The Gangsters of the Silicon Valley


Where are the jobs? Ask the patent trolls.

Vivek Wadhwa

Washington Post
May 8, 2012

President Obama has been touting patents as a way to create jobs and increase U.S. competitiveness. “These are jobs and businesses of the future just waiting to be created,” he said of patent applications last September, “somewhere in that stack of applications could be the next technological breakthrough, the next miracle drug, the next idea that will launch the next Fortune 500 company.”

The President is mistaken — at least when it comes to the patent system as it relates to software patents. These patents—and the patent system—aren’t creating innovation, they are inhibiting it and, by extension, job creation. Why? Because the breakthroughs aren’t in the patents, they are in the way ideas are commercialized and marketed. Because of flaws in the patent system and government leaders’ misunderstandings, there is an arms race of sorts happening in the tech industry that is sapping billions out of the economy and crushing technology startups. This system is enriching patent trolls—companies that buy patents in order to extort money from innovators. These trolls are like a modern day mafia. Given this, I argue software patents need to be eliminated or curtailed.

In the smartphone market alone, $15-20 billion has already been spent by technology companies on building defenses, says Stanford Law School professor Mark Lemley. For example, Google bought Motorola Mobility for $12.5 billion—mostly for its patents. An Apple-Microsoft-Oracle-Nokia consortium bought Nortel’s patent portfolio for $4.5 billion. Microsoft bought Novell’s patent portfolio for $450 million and some of AOL’s patents for $1 billion. Facebook bought some of Microsoft’s new AOL patents for $550 million. Lemley estimates that more than $500 million has been squandered on legal fees—and battles are just beginning. This is money that could have been spent, instead, on R&D.

The larger players can afford to buy patents to deter the trolls, but the smaller players—the innovative startups—can’t. Instead, they have to settle out of court. Patent trolls take advantage of this weakness.

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