’s only threatened to, and won’t even reveal what patents it’s talking about (although it’s fairly clear it’s the FAT patent).”
How is there even still a FAT patent to enforce? FAT has been around for like 4 decades! I thought patents were only good for a limited time?
A REAL limited of time, not the theoretical copyright “limited time” that is in actuality forever.
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It’s on long filename support in FAT and FAT32, actually.
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FAT32 was introduced in 1996. So there should only be two more years of this bullshit.
Well, this just proves that innovation is worth more than execution.
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I think you meant patents are worth more than execution.
Take care
FOSSpatents is historically a paid Oracle and Microsoft shill, posting stuff sourced from them without citing the fact he is retained by them. Hence about the least trustworthy source you can find on the interwebs… fact checks elsewhere hence actively encouraged.
Yes, anything you read on FOSSpatents is paid-for distortion.
FM is quite good at getting press coverage, using likely-sounding ‘facts’ and misleading statistics.
I only know the numbers behind a few of the categories, and the ones in the story are wildly wrong. But you don’t need to be an insider to know that you can buy complete WiFi devices for less than the claimed license fee.
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Yeah, Florian. Trying to show how evil the old phone manufacturing companies were. They were asking how much for basic essential patents to make phones? Too much clearly.
Compare that to the reasonable amounts that truly innovative companies like Apple and Microsoft are asking for really innovative patents like “rounded corners”, “icons”, “grids of icons”, “square or rectangular icons”, “touch screens”, “multi-touch gestures”, “scroll rebound”.
Holy crap. h.264 is $10? And keep in mind that for every $1 in cost, OEMs need to charge $2 or even $3 at retail, to cover all the other distribution, marketing and salary costs and the profit they need to make.
But if it’s this much, why the hell aren’t OEMs pressing to adopt VP9 (only) harder?
Also, at least the other technologies in there have some merit, but Microsoft’s tax is a true tax on innovation (by someone else).
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Check the Google CDD. You need to meet the requirements to have Google Mobile Services (play, YouTube, maps, Gmail, etc).
So what? The research probably cost more
I know that hardware design and construction cost money. But so does software and so does research. Why shouldn’t that be paid for too? Do you think that those companies did all of that work just for free? Why shouldn’t they get a return on their investment.
The fact is that software and design and interface and other researchy, patentable things are a big, big part of the experience. If we don’t pay for them, we won’t have them.
Re: So what? The research probably cost more
Re: So what? The research probably cost more
I know that agriculture costs money. So does research into weather patterns, fertilizer manufacture, farming hardware, et cetera. If we don’t pay for them we won’t have them, which is why apples should cost several thousand dollars.
You’re an idiot, bob.
I thought
I thought there were about 200 patents in a cellphone..
And peple wander why employment and inflation(unrealized) are high and the GDP is in a down trend (according to the latest data).
I agree, we all deserve more affordable products for our pubic.
Not really accurate
Technically, those are the ‘rack rate’ for licensing.
I used to negotiate OS licensing for mobile companies. Motorola, Palm, Nokia, Microsoft, etc., all negotiate bulk license that are a fraction (maybe 20%-25%) of the amounts shown. Same thing for components… if you commit to five or ten million units there is a huge discount.
Otherwise companies like Motorola could never have gotten the price of a feature phone under $100 to the carrier.
The bad news is that these licenses are a barrier to entry for newer and smaller companies, but even then, if you are a friend of a big guy, you can tag on to their order. e.g. you are ex-employees spinning out, they throw you some help.
Old examples: (I don’t want to get in trouble here) MicroSoft had Win CE license for $12, Palm OS $8, et cetera.) HP and Dell never paid a penny of royalty for the devices they shipped. Sony and Handspring negotiated much better deals than the smaller players. It was strategic to get those partners on board. Licensors also have to supply support and updates….
Same today
JF
Re: Not really accurate
JF:
I was preparing to say something similar, and you beat me to it.
Your experience is similar to mine. The numbers cited in the post are asking rates and not actual rates. Based on similar experiences with other companies that have licensed patents to us, they often start with over-inflated rates, and we have generally been able to negotiate them down into the 5% to 10% range, and we have never paid over 20% of the “asking” price. These people are looking for fast money, and long, drawn-out negotiations do them no good, and they are certainly not looking to go into an actual trial where their patent might be weakened.
Re: Not really accurate
All true, but in this context the difference is unimportant. The asking rate is the one they advertise, so it’s the one that is legitimately used in analysis. That big players have the leverage to negotiate a better rate isn’t as important because of exactly what you point out: if you aren’t a big dog, the asking rate is the actual rate.
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John:
Not true at all. Indeed, it is often the opposite way around, because patent holders are (yes, this is hard to believe, but it is true) typically not stupid. They know that big companies have lots of cash, and small companies do not. Smaller companies often end up getting a better deal because of economics.
Simple example:
If company X is producing 500,000 infringing units per year, and a patent holder believes there is $10 in infringement, then the value to the patent holder is $5,000,000 per year, which is easily worth a litigation.
If company y is producing 10,000 units, the value to the patent holder is only $100,000 per year. Of course, the patent holder knows that by the time the dust settles, the actual value after litigation could end up being anywhere from zero to realistically $50,000 or perhaps $75,000 per year. Except, if the patent holder has to actually go to court, the battle could end up costing several hundred thousand in attorney fees.
Does the patent holder really want to go to all that trouble for a small player? Not if the patent holder is just out for money, and not for stopping all infringers. Just to get in and out, the price could easily be $5,000 or $10,000, and patent holders routinely settle for that, because it is easy money.
The asking rate is almost never the actual rate, if ever.
Re: Re: Re: Not really accurate
I’m not referring to infringement, I’m referring to how much I’d be charged if I, as a nobody, wanted to buy a license. Are you saying that it’s not going to be near the asking rate? So published rates are just blatant, knowing lies that really ealing nothing? That seems even more despicable.
Re: Re: Re:2 Not really accurate
I see “list” prices for cars every day. I have never paid “list” price for a car. So, published prices are just blatant, knowing lies that really mean nothing. Is that despicable? I suppose it is.
Okay, if you are a nobody, and you wanted to license a patent, the asking rate will be the starting point. However, the final contract will be full of “depends.” If you are a podunk operation making low volumes, you could most likely get a license for a song, because the patent holder really does not have the time to deal with you. You are just not worth their time. I am willing to bet you that most patent licensing operations will grant you a license for 5-10% of asking if you are a small operation, with a caveat for certain volumes in case you become really successful, which perks their ears up.
Re: Re: Re:3 Not really accurate
“I see “list” prices for cars every day. I have never paid “list” price for a car.”
I don’t think holding up the car sales business as some sort of example of what is acceptable is a good idea.
Re: Not really accurate
So these licenses are the rates that a small company without a (large) patent portfolio that doesn’t sell a lot of product would have to pay. A large company gets to pay less because they already have a large patent portfolio (so they don’t have to pay licensing fees to themselves), they can use their large patent portfolio as bargaining power to negotiate cross licensing deals and pay less, and they can also use a larger product volume as negotiation leverage. No wonder why big companies are the ones that want patents the most and we hardly see them oppose patents, because they keep small competitors out of the market (or force those competitors to depend on them).
“if you are a friend of a big guy, you can tag on to their order. e.g. you are ex-employees spinning out, they throw you some help.”
So patent law makes the small guy dependent on the big guy. Nice to know.
I say we abolish patents. The claim that they’re to protect the little guy is a big fat lie and I see it as an insult when the IP defenders around here try to use them as the poster child for defending IP. IP defenders know better and have little intent on defending the little guy.
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Actually, having a large patent portfolio is generally irrelevant in most circumstances, because the people who come knocking on your door could care less about your portfolio, they just want to license their portfolio. If there is cross-licensing, then there may be no fees at all.
The size of the company could well matter. However, that often works to the small company’s benefit. Many smaller companies routinely infringe patents because they are so small that they figure (correctly) that it is not worth the patent holder’s time to go after them. If the patent holder does go after them, the royalties tend to be very small because (1) the patent holder knows they will lose money in litigation and (2) the amount of product is so small that anything, even a pittance, is better than nothing. Smaller companies are typically in a much better position in these situations than bigger players, unless the patent holder wants to stop the smaller company from using the patents completely.
Being bigger just means being a bigger target, and it is relatively easy to hide in plain sight when you are smaller.
Re: Re: Re: Not really accurate
“Actually, having a large patent portfolio is generally irrelevant in most circumstances, because the people who come knocking on your door could care less about your portfolio, they just want to license their portfolio. If there is cross-licensing, then there may be no fees at all.”
Exactly, if there is cross licensing then your portfolio matters because then you have more cross licensing leverage. So they better care about your portfolio.
“However, that often works to the small company’s benefit. Many smaller companies routinely infringe patents because they are so small that they figure (correctly) that it is not worth the patent holder’s time to go after them.”
Sure it is. When the patent holder doesn’t want competition they can sue for an injunction.
“If the patent holder does go after them, the royalties tend to be very small because (1) the patent holder knows they will lose money in litigation”
The patent holder of a large corporation is much more capable of fighting these lawsuits. A mere legal threat would deter many small entities from entering or compel them to stop competing upon receiving these legal threats leaving the big guy free to sell their products without the threat of new entrants.
“the amount of product is so small that anything, even a pittance, is better than nothing.”
If the intent is to stifle competition, which is more profitable, then suing for an injunction is more likely.
Re: Re: Not really accurate
So like when I open a small restaurant and I don’t get food and stuff at the same low price that a major chain restaurant gets (because they are big) I should blame patents?
Like it or not, the size of your business often drives costs. Economy of scale comes in all sorts of ways, one significant driver is that you can obtain lower costs for your raw materials when you commit to buying a whole lot more.
So what you are saying is that we should abolish business, because clearly it’s not fair out there.
Suck it up sunshine, the world ain’t fair!
Also, you can look at licensing rack rates in the same manner that the “maximum room rate” that is published on the back of some hotel room doors by state or local law. They may only ever charge that rate once, but there is a top rate. Showing up at the counter and asking generally gets you a much lower rate. Is this unfair as well? It would certainly be very misleading if someone reviewed hotels and only used their “maximum room rate” to decide if a hotel was too expensive, right?
This story is just another example of an attempt to vilify patent holders by exaggerating the situation. It makes the MPAA and RIAA reports look reasonable.
Re: Re: Re: Not really accurate
Economy of scale doesn’t enter into the economics of patent licensing of this sort. It costs the licensor exactly the same to provide a license to an individual as to as megacorp.
Re: Re: Re:2 Not really accurate
Well, not exactly. A patent licensing operation wants to spend as little time with a small operation as possible, so they are often willing to go for a small rate to be done with them. Megacorps, on the other hand, end up with all sorts of stipulations and provisos, so they end up taking much more time. of course, they are generally worth much more money.
Ten guys walk in the door. Six of them have gross sales of $10 million per year total, and they each want a license. Four of them have gross sales of $100 billion per year total. How much time do the six guys get? Very little. The licensors want to cut a quick deal, they want the terms secret to keep anyone from knowing that the are getting much less than the asking rate, and then they want to focus on the four people with “serious” money.
Real life in the fast lane.
Re: Re: Re:3 Not really accurate
“A patent licensing operation wants to spend as little time with a small operation as possible”
Or a patent troll could just be a shell for the big companies knowing that the big companies are happy to pay up and not fight patents in court provided that the troll keeps competitors out of the market or force them to pay unreasonable prices.
Re: Re: Re:3 Not really accurate
That’s not a good example. That a licensing company chooses to spend more time up-front negotiating terms doesn’t mean the license itself costs any more or less at scale. The cost of issuing the license remains exactly the same.
Re: Re: Re: Not really accurate
Abolishing patents is not the same thing as abolishing business. And it is often ip defenders arguing that patents are to protect the little guy from being copied by the big guy because it’s not fair. All if a sudden you don’t care about fairness. I agree, life isn’t fair. Abolish IP.
Re: Re: Re:2 Not really accurate
How does “life isn’t fair” get associated with “abolish IP”? That seems to be two disconnected thoughts that ended up side-by-side.
Its time to abolish patent rights and other state granted monopoly rights. These rights wich only big corporations are able to pay for are a factor of the development of corporate monopolism wich will lead to the enslavement of the free.
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Whoa now. Abolishing patent rights is not going to help anything. There would be absolutely nothing stopping big corporations from copying a product developed by a small company in its entirety and running that small company into the ground. Patents need some reforming, but removing patents would be a killing blow to small companies and new startups.
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That’s happening right now. Patents are not only not stopping it but making it worse.
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Big campanies could copy the. Small sure. The flipside is big companies wouldn’t be able to crush small businesses with patent fees and lawsuits
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The purpose of patents should not be to protect the little guy or ensure your definition of fairness. It should be to promote the progress. If the market can better be served by the big guys I have no problem with that. If the little guy is real smart and has brilliant ideas I am sure he will find no problems finding a nice job with the big guy. If the big guy charges too much the little guy can enter the market as a competitor and grow his business. Big corporations may benefit from economies of scale and scope but that only benefits consumers if the big guy must face the potential threat of competition if he charges too much. I say we abolish patents. Those pushing for them the most are the big players and I doubt you really care about the little guy and are only using them as the poster child to protect the big guy.
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Most innovation and invention ones from small business, not big ones. If the goal of the patent system is to encourage innovation, it’s not unreasonable to try to avoid shutting out the small guy.
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“Patents need some reforming”
and exactly what reforms do you suggest?
Some reforms I suggest are don’t allow corporations or businesses to own patents and don’t allow patents to be transferable. But you will scream and cry against these suggestions because you want these laws to protect the big guy (though you will make up some other excuse). Instead any suggestions you do make will have the effect of helping the big players.
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the intended effect of helping the big players *
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(the word intended should have been in parenthesis)
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And just who would own patents?
As for “owning” patents, good luck. Incredibly enough, while patents are issued by the federal government, the rules for ownership are state laws, which includes the ability to transfer patents. So you end up with the interesting situation that patent infringement is tried in federal courts, and patent ownership is tried in state courts. To keep patents from being transferable, you would have to pass a law to that effect in each of the 50 states, which none of the 50 states will ever do.
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“And just who would own patents?”
The inventor.
“To keep patents from being transferable, you would have to pass a law to that effect in each of the 50 states, which none of the 50 states will ever do.”
Or you can pass a single federal law stating they are non-transferable. IP extremists are always trying to pass international agreements so that they can use them to pressure countries to enforce them and they have no problems manipulating federal laws so that they can use them to manipulate them into being enforced statewide.
but the point is I rest my case. The shills here are not interested in any meaningful patent reform. They are only interested in serving the interests of big corporations and patent trolls. Upon the suggestion that patents should be abolished they say “but what about the little guy”. When it’s pointed out that patents do little to help the little guy and they mostly help the big guy and are mostly lobbied for by the big guy they say “so we need reform”. When reform is suggested to them that would fix the problem they say “No, we don’t want reform”. You want laws that only help the big guy.
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“As for “owning” patents, good luck. Incredibly enough, while patents are issued by the federal government, the rules for ownership are state laws, which includes the ability to transfer patents.”
I didn’t know this, thanks for clarifying that to me. But this is only because the federal government chose not to handle situations of patent transfer. The constitution gives the federal government the ability to grant patents to promote the progress and so the federal government can regulate them to promote the progress. The federal government may have chosen not to regulate the transfer of patents but they could and all it would take is for federal courts to enforce this. Yes it maybe unprecedented but new laws are unprecedented, that’s the whole point. So the federal government simply passes laws stating that it would only grant patents under the condition that they are non-transferable otherwise it won’t grant them and it doesn’t have to.
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AC @ Jun 1st, 2014 @ 5:56 AM
You said “But this is only because the federal government chose not to handle situations of patent transfer.”
You also said “The federal government may have chosen not to regulate the transfer of patents but they could and all it would take is for federal courts to enforce this.”
You further said “So the federal government simply passes laws stating that it would only grant patents under the condition that they are non-transferable otherwise it won’t grant them and it doesn’t have to.”
Okay, you are hitting upon two separate issues here, and I will deal with the most significant one first.
Patents are treated as property, by law. The only way to undo that is to remove that stipulation, which will never happen unless patents themselves are eliminated, which is highly unlikely. Patents were given the attributes of property so that a whole new set of rules did not have to be created to deal with the ownership aspects of patents. This information is quite well documented.
Now, you claim that the federal government chose not to handle situations of patent transfer. That statement is not entirely true. As I said before, patents were given the attributes of property, but that was not done by the federal government, but by representatives of the people. This step was taken because states wanted to reserve the power to adjudicate property disputes, and they still do.
The constitution only gives the federal government the right to grant patents, and they can, to a certain extent, “regulate” them, BUT, and this is a tremendous but, only to the extent that patents are granted in the first place, the scope of a patent, and whether a patent is infringed. Ownership of a patent, as with all patents, is a state issue, and not a federal issue, and that is unlikely to change.
The reason is simple, because states adjudicate property rights, for the federal government to declare that they will adjudicate ownership issues would be to take one of the state’s biggest areas of authority from them, and while the states have been incrementally giving up control to the federal government for decades, this area is one which the states, and individuals have fought for years. See this article for examples of the federal government “choosing” to take control of property rights, and losing:
http://reason.com/blog/2013/06/12/obamas-supreme-court-losing-streak-0-3-i
The other issue you raise is transferability of patents. If patents are non-transferable, then licenses to use them could never be granted. That makes zero sense. Furthermore, since patents are treated as property, by law, patents have all the same rights as are assigned to property; i.e., you can grant exclusive use of property (a lease), or non-exclusive use of property (joint use of water rights). Patents are, by law, treated the same way, and there is 200 years of history to support that treatment. To do otherwise would be to make patents a special case, which would hurt the brains of poor congressmen to the point where they would probably go insane.
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Patents are an interstate issue. The federal government can regulate interstate commerce. So there would be no problem here. The federal government can simply choose not to enforce the transfer across states. The state governments need the federal government to enforce interstate laws and the constitution gives the federal government authority over interstate issues.
Regarding your claim that making patents non transferable means that they can’t be licensed, you are just playing with semantics. That is just a matter of how the law is written.
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If the federal government fixes patent law in the public interest I highly doubt you will get a huge uprising. We may get some protests from a few astroturfing groups at best and sure patent trolls and a few monopolistic corporations may complain but that’s about it.
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Here’s the thing. The federal government can “fix” patent law all they like, because granting of patents, adjudicating the validity of patents, and infringement, all fall under federal jurisdiction. Ownership, on the other hand, is a states rights issue, and you will get a huge uprising because if the federal government takes authority over one kind of property, what is to stop the federal government from taking authority over other types of property?
Fortunately, the Supreme Court has generally be on the side of states and property owners and has generally aligned with states and property owners’ rights over the federal government. Amen to that.
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“which would hurt the brains of poor congressmen to the point where they would probably go insane.”
Making patents non-transferable is not that complicated. They seem to have no problems with complexity when the laws are intended to serve the interests of those greasing their palms. Now that someone suggests a law in the public interest all of a sudden you have a million objections.
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Yes, make patents non-transferable, which will effectively make them useless. However, that will never happen. You REALLY need to learn about property laws.
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Patents are an interstate issue. When the federal government passes them they apply across state borders. It is perfectly within the scope of the federal government to regulate them if they choose.
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Patents are an interstate issue. However, OWNERSHIP of patents is not. Ownership falls under property rules, which are adjudicated by the states. States are already complaining about the federal government interfering in state control of property rights. For the federal government to take control of the ownership of patents could well start another revolution, this time by state governments. However, the Supreme Court would rule against the federal government, as it has so many times before, and that would be the end of that.
Re: Re: Re:4 Re:
No, ownership of patents is a federal issue because that ownership applies nation wide. The alternative ia for the federal government not to grant patents. If a state wants to enforce a patent transfer within its borders fine. But the federal government can simply choose not to honor the transfer across states.
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Sigh, you really not getting the point, are you? Ownership of patents always has been, and almost certainly always will be, a state issue. Tractor-trailers cross state lines all the time, but they are registered in one state, because ownership is a STATE issue. For you to ignore this is to demonstrate your ignorance of what ownership means.
The same holds with leases across state lines. If someone rents a car and crosses a state line, the ownership still resides in the state of registration. In theory, the federal government can prevent a car from crossing a state line, but that would be restraint of trade by the federal government which is illegal.
Speaking of illegal, preventing transfer of a patent across a state line would fall under states rights, not federal rights. States do not permit transport of, say, alcohol and tobacco, across state lines all the time. Patents would and do fall under the same laws.
The federal government does not “honor” transfer of anything across state lines. The state on the transfer end does. Do you think that a state will not “honor” a patent license by one of its businesses? That would be illegal for a list of reasons so lengthy that I have neither the time nor inclination to list them. You, on the other hand, should learn more about contract law and property rights.
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Fine, the state can own the patent, but the federal government can refuse to enforce a transfer across states. If another state chooses not to acknowledge that patent the federal government can say so what.
Your argument is just one of semantics. You don’t want patent law fixed because you want them to continue to serve patent trolls and incumbent businesses. So your response is to appeal to how the current system regards and handles patents and insist it can’t be changed and to make the ridiculous claim that such changes would lead to a huge uprising. But changing it is simply a matter of changing the laws.
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The main problem with patents nowadays is twofold: first, there are FAR too many bogus patents being issued. If nothing else, that needs to be fixed. Second, I think there are serious problems with the buying and selling of the patents themselves. It’s harder to know what to do about that, but I lean toward disliking it completely.
Re: Re: Re:2 Re:
Are there “bogus” patents being issued? If you mean patents that should have never issued because the claimed matter either should have been obvious, or existed in the prior art, then I agree.
The real question always has been, just how many “bogus” patents are there? If a patent is “bogus,” but never gets enforced, then does anyone really care? Probably not. On the flip side, let’s assume that ALL patents asserted by a troll are “bogus.” Okay, that is an extreme assumption, but let’s run with it for the sake of argument.
We know that while patent trolls are an obnoxious side effect of the patent system, the actual number of patents ever asserted by trolls is less than 2%, and based on estimates by researchers such as Bessen, is probably closer to 1.5%. It is difficult to have ANY complex system involving humans be reliable more than 98% of the time, and yet, the patent system seems to be.
So, how do we eliminate the estimated 1.5% of patents that are “bogus”? That indeed is a difficult challenge. Opposition processes are likely a step in the right direction, but preliminary opposition systems in beta have had little or no participation. So, even if a system is established, will anyone use it?
As for buying and selling patents, that is done all the time because patents are treated just like property. As I noted earlier, treating patents like property made implementing simple. Otherwise, a whole, special body of law would have to be created dealing with patents. Further, even if you somehow restrict buying and selling patents, it would not work. I was recently involved in a divestiture, and my part of that was identifying patents that needed to go with the divestiture. It was a complicated process (for me), but eventually the list of patents was sold with the divested business because that business needed the patents to operate.
Patents are sold every day, and though trolls make big waves because of their abuse of the system, many sales, and maybe even most sales, of patents are for legitimate reasons.
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“but eventually the list of patents was sold with the divested business because that business needed the patents to operate.”
Such a need is only artificial. IP lawyers need patents to operate. Abolish patents and the business would still be legally able to operate without the patents. Sure it may not be able to compete as easily but the competitors would then be allowed to operate.
Re: Re: Re:3 Re:
“If a patent is “bogus,” but never gets enforced, then does anyone really care?”
It’s a waste of resources both to the patent holder, who needs to pay to get them, and to the patent office. A waste of resources directs labor and resources away from economically beneficial activities which harms the economy.
The majority of patents never make it to product. So why are all these unused patents being acquired. Reasons include for defensive purposes, which just goes to show how broken the system is when someone needs a bunch of defensive patents just to be in a market, or to turn the patent system into a landmine so that you can sue someone that accidentally stumbles upon a patent.
Re: Re: Re:3 Re:
“The real question always has been, just how many “bogus” patents are there?”
I come from the software world, where the majority of patents I see are clearly bogus.
“If a patent is “bogus,” but never gets enforced, then does anyone really care?”
Yes. Just because a bogus patent isn’t enforced now, doesn’t mean it won’t be later. The larger issue is all those bogus patents that are hiding out there, invisible and unknowable, waiting until a product becomes a hit before it pops up.
“treating patents like property made implementing simple. Otherwise, a whole, special body of law would have to be created dealing with patents.”
Umm, there is a whole special body of law for patents. There’s even a special court system. There is nothing “simple” about patents.
I can buy a 802.11g certified module for less than $10, where the hell do they get $50??
potential
I love when the methodology is so bad that it stands out.
Potential.
All of the rates quoted are the absolute maximum ever charged, I think, and not a realistic licensing cost. You can bet that your total licensing on any mainline phone is about a quarter of that.
It’s nice to toss up big numbers and get outraged, but honestly, that makes you no better than the MPAA and RIAA types you always bitch about.
And how much was stolen from Open Source folks?
Re: Response to: Anonymous Coward on May 30th, 2014 @ 7:17pm
Referring to takerbot I assume?
Re: Re: You gave a patent on what?
That applies to simple stuff like the FAT patents where alternative approaches were in use prior. Microsoft basically got a patent on the particular “file format”. Their approach didn’t represent anything remotely “inventive. But you do have to employ it if you want to be “compatible”.
“Brandis said that his team has consulted with “industry leaders” in the United Kingdom and the United States to learn from their experiences. That wasn’t the answer Ludlam was looking for.
“I know industry leaders have very strong views on these things, but i’m asking you about groups like Choice or ACANN or others that might represent consumer interests or the public interest,” he said.”
http://torrentfreak.com/aussie-attorney-general-pressured-on-three-strikes-secrecy-140529/
IP extremists often try to argue that IP law is for the little guy. If that’s true why is it always the big guy, the industry leaders, pushing for these laws the most?
Re: Re:
Sorry I didn’t post where I first saw this
http://soylentnews.org/article.pl?sid=14/05/29/148234
The MP3 patent is over 20 years old. Is it still getting royalties?
Re: Re:
“An exception is the United States, where patents filed prior to 8 June 1995 expire 17 years after the publication date of the patent, but application extensions make it possible for a patent to issue much later than normally expected (see submarine patents). The various MP3-related patents expire on dates ranging from 2007 to 2017 in the U.S.[55] Patents filed for anything disclosed in ISO CD 11172 a year or more after its publication are questionable; if only the known MP3 patents filed by December 1992 are considered, then MP3 decoding may be patent-free in the US by September 2015 when U.S. Patent 5,812,672 expires which had a PCT filing in Oct 1992.”
https://en.wikipedia.org/wiki/MP3
The inventor would own the patents? There would be essentially no difference from our present system. Corporations would require inventors to sign an agreement giving the corporation full rights to practice the invention, and full rights to pursue infringers. Assignment of the invention would be unnecessary.
Pass a federal law stating that patents are non-transferable? The law would be (1) unconstituitional and (2) the states would never permit it. Property rights are adjudicated under state law, not federal. If you tell state’s otherwise, do you think they would sit still for that?
As for your statement of helping big versus little, I accept your statement as an interesting theory. Now, what facts support your position?
Re: Re:
“The inventor would own the patents? There would be essentially no difference from our present system. Corporations would require inventors to sign an agreement giving the corporation full rights to practice the invention, and full rights to pursue infringers. Assignment of the invention would be unnecessary.”
Now you’re just being dishonest. By making patents non-transferable obviously this would not be an option.
“Pass a federal law stating that patents are non-transferable? The law would be (1) unconstituitional and (2) the states would never permit it. Property rights are adjudicated under state law, not federal. If you tell state’s otherwise, do you think they would sit still for that?”
More with the dishonesty. The constitution grants congress the legal ability, not the requirement, to grant such monopolies. That’s the constitution giving the federal government control over these matters.
States already permit the federal government to regulate these issues because the federal government already does. Your only problem is that you don’t want these issues being regulated in the public interest instead preferring that they get regulated in the interest of patent trolls and big corporations.
The facts that support my position are the fact that it’s mostly big corporations that are responsible for pushing for more of these laws and not the little guy and the fact that these laws have been mostly helping the big guy. You keep ignoring the evidence and facts because you don’t like others pointing them out to you. But it only makes you look more and more dishonest.
Re: Re: Re:
I said:
“The inventor would own the patents? There would be essentially no difference from our present system. Corporations would require inventors to sign an agreement giving the corporation full rights to practice the invention, and full rights to pursue infringers. Assignment of the invention would be unnecessary.”
AC Said:
Now you’re just being dishonest. By making patents non-transferable obviously this would not be an option.
My response:
Not so obvious. Most public lands are currently not transferable, and yet they can be leased by the public. Just because something is not transferable does not mean it cannot be used by someone else. In fact, you are being dishonest, because an inventor would have to grant rights in a patent, otherwise, no one would eve be able to use a patent. One such right would be exclusive use by a single entity. If an entity has exclusive use of a patent, though they are not the owner, then they have the right to defend a patent. Assignment of the patent is unnecessary in this case.
I said:
“Pass a federal law stating that patents are non-transferable? The law would be (1) unconstituitional and (2) the states would never permit it. Property rights are adjudicated under state law, not federal. If you tell state’s otherwise, do you think they would sit still for that?”
AC Said:
More with the dishonesty. The constitution grants congress the legal ability, not the requirement, to grant such monopolies. That’s the constitution giving the federal government control over these matters.
My response:
You are either being deliberately obtuse, or you are a deliberate liar. The constitution gives the federal government the authority to grant patents. However, that is as far as federal authority extends. When it comes to ownership of patents, that matter is generally resolved in state courts. I refer you, for example, to page 709 of the following article:
http://www.gunn-lee.com/Attorneys/TedLee/Pubs/SMLJv19n3.pdf
which states “Actions to resolve patent ownership do not usually arise under federal law.” If you are going to talk about the law, at least know the law.
AC Said:
States already permit the federal government to regulate these issues because the federal government already does.
My response:
See above. Patent ownership is decided in state courts. Please get your facts straight.
AC said:
Your only problem is that you don’t want these issues being regulated in the public interest instead preferring that they get regulated in the interest of patent trolls and big corporations.
My response:
Where did I make any of these statements? Now you are lying about what I said, and about my intent. You have lost all credibility with a nonsensical statement like this.
AC Said:
The facts that support my position are the fact that it’s mostly big corporations that are responsible for pushing for more of these laws and not the little guy and the fact that these laws have been mostly helping the big guy. You keep ignoring the evidence and facts because you don’t like others pointing them out to you. But it only makes you look more and more dishonest.
My response:
First, what laws are you talking about? What “more” laws with respect to patents? Generally, patent laws have remained fairly static. I am only ignoring your supposed “evidence” and “facts” because you failed to present any.
So, let’s conclude:
– You are wrong about the law. Evidence provided.
– You lied about what I said.
– You lied about providing evidence.
– You lied about providing facts.
I think that about sums it up.
Re: Re: Re: Re:
“Just because something is not transferable does not mean it cannot be used by someone else. In fact, you are being dishonest, because an inventor would have to grant rights in a patent, otherwise, no one would eve be able to use a patent. One such right would be exclusive use by a single entity. If an entity has exclusive use of a patent, though they are not the owner, then they have the right to defend a patent. Assignment of the patent is unnecessary in this case.”
Now you are just playing semantics. Making it non-transferable would obviously ensure that the patent holder can always grant new people permission to use the patent regardless of any contract.
“See above. Patent ownership is decided in state courts. Please get your facts straight.”
Ok, I didn’t know that assignment is generally a state issue while granting is a federal issue. But the constitution does give Congress the ability to grant patents. So we simply pass a federal law stating that they are non-transferable and have federal courts enforce it. Nothing unconstitutional about that. Maybe unprecedented but not unconstitutional. Problem solved.
“First, what laws are you talking about? What “more” laws with respect to patents? Generally, patent laws have remained fairly static. I am only ignoring your supposed “evidence” and “facts” because you failed to present any.”
Pushing for more laws and getting them are different things. and design patent length was recently extended by one year from 14 to 15 years. and every time someone suggests reducing patent laws it is the big corporations that are always opposed to it (ie: pharmaceutical industry). For instance when Obama suggested removing the pharmaceutical extensions that the FDA can grant early on (something he knows the public would want so it made for a good campaign pitch) the big pharmaceutical industry lobbied against it and he eventually changed his mind.
Re: Re: Re:2 Re:
WHAT….That the same as saying no contract is ever valid.
Re: Re: Re:3 Re:
You are being dishonest again. Saying that certain clauses are invalid is different from saying that no contract is ever valid. If a clause is illegal it is void. Happens all the time.
Also patents are different than contracts because they apply to and can be enforced against entities that agreed to nothing. Those entities may be across states. The federal government can decide how to enforce them.
Re: Re: Re:4 Re:
Sorry, my last paragraph didn’t make much sense. The point is that the federal government has the authority to choose when to enforce patent laws across borders. It can choose not to enforce a patent transfer across borders against an entity that agreed to nothing. So even if a patent holder transfers his patent to a company if the original owner later decides to revoke that transfer and license the patent to someone else in another state then the federal government can choose not to intervene and enforce the transfer. The federal government can pretend that the patent was never transferred and leave it to the other state to decide if they want to enforce the transfer. A contract may bind the patent holder into granting a license that can’t be revoked but no contract should be able to prevent the original patent holder the ability to issue new licenses that the federal government will enforce across states. This will actually give the states more control within their borders.
Re: Re: Re:5 Re:
That is the federal government could choose not to enforce the portion of the contract that prevents the original owner from issuing new licenses across states. It is up to each state government to decide how such clauses should be applied.
Re: Re:
By now the dishonesty of IP extremists and their true agenda should be very obvious. So to everyone reading through this discussion what I have to say is look at the dishonest nature of those pushing for these laws. Are these the types of laws we should be in favor of? I say abolish IP!!!! This dishonest scum doesn’t deserve to benefit from these laws and he and other IP extremists should be in jail for hijacking our democratic system.
Re: Re: Re:
AC:
I have a question? Just what patent laws are being pushed that you are discussing?
Re: Re: Re: Re:
Examples of the ones defending and pushing for more IP laws are the US chamber of commerce (which represents industry interests), patent trolls (of course, otherwise they can’t exist), big pharma, and the RIAA/MPAA. Don’t pretend you don’t know any better.
Re: Re: Re:2 Re:
We are specifically speaking of patent laws.
The RIAA/MPAA have nothing, as far as I know, to do with patents.
With respect to patents, my impression is that the pendulum pretty much swung to it’s maximum somewhere around a decade ago. Since then, rulings have been toward reducing patent scope and coverage, and laws have been moderating the ability of patent holders to enforce their patents. Perhaps one of the biggest rule changes in that area was preventing owners from lumping multiple respondents into one suit, which raised the costs for those litigating. The recent push toward loser pays is yet another example of push back. Yet another example are the rules that attempt to reign in NPE’s, aka “patent trolls.” It seems to me that there is more push to limit patent laws than there are to expand them.
What success has big pharma had in the last 10 or 15 years in “pushing for more IP laws”?
Re: Re: Re:3 Re:
Success and push are two different things.
Re: Re: Re:4 Re:
Okay, then I change my question:
What IP laws have big pharma been pushing in the last 10 or 15 years?
Re: Re: Re:5 Re:
Pharmaceutical corporations have long been defending patent law and puahing to expand them. For instance they have been pushing to expand them to India and have been pushing against exceptions. To deny this is very dishonest of you.
Re: Re: Re:6 Re:
I was speaking of patent law in the US. I repeat my question. To suddenly switch to another country is deceptive of you.
Re: Re: Re:7 Re:
What does it matter what you were speaking of. The point is still clear, it is the big guy pushing for and defending these laws.
Re: Re: Re:8 Re:
I hate to break it to you, but little guys defend the existing laws (not “push” for them) as well. I have only done work for small companies and independent inventors, and they prefer the laws to stay as they are, neither expanding or contracting, though there is a general feeling that patent quality needs improved and they do like the loser pays idea.
And I still want to know, in the US, just what are the “big guys” pushing for?
Re: Re: Re:9 Re:
“I have only done work for small companies and independent inventors, and they prefer the laws to stay as they are, neither expanding or contracting, though there is a general feeling that patent quality needs improved and they do like the loser pays idea.”
At the very least Mike says his discussions with small businesses has indicated patents harm them. And since he is not anonymous, he has a long history of being honest here on Techdirt, you seem to have a conflict of interest in that your profession is at least partially dependent on patents, and you have already proven yourself dishonest in this discussion alone, who should I believe.
Re: Re: Re:10 Re:
I have read Mike’s many posts about “small business.” What he seems to mean is “small software-based business.” We have been a manufacturer (you know, hardware and stuff like that) for our entire history, and without patents, at least one Japanese firm, one American firm (who copied us so exactly that they copied a mistake that we fixed in a later iteration), and a Chinese firm would have been copying our designs. All three of them were much, much larger than us (I would say anywhere from about 30 times larger than us to 200 times larger than us.
Funny thing is, when we called out the largest company for infringement, they said our patents were worthless. Except, of course, that’s not what the court said. Thanks to patents, we still exist.
Originally to protect the little guy
You have to realize that all of these so-called “intellectual property” laws were originally framed to protect the little guy so that he would have incentive to create competition for established players, but also to protect public interests by eventually making art and technology generally available.
However, big companies have lots of money and lots of political influence to get additional laws passed and/or have existing laws interpreted in a way that ends up helping them instead of their intended purposes. They also learn to ‘game the system’ and make the technicalities involved in the enforcement of these laws work to their advantage. Give the large corporations enough time and they can essentially turn any law on its head and use it to serve their purposes.
government's winfall
the government will do nothing to change the system. they make mounds of cash and all they have to do is handle the paperwork. their profit margin on patents is probably pretty sweet.
since our government is broke they will continue this legalized extortion.
The government can change the system, it’s just a question of when. Business mobile phones will always be here.
Death and Taxes!
Theres only two things certain in this world, death and taxes! If you are sourcing mobiles though try here Business Mobile