Patent Law

#1

By Gary Odom and Jordan Kuhn

Quantity over quality is expressed in the quintessential American hanker of wanting to know who's number 1, which is the surmised measure of who is best. If there ever was a justifiable bifurcation between quantity and quality, it lies with patents. Year after year, IBM gets the most U.S. patents. What does that really mean?

Hal Wegner and Justin Gray have released a short but facilely cogent PowerPoint presentation, pointing out that "patent activity by a small number of companies has more and more come to dominate the United States patent system in the past decade." Further noted is that computer technologies numerically dominate the listing, with the top ten computer companies patenting an order of magnitude more patents than biotech/pharma, 4000 (IBM, Samsung) to 400 (Johnson & Johnson).

Wegner and Gray get silly over automotive patents. "Does patenting a better muffler help the auto industry? In the automotive industry - where cars are sold based upon every factor other than patents - more patents are obtained by the majors than in biotech and pharma." Style matters, but cars are in fact sold based upon leading technology, which is, of course, embodied in patents. Toyota leads the world in automotive sales, technology, and patents.

Contrast the patenting picture to litigation. Bio looms large, comparable to computers for asserted patents. But there is a difference between the two in litigation. Bio battles are between companies, and include a hefty portion of DJ actions, whereas computer patent assertions by participant are mostly lopsided: inventors, small companies, and universities, suing large (or larger) companies.

That's because large computer companies refuse to pay any patent tax unless threatened with the real prospect of damages. In other words, computer companies use litigation as a patent quality vetting process before settling. It's a common complaint how expensive patent litigation is, but it's quite cheap compared to the damages for infringement to the likes of Microsoft, IBM, or Apple. The cost of playing the sport of kings needs to be kept in perspective with what is really going on, rather than superficial appearances.

In bio, the big boys have the patents, which the feisty generics fight over to get a share of a big pie. In computers, inventive David regularly clashes with Goliath, over some of the most valuable intellectual property.

IBM may get the most patents, and a tidy annuity for licensing, but that says more about the quality of its licensing program than it does about the value of its patents, many of which are the same quality which IBM and its corporate brethren rail about as junk, thereby demanding patent reform.

If there is any area where composite numbers don't mean much in terms of quality or value, it's patents.

Full post as published by The Patent Prospector on November 23, 2009 (boomark / email).