Tech Suits Endanger Innovation

[Source: The New York Times, by Eduardo Porter, May 29, 2012]

Casual observers would find little in common between the smartphones in their pockets and the funky backbeat of the Beastie Boys’ "Car Thief." But these two creations will go down together in the annals of creativity as reminders of the flaws in our intellectual property laws.
TufAmerica, which manages the rights to the catalog of the go-go band Trouble Funk, sued the Beastie Boys this month, saying they had illegally used samples from Trouble Funk’s classics “Drop the Bomb” and “Say What” in several tracks on their 1980s albums “Licensed to Ill” and “Paul’s Boutique.”
To fans of 1980s hip-hop, the suit was a bitter reminder of how copyright law changed the music they loved.
Back then, a new generation of artists rapped over elaborate musical mosaics made of brief samples from other songs. “Paul’s Boutique” included hundreds of samples from artists ranging from the Beatles to Afrika Bambaataa. A series of court decisions in the 1990s, though, made this kind of musical collage all but impossible, forcing artists to get permission for every snippet they used — a logistical and financial nightmare. Lawsuits flew against several rappers, and a form of cultural expression virtually disappeared.
Hip-hop may have little to do with high tech. But its experience carries a stark warning for the future of technology. High-tech behemoths in a range of businesses like mobile computing and search and social networking have been suing one another to protect their intellectual property from what they see as the blatant copying and cloning by their rivals. Regardless of the legitimacy of their claims, the aggressive litigation could have a devastating effect on society as a whole, short-circuiting innovation.
The battle raging over smartphone technology is the latest case in point. Since 2010, Apple and Microsoft have led a frenzy of patent and copyright litigation against the makers of smartphones running Google’s Android operating system, hoping courts around the world will force their rivals to pay license fees, remove features from their devices or even leave the market altogether.
Apple and Microsoft have spent billions to acquire the patent portfolios of old technology companies to bolster their case. Though Google has mainly played defense, its $12.5 billion purchase of Motorola Mobility and its thousands of patents have helped Android device makers go on the offensive.
The confrontation could have a reasonable outcome — a détente in which the companies licensed each other’s technology on reasonable terms and coexisted in peaceful rivalry. But the smartphone wars could easily escalate, reducing competition in mobile computing and, like hip-hop mash-ups, knocking technologies out of the market for good. This would defeat the very purpose of intellectual property law.
Patents on inventions, like copyrights on songs, are not granted to be fair to their creators. Their purpose is to encourage innovation, a broad social good, by granting creators a limited monopoly to profit from their creations. While companies like Apple may believe they are insufficiently compensated for their inventions, the evidence often suggests otherwise. The belief that stronger intellectual property protection inevitably leads to more innovation appears to be broadly wrong.
Innovation is often tripped up by intellectual property rights. One study found that the number of new rose varieties registered by American nurseries fell after the passage of the Plant Patent Act of 1930, which allowed for the patenting of new rose hybrids. Another study concluded that copyrighting new gene sequences sharply reduced scientists’ subsequent experimentation with the decoded genes, even if they were later placed in the public domain. Surveys have found that the risk of patent litigation deters firms from pursuing innovations.
It’s not that we don’t need to protect intellectual property at all. But the protections must take into account that innovation is often a cumulative process, with each step piggybacking on the ideas before it. Like “Paul’s Boutique,” the software that drives smartphones is composed of a vast array of ideas from multiple sources. Everybody infringes to some extent on everybody else. Overly strong intellectual property laws that stop creators from using earlier innovations could slow creation over all and become a barrier for new technologies to reach the market.
One of Apple’s patents, for instance, appears to grant it ownership over any application based on a user’s location. Think of the Google map feature that pinpoints where you are. Or imagine an app showing nearby hospitals or the best deals in nearby pizzerias. If Apple enforced the patent aggressively, it could foreclose a vast array of innovation.
To compound the problem, critics argue, the Patent and Trademark Office regularly issues patents on inventions that are obvious or not new. Sometimes the patents are written too broadly. Apple, for instance, has patents on the concept of moving objects around on a mobile device’s screen using multiple touches. Not the specific instructions; the concept. Broad patents can even capture applications that the patent holder never envisioned.
Facebook did not succeed because it was the first social networking technology. It succeeded because of how it unfolded the social networking model among student communities. Still, two months before Facebook’s initial public offering, Yahoo sued it for patent infringement, arguing that “Facebook’s entire social network model, which allows users to create profiles for and connect with, among other things, persons and businesses, is based on Yahoo’s patented social networking technology.”
Broad patents can hinder innovation by allowing dominant businesses to stop future inventions that would disrupt their business model. “Who has patents?” asked the Stanford economist Tim Bresnahan, an expert on technology policy. “It’s the guys who have been around for a while, not the guys who have done a lot of innovation lately.”
Overly broad patents have given birth to an entire new industry of “patent trolls,” whose only business is to buy patents and sue for royalties. TufAmerica, for instance, has made a business out of buying the rights to old songs and suing artists who sample them without permission.
Intellectual property rights could be improved to better serve their purpose of encouraging innovation. Carl Shapiro, an expert on information technology on President Obama’s Council of Economic Advisers, has suggested patent reforms, including making it easier to challenge patents after they are issued, culling the roster of overly broad or ambiguous claims, and allowing those accused of infringement to claim independent invention as a defense.
Perhaps software should not be patentable at all. In rulings since the 1970s, the Supreme Court has determined that abstract concepts like mathematical formulas cannot be patented. It has struck down two software patents and ruled against patents on diagnostic techniques because they were based on laws of nature. And it has asked an appeals court to reconsider a decision on patents over advertising online.
Yet for all the concern over excess, intellectual property protections seem only to grow stronger. In 1998, for instance, Congress extended copyright protection to 70 years after the death of the author, from 50. Notably, the legislation applied to works of art that had already been created and hence needed no further incentive to come into being.
Software patents will never be banned, of course. Indeed, software patents exploded after an appeals court in 1998 upheld a patent on a method to pool the assets of mutual funds using a mathematical algorithm, establishing the patentability of a business method and the software to run it.
And the America Invents Act of last year, a measure expected to curb some of the excesses of patent law, came up short, allowing only a small window of time for companies to challenge new patents and forcing companies that challenged a patent to waive the right to do so again in court.
Intellectual property, meanwhile, keeps growing. The United States patent office awarded 248,000 patents last year, 35 percent more than a decade ago. Some will spur innovation. But others are more likely to stop it in its tracks.