Thursday, August 4, 2011

One massive software patent consortium: A solution to the patent wars?

In an earlier post today, I talked about the distinction between 'pure software' and 'hybrid' patents and a couple of weeks ago I called for other changes to software patentability.

However, making changes to the patent law is for the long term. Right now we are in the midst of a very hot patent war, with Google on one side and several companies, including Apple and Microsoft on the other.

Google is clearly feeling the heat. Many commentators have discussed Google's post yesterday in which it complained about Apple and Microsoft attacking Android through patents. They have pointed out that Google itself was willing to bid high for Nortel's patents; it was just that Apple and its consortium bid even higher. The BBC has one interesting article, and there is some interesting discussion on Slashdot about it.

It is clear that despite the negative consequences of the patent system, corporations desperately need a large patent portfolio to defend themselves against claims of infringement . You can't produce software of any complexity today, without necessarily stepping on patents. Apple and Microsoft did what they had to do until the law changes, or until the status quo changes in some other fundamental way.

If nothing changes, Google is absolutely right: Android will end up costing more and more due to the need for manufacturers to license all the patents. And patents will go ever higher in price due to bidding wars. Further still, some platforms will lack features because patent holders refuse to licence the patents, or the manufacturers can't afford to pay.

The solution is for all companies of significant size in the area to hold a summit and agree to form a universal patent consortium for all software related patents. Perhaps Apple, Microsoft, RIM and Ericsson (the group that bought the Nortel patents) could initiate this by inviting Google, IBM, Samsung, LG, HTC, Nokia and others to the table.

The rules of the consortium could be like this:

  • All software patents held by consortium members would be usable by all members at no cost. This would include pure software patents, and hybrid patents, as I described earlier.  
  • Small companies (e.g. below $10 million in revenues), educational institutions, governments and nonprofits would be able to use the patents, with no application process, as long as they did not sue any consortium member for infringement of software patents.
  • Any larger company would always be granted a license for any patent at reasonable cost, or else membership in the consortium as a whole, as long as they did not sue a anyone for software patent infringement. 
  • A company that joins the consortium would pay a reasonable fee that could be cash or patents in-kind.
  • Membership in the consortium would require an annual fee proportional to corporate revenues. However, this fee would be designed to be reduced over a period of 10 years to a level that would not be significant.
  • Since many consortium members have paid a lot of money for their existing portfolios, such members would be compensated over a the next decade by a proportional distribution of funds from the consortium. The funds would come from licensing patents to non-consortium members, membership fees in the consortium, or members joining, as described above.
  • All consortium members would have to agree to lobby for patent reform, such that software patents would not continue to be a burden on the industry. This would include pushing for legal changes that would eliminate or reduce the validity time of pure software patents.
  • Once legal change had been effected, and the consortium reached a critical size, such that the risk from non-members was minimal, members would agree to contribute future ideas to the consortium without actually patenting them. Just publishing the ideas formally would prevent others from patenting them. Members would still be compensated for contributing to this pool of published ideas, and indeed perhaps even non-members such as universities could be compensated for contributing to it.
  • Any consortium member sued by an outsider for infringement of a software patent would receive the support of all consortium members in fighting the suit.

My suggested rules as described above should have some of the following consequences:

  • Innovation would be fostered in several ways: People would be free to put together ideas involving lots of patented components in innovative ways, without risk of being sued, and would receive benefit from contributing additional IP to the pool.
  • The price war for patents would be eliminated eventually, reducing the costs of doing business, and hence the end costs to consumers.
  • Patent troll companies would be forced out of existence, since the value of their patents would decrease, and they would have a formidable opponent if they chose to sue anyone. They would be better off just joining the consortium.

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