Why Apples Defeat to Samsung Was a Victory for Innovation

Apple just suffered an important legal defeat to Samsung in its battle over patents. This is good because Apple’s claims were frivolous; its patents were questionable; and its use of litigation to hold back a competitor set another wrong precedent for the industry. Because of these patent wars and patent trolls, technology companies are divesting huge resources to defend themselves rather than advancing their innovations. This is the equivalent of nuclear arms race and is a lose-lose situation.

Apple and Samsung have been at war over patents for many years. In the last round in 2014, a jury ordered Samsung to pay Apple $119.6 million in damages for infringing on three Apple patents. These weren’t game changing innovations; they were simple and common smartphone features. One patent described how to turn a phone number into a link that could be clicked on, another protected the “slide to unlock” feature, and another was a slightly different way of auto-correcting spellings.

A three-judge appeals panel agreed with Samsung that there was substantial prior art for the first two patents and these should never have been granted. They also concluded that Samsung didn’t infringe on Apple’s auto-correct patent.

If reason prevails, this ruling will stop the smartphone patent wars. What is best for innovation is a thriving ecosystem in which companies build on each other’s ideas and constantly reinvent themselves — instead of trying to slow each other down in the courts. It is bad enough when big companies with deep pockets battle each other, but for young companies, lawsuits can be fatal. Fledgling innovators have to live in constant fear of a big player or patent troll pulling out a big gun and bankrupting them. For startups, this is a greater concern than someone stealing their ideas.

This begs a bigger question: do we even need patents in an era in which technology is advancing so rapidly that it makes entire computing platforms obsolete in less time than it takes to be awarded a patent?

Stanford Law School professor, Mark Lemley, who is my colleague, says that when used correctly, patents can be valuable because they generate real technology transfer. But patent litigation, such as what Apple resorted to, rarely does the world any good. Says Lemley “in this case, they’ve spent years, countless court resources, and literally over one billion dollars in attorney and expert fees to produce a net fee award of $158,400 — and ironically, this went to Samsung.” He notes that in an earlier case, Apple won a significant amount of money that it may or may not get to keep depending on what the Supreme Court rules. “Other than that, not much has changed as a result of the lawsuit”, he concludes.

In a new paper, “Patent Licensing, Technology Transfer, & Innovation,” that Lemley co-authored with Robin Feldman of University of California Hastings, the key finding was that patents are only useful when they deliver innovation to consumers that they would not otherwise get. This happens in the pharmaceutical industry when a company is allowed to exclude competitors for a fixed period of time to recoup its sizable investment in research. Value is also created when a university transfers know-how along with a patent and when an infringer copies from the patent owner.

If a patent isn’t causing innovation to get to consumers, it is not helping society, however.

Lemley and Feldman found that that patent litigation and licensing demands for existing patents only happen after the defendant has developed and implemented the technology, particularly when patent trolls are involved. And they cite several studies which show that patent trolls now account for the majority of patent lawsuits that are filed.

This means that other than through university technology transfer, hardly any innovation is being created by technology patents. Therefore, it may be best to abolish them, particularly software patents–which have long been clogging up the patent office.

Universities are very defensive about patents; they argue that they need these to protect their ideas and inventions. This may be true, but it leads to yet another question: should universities be profiting from license revenue obtained from research that was publicly funded? Regardless of the answer, for the larger cause of innovation, it is clear that patents are not fulfilling the purpose for which they were intended. The often-cited defense of patents, that patent rights encourage inventions that would not otherwise occur, is no longer grounded in reality.

Patents were created by the founders of the United States for a purpose: “to promote the progress of science and useful arts, by securing for limited times to authors and inventors the exclusive right to their respective writings and discoveries.” Patents were very important when technology moved very slowly and required the types of investment and protection that medical discoveries and pharmaceuticals do. And there may be rare instances where unique software algorithms need protection. But all of this can be achieved through copyright laws and trade secrets.

In this era of exponentially advancing technologies, the only protections that really matter are speed to market and technological obsolescence. The underlying technologies are changing so fast, that by a time a patent is filed, it loses its innovation value.

About Author

Vivek Wadhwa is Vice President of Innovation and Research at Singularity University; Fellow, Arthur & Toni Rembe Rock Center for Corporate Governance, Stanford University; Director of Research at the Center for Entrepreneurship and Research Commercialization at the Pratt School of Engineering, Duke University; and distinguished visiting scholar, Halle Institute of Global Learning, Emory University. He is author of ”The Immigrant Exodus: Why America Is Losing the Global Race to Capture Entrepreneurial Talent”–which was named by The Economist as a Book of the Year of 2012. Wadhwa oversees the academic programs at Singularity University, which educates a select group of leaders about the exponentially growing technologies that are soon going to change our world. These advances—in fields such as robotics, A.I., computing, synthetic biology, 3D printing, medicine, and nanomaterials—are making it possible for small teams to do what was once possible only for governments and large corporations to do: solve the grand challenges in education, water, food, shelter, health, and security.

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