Nokia's infringement suit against Apple illustrates need to scrap US patent system
From a post on Jurist:
Nokia's infringement suit against Apple illustrates need to scrap US patent system
Stephan Kinsella [General Counsel for Applied Optoelectronics and Editor of Libertarian Papers]: "A recent lawsuit filed by Nokia against Apple alleges that the iPhone infringes 10 of Nokia's patents. Nokia is probably "seeking between $200 and $400 million in damages from Apple," which JURIST characterizes as "a relatively low amount to seek from a company that expects revenues...of over $11 billion this year." It doesn't seem trivial to me, given that $400 million is a good chunk - say, 5 to 10% or so - of Apple's profits. And Nokia's is not the only lawsuit Apple faces. Half a billion here, half a billion there, and pretty soon you're talking real money. For other examples, see here.
This case is a good example of the waste caused by the patent system. The common justification for IP is that it increases innovation and overal societal wealth (see my article "There's No Such Thing as a Free Patent"). But study after study concludes otherwise (see my article "The Case Against IP: A Concise Guide," and my post "Yet Another Study Finds Patents Do Not Encourage Innovation"). Is this surprising? After all, the patent system undeniably imposes enormous costs on society - companies spend millions of dollars on patent attorneys' fees and salaries, patent filing fees, licensing fees, litigation fees, and so on. Is the value of the extra innovation that patent law stimulates greater than all these costs? Nobody knows for sure, but the various studies almost universally conclude no. Some studies even conclude that the patent system decreases overall innovation, meaning that that we are paying a huge cost just to have innovation impeded. Thus, as noted by Mike Masnick, "if you build anything even remotely innovative these days, you're going to get sued for patent infringement, probably multiple times. It's become a massive tax on innovation, rather than a lever for innovation."
Many patent lawyers and IP advocates begrudgingly admit that the system is broken, or at least needs significant improvement. As a senior partner in the patent department of a major national law firm wrote me:
Stephan, Your letter responding to Joe Hosteny's comments on Patent Trolls nicely states what I came to realize several years ago, namely, it is unclear that the US Patent System, as currently implemented, necessarily benefits society as a whole. Certainly, it has benefited [Hosteny] and his [partners] and several of their prominent clients, and has put Marshall, Texas on the map; but you really have to wonder if the "tax" placed on industry by the System (and its use of juries or lay judges to make the call on often highly complex technical issues that the parties' technical experts cannot agree on) is really worth it. Of course, anyone can point to a few start-up companies that, arguably, owe their successes to their patent portfolios; but over the last 35 years, I have observed what would appear to be an ever increasing number of meritless patents, issued by an understaffed and talent-challenged PTO examining group, being used to extract tribute from whole industries. I have had this discussion with a number of clients, including Asian clients, who have been forced to accept our Patent System and the "taxes" it imposes on them as the cost of doing business in the USA.
But I disagree that the patent system is broken, or malfunctioning at all. It benefits certain people and companies, as all taxes and regulations do. The beneficiaries of this government program defend it with various forms of propaganda. For example, they say that is a major cause of innovation and wealth - indeed, that it is necessary for innovation. But as noted above, there is no proof that patent systems generate net wealth. Another tactic is to call patent a property right - in particular an "intellectual property right." But calling it a property right does not make it so. In fact, as I have argued extensively - from the perspective of someone who is both as a practicing patent attorney familiar with the system and a libertarian who is a strong advocate of private property rights - patent rights are not genuine property rights. Patents are artificial privileges granted by the state that actually undermine private property rights. A patent is a government grant that gives the patent holder the right to tell others how they can use their own property, by vetoing certain uses. They can use this veto right to extort ransom payments, politely called licensing royalties today.
IP advocates often say that infringers "steal" ideas from the originators, to bolster their characterization of ideas and patterns as property. In fact, in the dispute at hand, as reported here, "Nokia said Apple has refused to pay for use of intellectual property developed by Nokia that lets handsets connect to third-generation, or 3G, wireless networks, as well as to wireless local area networks. 'Apple is attempting to get a free ride on the back of Nokia's innovation,' Ilkka Rahnasto, Nokia vice-president for legal and intellectual property, said in the statement." In other words, Nokia is trying to make it look like Apple copied Nokia's patented inventions, so that it looks more like a thief. But in a patent infringement lawsuit, the patentee does not need to prove copying. In fact, the infringer could have independently invented the technology, totally unaware of the patentee's invention, and still be liable. While Nokia here implies Apple is getting a "free ride" by using IP "developed by Nokia," you can bet that they will happily accept a win in court over Apple even if Apple is shown to have independently invented the technology.
And what is wrong with copying, anyway? This is how society and technolgy advances: by emulation, by learning. The free market thrives on competition and cooperation, and also on emulation and imitation. Every stage of technology is built on the body of knowledge developed over the centuries. Emulation and the acquisition of knowledge play a key role - are essential to - society and economy. Nokia's own technology was not developed in vacuo. There is nothing wrong with imitation. It is part of the market. It is essential to progress. It is no more theft than learning is. In fact, IP can be a barrier to learning, and even lead to censorship.
So, no, the patent system should not be reformed. It should be abolished, for the sake of freedom, private property rights and prosperity.
For further elaboration of the ideas expressed in this post, see my monograph Against Intellectual Property, my article "The Case Against IP: A Concise Guide," and other material on my website."
Update: see Intel Will Pay $1.25 Billion to Settle Disputes With Rival, reporting: "Ending the computer industry's most bitter legal war, the chip maker Intel agreed on Thursday to pay a rival, Advanced Micro Devices, $1.25 billion to settle antitrust and patent disputes."
$1.25 billion in wealth transferred, and untold hundreds of millions spent on litigation, patent acquisition, losses due to strategic adjustments in response to antitrust and patent law ... Yet another example of how the central state's artificial legislative patent and antitrust schemes do nothing but destroy and waste wealth. Well, not only that--they also enrich certain classes who parasitically benefit from the system, e.g. patent lawyers, litigators, and large companies.
Comments (11)
crazynutjob
"Half a billion here, half a billion there, and pretty soon you're talking real money."
Real money? No, I'm pretty sure we're still talking about fiat money.
Sorry, couldn't resist.
Published: November 6, 2009 12:45 AM
TokyoTom
"scrap US patent system"?
Stephan, how is your appeal here to political action consistent with your rejection of any efforts, in the context of climate change, to deregulate utilities, loosen air pollution regs, roll back corporate taxes and privatize federal lands?
You`re an ancap, remember, not a damned activist or dirty accommodationis!
Published: November 6, 2009 3:11 AM
Bala
TokyoTom,
" how is your appeal here to political action consistent with your rejection of any efforts, in the context of climate change, to deregulate utilities, loosen air pollution regs, roll back corporate taxes and privatize federal lands? "
Maybe the reason there is no inconsistency is that what was rejected in the context of climate change was not rejected on its merits (or the possible lack of it) but the context of climate change?
IMO, you are missing the point that taking up major points regarding deregulation in the context of climate change requires the implicit acknowledgement of the position of the Global Warming and Climate Change proponents - an acknowledgement Stephan is probably not ready to give. A person who rejects the position of the GW & CC hysteria crowd on the grounds that
1. their science is unproven, inconclusive and hence unreliable
2. their science is highly politicised
will not see any merit in linking up valid proposals with their agenda.
Proposals regarding deregulation have merit with or without climate change. Your attempt to try to link them up is what is misplaced enthusiasm.
Published: November 6, 2009 5:14 AM
Stephan Kinsella
Tokyo:
"Stephan, how is your appeal here to political action consistent with your rejection of any efforts, in the context of climate change, to deregulate utilities, loosen air pollution regs, roll back corporate taxes and privatize federal lands?"
What are you talking about? Where have I "rejected" "efforts" to "to deregulate utilities, loosen air pollution regs, roll back corporate taxes and privatize federal lands"? I am in favor of all these things.
Published: November 6, 2009 9:21 AM
Ohhh Henry
"there is no proof that patent systems generate net wealth."
Net wealth a.k.a. "the greater good" cannot be measured because happiness or sadness is experienced individually and you cannot weigh one person's feelings against another person's feelings in a balance.
Secondly, it goes against human nature to be concerned about "net wealth" (the greater good of society) instead of being concerned about personal wealth. People who are truly selfless such as Mother Teresa are as rare as hen's teeth.
Therefore it is impossible that the people who control a system of allocating and protecting monopolies will do so for the benefit of others and not for the benefit of themselves. In the absence of a free, competitive market for their services they cannot determine whether other people are satisfied or not, and in any case since they control a monopoly they have no strong motivation to do so.
Published: November 6, 2009 12:01 PM
Fed Up
Oh yeah, Stephen Kinsella, Mr. Anti-IP in person. Mr. "I Hate IP" in person. The great IP hater... Mr. Stephen Kinsella.
I propose we create a new verb, to kinsell, which would mean to eliminate the IP system.
It's time we kinsell the IP system once and for all.
Save IP System before leaving ?
|Yes| |No| |Kinsell|
Published: November 6, 2009 12:28 PM
Fed Up
In other words, Nokia "invented" the concept of connecting a handset to 3G networks.
Now, if a company owns a 3G network and decides to develop an application to connect it's handsets to it's 3G networks, it would "violate" Nokia's "invention" ???
Nokia is not even claiming a technology nor a process here. How can Nokia claim to own the idea of connecting a handset to a 3G network ???
Totally insane. Now it's not technology that is pantented, it's usage.
Published: November 6, 2009 12:41 PM
jgo
I can't help but notice the elephant in the room. No one has said anything about whether Nokia or Apple has the prior art.
As to 3g networks. I hereby declare the one Apple is using to be a 5g network. Poof!
Or is someone claiming the patent on numbering generations of technology? Pffft!
Published: November 8, 2009 11:21 AM
TokyoTom
Stephan: "What are you talking about? Where have I "rejected" "efforts" to "to deregulate utilities, loosen air pollution regs, roll back corporate taxes and privatize federal lands"? I am in favor of all these things."
In looking back, I see that you finally did, reluctantly, get around to agreeing to these things. My bad.
Sorry to push the threadjack, but then there are others, like Bala, who think that it is a strategic mistake to make an effort to persuading the enviros or others that rolling back the state (and others who seem to think the effort itself is actively evil: http://mises.org/Community/forums/t/11818.aspx ).
But all such efforts, including efforts to reform the IP system, involve persuasion and accommodation.
Published: November 8, 2009 11:37 AM
Mike D.
Stephan:
Is anything positive likely to come out of Bilski? Or are the Supremes just going to reject Bilski but allow other ridiculous software patents, particularly for very simple and non-original ideas?
http://finance.yahoo.com/news/Software-cos-eye-key-patent-apf-2018569048.html?x=0&sec=topStories&pos=7&asset=&ccode=
Published: November 8, 2009 1:37 PM
Bala
TokyoTom,
" but then there are others, like Bala, who think that it is a strategic mistake to make an effort to persuading the enviros "
You got me all wrong. I was saying that if your statement that the concern among enviro's regarding GW & CC presents an opportunity to get them also to support steps towards deregulation is incorrect.
Your statement reflects a lack of understanding of the mind of an enviro. Firstly, these are people who, for an entire lifetime, have been brainwashed into believing in the notion that human activity is causing the current round of GW & CC. I live in India. Recently, while in the process of designing curriculum for the pre-school that my wife and I run, I checked out the prescribed text books of 6-8 year old children. Guess what I found regarding GW & CC - That human industrial activity is causing it and that cutting emissions and controlling GW & CC is the prime challenge ahead of us. That's how early the brainwashing starts. You should see the way the hysteria is built up in the name of campaigns to "save the planet".
Secondly, these are very misguided people whose thinking (if you will call it that) starts from ridiculous notions such as "conservation" of the environment. For the life of me, I can't figure out how (in the big picture) you maintain an advanced industrial lifestyle while conserving your environment. I am therefore forced to conclude that enviros are actually part of the "anti-industrial revolution". They seem to hate human progress because they see all human progress as causing degradation of the environment they hope to conserve. These are people who want to have the cake and eat it too.
All I am saying, therefore, is that trying to make the enviros your allies on the grounds that you think you can convince them that your agenda serves their agenda as well is highly misplaced. I am not saying "Don't engage them." I am saying "Your suggested way of engaging them is flawed.".
In other words, go ahead and engage enviros on deregulation, but I would not suggest holding out the carrot of "atmospheric CO2 level reduction" to tempt them to come on board. As I said elsewhere, deregulation has merit with or without CO2 emission control. The same goes for abolishing IP laws.
Published: November 8, 2009 11:35 PM