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Did Google buying MMI actually make the patent mess worse?

Written by Rich Fiscus (Google+) @ 05 Jun 2012 3:44 User comments (2)

Did Google buying MMI actually make the patent mess worse? When Google announced their plan to buy Motorola Mobility (MMI) last year the deal was widely praised by mobile industry analysts who predicted Motorola's phone patents would give Google the leverage needed to force Apple into a cross licensing agreement. Nearly ten months later, Google has finally cleared all the regulatory hurdles and the buyout is complete, but if anything it seems that the licensing disputes have multiplied and Google seems willing to fight dirtier than their opponents just to prolong the fight..
To appreciate the implications of where we are now you first need to understand how we got here. In fact you can trace the current web of lawsuits and patent claims all the way back to the 1990s when the US appeals court which holds the final authority over all patent cases (short of the Supreme Court) began broadening their interpretation of patent laws, suddenly rejecting a long established test and claiming that the standard it represented had never, in fact, existed at all. At the time it was perhaps reasonable to consider whether a bit of code could, in fact, be novel and original enough to be patented. At the same time they could have explored whether it is possible to narrow down a patent definition to a point where it protects only the novel and inobvious bits.

What the court actually ruled did not indicate anything approaching that level of reasoning. In fact, reading through the text it seems to say that when software is involved it is permissable to ignore the properties of every single component of the so-called invention, assigning the properties a judge feels it should have instead. Specifically, the court ruled that as long as the software in question was operating on real world data it was considered an invention. This elevated softwar to a status not enjoyed by other inventions. Even if the data being manipulated may be disqualified from patent consideration, such as data describing natural phenomena like seismic activity or wind speed, and even if the "processing" involved is nothing more than a mathematical algorithm which is also automatically disqualified, the judges decided that combining the two unpatentable components somehow altered the properties of one (the software), transforming it into a patentable invention.

Then, in the mid-90s, a copyright lobbyist named Bruce Lehman was appointed to head the US Patent and Trademark Office (USPTO). Under Lehman, who was also the chief architect of the DMCA, the rules for examining a patent were changed so that every application was all but assumed to be valid unless the examiner could make a case that it failed to meet every possible criteria. Under this new standard, the specifics of a patent weren't important so long as approving the patent felt right based on some entirely unexplained criteria:

The question of whether a claim encompasses statutory subject matter should not focus on which of the four categories of subject matter a claim is directed to -- process, machine, manufacture, or composition of matter -- [provided the subject matter falls into at least one category of statutory subject matter] but rather on the essential characteristics of the subject matter, in particular, its practical utility.


Denying a patent application, on the other hand, had to be based on exactly those qualities which the examiner was instructed to all but disregard:

The burden is on the USPTO to set forth a prima facie case of unpatentability. Therefore if USPTO personnel determine that it is more likely than not that the claimed subject matter falls outside all of the statutory categories, they must provide an explanation. For example, a claim reciting only a musical composition, literary work, compilation of data, >signal,< or legal document (e.g., an insurance policy) per se does not appear to be a process, machine, manufacture, or composition of matter.


Combined with a lack of programming expertise among patent examiners or documentation for prior art over the preceeding decades when software and other purely process-based patents were thrown out almost automatically, the floodgates soon opened for patents covering everything from 1-Click Checkout by Amazon to rental queues by Netflix, and practically anything else containing the magic phrase, "a computer readable medium containing computer executable instructions."

The Supreme Court has since pulled back somewhat from the earlier position, but has so far been unwilling to make a definitive ruling. Patent disputes are already denied the most common path to Supreme Court consideration, contradictory rulings in different appeals courts, thanks to there being just one appeals court for all patent appeals. For some reason district court judges are considered qualified to rule on patent issues, but the judges above them incapable of understanding the same issues.

Regardless of the reasons, after more than a decade of lax oversight and a generally inexperienced patent examiners working under continuous political pressure to approve more patents in less time, it is all but impossible for any new piece of software not to infringe on at least one, and probably several patents, often despite the patent descriptions being completely unrelated. Imagine making a small improvement to a standard light bulb only to find out that it violates a patent covering a new type of fan simply because they are both powered by household current. It seems crazy, but when it comes to software patents they are frequently far more vague and open ended than that.

Even when a software patent is obviously illegitimate the examination process is designed to ensure every possible reason for approval is considered even if it requires that all the arguments against approval be ignored. And yet when it comes time to contest the validity of a patent the court is required to pretend that just the opposite is true - that every patent approval is an expert opinion based on a thorough and objective analysis of the evidence examined. Furthermore, the scale of patent infringement damages make it risky for even the richest companies in the world to risk a legal challenge, especially against so-called non-practicing entities (patent trolls) who cannot be countersued since their sole business activity is filing lawsuits.

At the same time we find ourselves increasingly reliant on technology which must adhere to common standards, from file formats and media formats to computer peripheral interfaces and consumer electronics connections. For example, when a successor to DVD was being developed several years ago it was patents, rather than technical merits, which ultimately created an alliance between Sony and Panasonic in the Blu-ray camp having lost a similar battle during the development of DVD. Fearing they would once again receive a smaller share of Blu-ray patent revenues, as they did with DVD, Sony took what seemed like the safe course and allied with their rival.

And yet those same patent alliances often result in exactly the inequitable outcomes they are intended to prevent. Although they are Panasonic's equal in the Blu-ray patent pool, Sony's decision to put up their own money promoting Blu-ray, building PS3s at a loss and giving away large numbers of discs while also spending a lot of money courting studios. In fact, you could argue that Sony almost single handedly won the HD format war.

Sony's mistake, the same mistake which the world's top economic powers seem to be increasingly reliant on, was assuming that it is patents, not customers, which determine your fate in the market. Sony executives were at once blinded by visions of the money they planned to make when Blu-ray took off like DVD and focused on the competition that they failed to pay attention to what their customers were telling them in plain language. What patents don't do, what they can't do, is sell your product. Panasonic, on the other hand, waited to invest heavily in Blu-ray until there was enough interest to justify it and turned it into a profitable business. Not profitable on the scale of DVD, but very few things ever have been.

As far removed as all that may seem from smartphones, in reality the same "features" of the patent system which provided Netflix with a de facto monopoly in the online DVD rental market in the US and Panasonic with the lion's share of profits from Blu-ray despite being practically a non-factor in its adoption are the driving forces behind the legal battle companies like Apple, Google, Microsoft, and HTC are waging around the globe.

Apple's design-based strategy
When Steve Jobs returned to Apple in the late 1990s, he was far more capable than the arrogant kid who was run off by the company's former leadership. During his time away from Apple he learned lessons most successful executives never get to learn, most significantly about focusing on his strengths. Steve Jobs was never a brilliant inventor or technical genius. He wasn't even the brilliant visionary many people make him out to be. His genius was the ability to see things from the average person's point of view, despite having almost nothing in common with the average person, which gave him the insight to know when a new product was ready for his customers.

Being fundamentally an artist, rather than a technician, he put a lot of emphasis on form over function. The dirty secret those of us who eat, sleep, and breathe technology don't like to admit is that most people don't care about computers. They buy computers, but to fulfill a particular function like getting on facebook or watching videos. The iPhone, and even moreso the iPad, fill that need.

From the first time I used an iOS device, a first generation iPod Touch, I could see that it was innovative. Within 15 minutes I was sure that what I was using was one of the most important developments in the history of computers. In fact, you might say it was the first truly personal computer. But patents are supposed to be about more than innovation. They are specifically supposed to cover novel and original technical developments but for all its brilliance the technology in the iPhone was not new or unique.

From multi-touch to the use of icons. From the various program controls to the hardware inside the case, from a technical point of view the iPhone was essentially just a collection of technology developed by other companies and copied by Apple. The way that technology was used, the way everything fit together to form an amazing little computer, was truly impressive, but in the way a perfectly arranged piece of music is. And like a beautiful piece of music, I couldn't identify anything which would qualify for patent protection.

But under the modern rules of patent examination in the US the standard is not rooted in what things are, but rather how they seem. Based on the simple test of whether it "feels" innovative, the iPhone passed easily. But patents are supposed to cover a specific technical advance which represents a leap most experts in the relevant field wouldn't come up with. Nothing in the iPhone would have passed that test. Even things which may have seemed unique and new on the surface, like the animated Slide To Unlock feature, turn out to be cosmetic improvements on existing technology. Certainly a design wonder, arguably even brilliant, but nothing more than an incremental, and when you come right down to it even obvious, improvement.

Likewise, even the most obvious features, like the ability of a smartphone OS to recognize and interact with phone numbers, may be patented when obviousness is not considered during patent examination. Particularly in the US, but increasingly also in Europe, Asia, and other parts of the world, the appearance of innovation is easier to patent than actual technology because it need not stand up to serious initial technical challenge, to say nothing of the judges who are likely to rule on its patentability in any future challenges. In fact, you could argue that a patent for something which seems like an invention is ultimately stronger and easier to defend than many things which actually are.

In addition to patenting design elements masquerading as technical innovation, Apple also has actual design protection to fall back on. In a time when content industries have managed to conflate and confuse issues of copying with stealing and convince public officials that the purpose of IP protection is to reward monetary investment rather than originality, simply selling enough iPads or iPhones allows Apple to claim ownership over generic and primarily pragmatic design elements like rounded corners and a thin profile.

There have also been accusations that Apple has actually been actively working against the adoption of a W3C standard related to touch-interfaces. A participant in a W3C working group developing a touch interface standard complained last year that Apple, after declining to participate in the working group, was intentionally impeding the standard development process by waiting until their work was all but complete before mentioning more than half a dozen Apple patents which are supposedly essential to the standard.

A quick glance at the current status of the draft proposal, which was delayed indefinitely after Apple submitted seven patent claims last Decemter. A quick visit to the page listing the proposed standard indicate it remains stalled almost five months later. Apple's accuser, a developer for the Opera web browser, also pointed out that this was the second time Apple had used this tactic, the first coming at the end of the W3C Widgets specification.

The real irony in Apple's aggresive defense of these questionable patents is that it ultimately gains them nothing. For all the cosmetic similarities, Android does not duplicate the iOS experience. Beyond basic features like icons and a multi-touch interface, they fulfill very different needs. My wife would no more consider an Android phone than I would an iPhone. For her the limited customization is a feature. She doesn't want to tweak settings and customize the interface. And I'm just the opposite. I enjoy the challenge of finding just the right app for my SMS client and email. I've never used a computer I didn't want to customize.

From a competition perspective, Android certainly isn't taking Apple's customers. Study after study shows that people who buy iPhones almost never switch to Android. Android owners, on the other hand are much more likely to at least consider buying an iPhone. And if they're the type of person who appreciates the iPhone's simplicity, chances are they're even happier with it after a disappointing experience with Android.

Even setting aside all those factors, even if you assume that Apple could sell significantly more iPhones and iPads if they could push Android out of the market, without a serious competitor Apple's ability to tightly control iOS development would be seriously compromised. Governments would have an incentive to force Apple to make the platform more open and customers who actually wanted what Android offers would pressure them to make changes as well. Besides, nothing promotes innovation like competition. The better Android gets, the more incentive Apple has to improve their own products. A company which is committed to serving their customers has nothing to fear from competition and nothing to gain from crushing it with patent lawsuits.

Microsoft's shotgun approach
Of course most companies do not have Apple's design sensibilities and are not run by executives with the late Steve Jobs' gift for identifying with the average consumer. Tech companies are usually run by technically oriented leaders who are more interested in the technology under the hood than how it is packaged. Microsoft, is a perfect example of that.

The emergence of software patents as a separate commodity in the mid to late 1990s happened to coincide with Microsoft's most successful period, both in terms of sales and innovation. While Apple was pushing the boundaries of interface design, Microsoft was doing something similar in business computing. As Windows server software delivered unprecedented capabilities to PC-based hardware, Microsoft stockpiled a significant warchest of patents around it. In fairness to them, they have significant experience being the target of lawsuits over illegitimate patents so it's easy to see why they would have placed such an emphasis on stockpiling them.

Which is not to say Microsoft's software patents are necessarily any more legitimat than Apple's. If you dig through their patent portfolio you will find countless examples of the typical problem patents. Just about any technology, no matter how old or new, regardless of whether it was innovative or simply an incremental improvement, has ended up on a patent application.

For example, in 2000 they applied for a patent covering the UAC security feature introduced in Windows Vista. The only problem is UAC is really just a Windows version of SUDO, a command introduced in the UNIX world back in the early 80s. This patent, covering one of the best known and most basic features in every UNIX-like operating system was granted in 2004. No one who was truly an expert in computer networking would have to think twice about whether that was already covered by prior art.

Another patent, granted right around the time patent examination rules change, covers a process for loading web pages efficiently by using strategies like loading text before backgrounds. While it includes several important innovations in web browser design, it appears as though the invention process involved nothing more than opening the version of Netscape Navigator which was introduced a month earlier. If there's an argument in favor of the patent's validity, there's no question Microsoft did not invent it. Perhaps that explains why they were so eager to spend $1 billion purchasing Netscape's IP from AOL back in April.

While their intentions in applying for patents may be innocent enough most of the time, Microsoft has never hesitated to use them against the competition. Even while they were experiencing rapid growth in the server software market, displacing established companies like Oracle and Sun, they faced competition of their own from open source software. From operating systems like Linux and FreeBSD to database servers like MySQL, these products filled a niche Microsoft couldn't. What they lacked in simplicity they more than made up for it in performance and cost effectiveness.

Rather than focusing on improving their own products Microsoft initiated a smear campaign against Linux. They claimed that it violated a large number of Microsoft patents, which clearly it must have given Microsoft's track record of patenting established industry standards. Microsoft conveniently declined to ever mention even one patent which was being infringed on, relying on fear and uncertainty to scare people away from Linux.

Then the iPhone was introduced in 2007 and everything changed. Unfortunately for Microsoft, Bill Gates already had one foot out the door and Steve Ballmer failed to recognize what was going on right under his nose. In fact it's debatable whether he really understands it even today. Windows Phone, which Ballmer seems convinced includes all the important features of the iPhone, has been perhaps Microsoft's biggest failure ever, and yet they continue to insist it is already better than Android. In fact, despite the almost complete lack of interest in Windows Phone, Microsoft seems to be betting their future on it, designing WOA (Windows On ARM) in its image, eventually planning to use it as the basis for the next generation of Windows Phone.

Faced with an almost complete inability to be more than a statistical anomaly in the market, the smart thing to do would be to assess your strategy and find out what Windows Phone is missing. As an alternative, a short term solution would be to start threatening companies who clearly are providing products people want. It's sort of like a Silicon Valley protection scheme. If you promise to give me some of your hard earned money I won't spend the next several years trying to destroy your company. Since Android is Linux based, it was simple enough for Microsoft to fall back on their old anti-Linux claims.

In the short term this may seem like a winning strategy. The problem is Microsoft, and Steve Ballmer in particular, seems oblivious to even the possibility that the problem lies in their product and that people simply don't want what he is selling. Ballmer seems completely focused on Android's success as the cause of Windows Phone's continued failure. But even completely eliminating Android from the market will not put a dime in Microsoft's coffers. For all his insistence about the benefits of Windows Phone, the platform is clearly designed first and foremost for selling software. The strict hardware requirements are to ensure developers can be confident their apps will run correctly. The walled garden is there to force Windows Phone users to get their apps from Microsoft's online store. It's clear why Windows Phone is good for Microsoft, and even what would attract a developer.

What's missing is a reason for consumers to choose Windows Phone over an iPhone or Android handset. Just like Sony's missteps with Blu-ray, Microsoft is so focused on the competition that they don't hear the obvious message consumers are sending them. Like most companies, particularly when they have been wildly successful and dominated a market, Microsoft's executives believe it was their brilliance rather than the pure chance of having a good idea at the exact time the market was ready for it. It's the same thing Steve Jobs experienced at the end of his original tenure with Apple. The Steve Jobs who left Apple in 1985 could not have turned around the company the way the Steve Jobs who returned in 1998 did. Starting over and failing to build another Apple showed him that he wasn't the visionary everyone told him and forced him to learn how to be a successful CEO.

But while Windows Phone may not be a threat in the market, even if they continue on their current path Microsoft can do a lot of damage on their way out. Their patent shakedowns are already diverting money which could be spent on new and improved products. Just like Sony's wasted efforts infecting CD buyers' computers with rootkits, financing the RIAA lawsuit campaign against file sharers and lobbying governments for legal protection against the changing market, allowing Microsoft to fight for their survival at the expense of competitors and customers isn't something we should take lightly, and neither should Google, or Apple for that matter.

Sometimes your enemy's enemy is not your friend. Sometimes he is everyone's enemy. Clearly Apple doesn't see Microsoft that way. Realistically they probably simply consider Microsoft as harmless, but a useful tool as long as they are focused on Google. No doubt that was part of the thinking behind their decision to join forces with Microsoft and several other companies in order to buy Nortel's patents last year. But now that the deal is done they have, jointly, created another patent monster in the form of an independent company established purely to "monetize" (ie sue) thousands of those patents. Both Microsoft and Apple had to promise the US government they wouldn't use the Nortel patents to attack competitors, and technically this company isn't bound by that agreement, being an independent company. But should they choose to take on Google at some point this could come back to haunt Apple, and Microsoft if they are still around, the next time federal regulators are considering whether to okay another purchase. Google has a lot of enemies in Washington, but given Apple's size and power, even the appearance of wrongdoing can be just as damaging as the real thing.

Google brings a FRAND knife to Apple's patent gunfight
Facing a serious threat to Android's survival from Apple and a threat to their partners from Microsoft, Google announced their agreement to buy MMI last year, making a big public show of how the phone patents they were getting in the deal would solve their Android's patent problems by providing leverage to force Apple into a cross-licensing agreement. But they had to have known the truth, that all MMI had to offer was a handful of Standards Essential Patents (SEPs), making them basically useless as a bargaining tool. The rules for SEPs are clear and unambiguous. By submitting your patent for inclusion in an industry standard you are agreeing to license it without prejudice to anyone who wants to use it and the licensing terms must be Fair, Reasonable, and Non-Discriminatory (FRAND). You can't refuse to license your patent to a company because they are suing you over patents of their own, nor are you allowed to hike the price up to unreasonable levels as an incentive to settle a legal dispute.

While Apple could certainly be criticized for gaming the patent system, something most tech companies do as a matter of course today, and Microsoft's patent shakedowns are certainly underhanded and dirty. Refusing to license FRAND patents goes beyond taking advantage of a broken system. Imagine what kind of mess the mobile phone industry would be in now without standards to ensure interoperatility between equipment and carriers. If a single company is allowed to decide who gets to use a standard or gouge companies they don't like with outrageous patent royalties, the patent system becomes even more broken than it already is.

When MMI first began pursuing injunctions based on FRAND patents, it seemed initially like it might be a ploy to hold off Apple until Google's buyout was complete, or even just to prevent Google's stock from falling because they were buying a victim rather than a viable company. Despite the timing of the lawsuits against Microsoft and Apple, both of which were filed several months ago, with Google waiting in the wings to take control they clearly orchestrated the entire thing. But for what purpose.

If they continue their suit in Germany, where they have been granted an iPhone injunction, the enforcement of which will be contingent on what happens in a US courtroom. Should the lose in the US, and it seems likely that Apple has a fairly solid argument that Qualcomm, whose chips implement the MMI patented technology, has already covered any required royalties and they are exempt from paying a second time under the doctrine of patent exhaustion. That doctrine is specifically designed to prevent a patent holder from collecting royalties every time a product is re-sold. Once you collect your royalties the deal is done.

Should Apple's patent exhaustion claim be successful, Google could find themselves in a difficult position in the EU, not unlike Samsung who is being investigated for antitrust violations over a similar attempt to improperly use their own FRAND patents to enjoin Apple from selling iPhones in Europe.

It would also seem to provide exactly the kind of evidence Google's many enemies in Washington would love to have against them. Particularly following so closely on the heels of the MMI buyout, they could easily be face antitrust allegations both at home and abroad. Even if Apple's patent exhaustion claim is rejected, Google won't have any more leverage against Apple than before. FRAND rules would still apply and there's nothing Google could do to prevent Apple from licensing the patents.

In any case, even Google's most die hard supporters during this ordeal would have a hard time sympathizing with them on this. Apple is taking advantage of poorly written and enforced rules. Microsoft is doing more or less the same. Google seems to have crossed the line to breaking rules which are both important and fairly enforced. If Google were to get everything they are asking the court for, it would open the door for all kinds of patent extortion by companies who are either unhappy with their FRAND responsibilities or simply vindictive. If Google loses, at best they get nothing but at worst they open themselves up for an antitrust investigation.

The only alternative explanation which seems to make any sense is that the entire case is purely symbolic. Perhaps their real goal is to demonstrate to Android vendors, like Samsung and HTC that they are standing up for them. Given the apparent sceptisim, particularly from Samsung, about Google's commitment to not play favorites now that they own their own handset maker, that would make some sense. The only other option seems to be that their entire case is designed to keep up the illusion that their interest in MMI was all about handsets and tablets rather than set-top boxes. If so, it's a poor excuse considering their new hardware division, the set-top box being tested there, and even their plans to get into the pay TV business are only secret in the sense Google hasn't officially acknowledged them.

Besides, at this point it's not even clear that Google even needs to worry about the outcome of the US lawsuit. The longer the various Apple lawsuits drag out in the courts, the less likely it seems that Android will be banned. In the end it may be that the only real consideration will be the market itself. Certainly Apple, as the largest company in the world which also has the best profit margin, would be hard pressed to prove any damages. Considering a ban on Android devices would effectively hand Apple a virtual monopoly on smartphones, such a move seems both unwise from both a legal and public relations standpoint. Then again, maybe Google's actual plan is to push the court far enough to do just that. It would almost certainly lead to significant pressure on Washington to enact meaningful patent reform.

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2 user comments

15.6.2012 19:36

Sharing to G+ to read later... This looks good! Thanks!


Oh, Im sorry... Did the middle of my sentence interrupt the beginning of yours?

25.6.2012 22:15

One of the best breakdowns of Microsoft, Apple, and Google I've read on Afterdawn. The entire thing is disheartening, though, because past the history lesson and CEO analysis this basically boils down to an analysis of why Microsoft and Apple will beat out the world's greatest company, Google. Apple and Microsoft played dirty in addition to teaming up against Google, and Google's decision to buy Motorola seems to be interpreted by Vurb as a big mistake...

I can only hope that the experts at Google have seen something unseen here in buying Motorola, because I simply can't imagine them taking the initiative to purchase Motorola based solely on the belief that Motorola's SEPs will somehow magically force Apple into a cross-licensing agreement.

Great, educating article.

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