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Summary:

Omar Little had it right: there’s a game out there, and you either play or get played. One of the most compelling characters from the televi…

Idea Light Bulbs

Omar Little had it right: there’s a game out there, and you either play or get played. One of the most compelling characters from the television show The Wire probably wouldn’t have cut it as a mobile executive or a patent lawyer, but his words underscore just how self-defeating it can be to complain about the rules of the dysfunctional patent game.

That’s why Google’s attempt this week to warn the public of a vast right-wing conspiracy bent on its destruction didn’t really earn it any points, and Microsoft’s release of a private e-mail designed to make Google (NSDQ: GOOG) look hypocritical was childish in its inability to recognize Google’s broader points. Google is right about two things: the patent system is ludicrous and it has no choice but to participate. But you have to wonder what Google hoped to gain by launching a public assault on Microsoft (NSDQ: MSFT) for playing the same game Google is obviously desperate to play.

Regardless of your corporate loyalties, let’s not be confused about one thing: the U.S. patent system is a mess. The U.S. Patent and Trademark Office is so backlogged that somebody thought it would be a good idea to build a Web-based dashboard illustrating the gravity of the situation.

According to the U.S. Patent and Trademark Office, 6,775 people worked as patent examiners as of June 2011. There is a backlog of 695,086 patent applications waiting to be processed (actually the lowest number in two years), and applications are growing each month, with 372,980 added in June alone.

If patent applications stopped tomorrow, each patent examiner would have to process about 103 applications to erase the backlog, and in 2009 the average examiner disposed of (approved or denied) 73 patents. The PTO estimates that it would take 22 months just to issue first office actions (i.e., getting around to reading the patent, researching prior art, pondering the claims, and then asking the applicant for further details) for all the applications in that backlog, and the average application requires 2.9 separate office actions. In other words, those people are under an enormous amount of pressure simply to keep their heads above water, let alone consider an extremely complex technical concept with as much knowledge as the company that applied for the patent.

Software and patents: Given the complexity of the tech industry and the fact that software is more art than machine, it’s simply too easy for patents to be issued that are exceedingly vague, obvious, or simply “bogus,” as Google’s David Drummond put it in his blog post. In an ideal world, patents reward inventors for breakthroughs. In the real world, they reward those who encourage engineers to patent anything they can think of and keep a legal department fully staffed to crank out as many applications as possible.

And so with patents easy to obtain but yet still subject to the same legal protections and privileges, tech companies wind up playing out the principles of “mutually-assured destruction,” the Cold War concept reinvented for the modern mobile computing industry. That’s why Google needs patents, even bogus ones, and is scrambling to find some after Microsoft, Apple (NSDQ: AAPL), and others bought a huge chunk of mobile patents from Nortel for $4.5 billion. Even if the concept of patenting software is abhorrent to many in the tech industry (a position that Oracle, currently suing Google for patent infringement of the Android software, once held) their existence is the best way to ensure that you can negotiate a reasonable settlement when sued by a competitor.

I had an off-the-record conversation with a senior legal executive at a major smartphone company earlier this year mostly for the purposes of providing some basic context around how patent negotiations play out. It was revealing: there’s no practical way for someone who builds a new product to obtain a patent license until they are approached by the patent holder for licensing discussions or sued, and there’s certainly no incentive.

Because patents are deliberately written to cover as broad a range of concepts as possible, there’s no definitive way for a person or company that has invented a product to know whether or not they are stepping into patented territory. There are some obvious infringers just trying to make a quick buck, to be sure, but some tech patents are so vague that they appear to cover anything with an on/off switch. Inventors and entrepreneurs are not people who are going to put their idea on a shelf if they come across a ridiculously broad patent, and if they’re unsuccessful, it would have been silly to pay a licensing fee up front. But patent holders have a way of finding companies they perceive to be infringing as soon as the business gets big enough to take a chunk.

The question of whether a product really infringes on a patent doesn’t get addressed until the parties reach the pretrial phase in what’s known as a Markman hearing, during which the judge presiding over the case decides how the key parts of the patent language will be interpreted. That decision can make or break the lawsuit, and it costs a lot of money to get to that point.

With patents, even ones that it doesn’t necessarily believe are legitimate, Google could promise to make life more difficult for those suing it by filing its own patent lawsuit, which would have to be considered on its own merits and would raise the possibility that these disputes end in settlement talks and royalty negotiations rather than court rooms and injunctions. So without patents to hurl back at accusers, Google is extremely vulnerable to getting sucked into expensive patent trials that may never amount to anything, or, in the worst case scenario, could ruin the company even if the patent at issue is a joke.

Patent Madness: This is stupid. It’s a colossal waste of time and money, bolstered by patents that may or may not have actually been read and a trial system that assumes each patent is valid until the patent office decides otherwise. It’s a game of chicken (or a protection racket, if you prefer) in which companies accused of patent infringement have limited defenses.

But Google is going to play the game, because if it wants to continue life as one of the biggest companies in the tech industry it doesn’t really have a choice. Unlike in WarGames, the only way to lose this game is not to play.

Google’s continuing problem, however, the one that exposes it to such criticism, is that it continues to believe that it is somehow different from its competitors, who it suggests are not playing fair and are just jealous of its success.

“Google is not a conventional company. We do not intend to become one,” wrote Larry Page, Google’s current and founding CEO, in the 2004 letter that accompanied its initial public offering. Well, in 2011, conventional mobile companies are making sure they have a strong intellectual property portfolio to defend themselves against attacks from competitors searching for weak points. That is exactly what Google is doing.

Patents are now competitive weapons in the same way supply-chain agreements, employee poaching, and advanced data centers provide companies with competitive advantages. And Apple and Microsoft aren’t doing anything illegal or even necessarily immoral: if they believe Android was developed largely on the backs of their patented technologies, they have the right to do something about it armed with patents that were awarded according to the law.

Whether or not those patents should have ever been awarded is a separate question. But each time Google complains about the rules of the game, it underscores just how weak and vulnerable it is in a legally sanctioned game without serious patent reform (not this thing), which simply isn’t going to happen any time soon in the current political arena, arguably even more dysfunctional than the patent system.

And it also makes the other players at the table take notice. The only thing Drummond may have succeeded in doing is driving up the price of entry into the game.

  1. You make no sense. Google has to whine about this all they can, these bogus software patents are completely ridiculous.

    And anyways, you can be sure the open handset alliance members have plenty enough of their own patents and their own prior art to demonstrate that the patent lawsuits against Android are completely stupid and should all be dismissed.

    Android has won, Apple and Microsoft are LOSING. This is what this is all about. Apple and Microsoft are hoping for some miracle of some kind somehow being able to forbid the sale of Android devices, somehow forcing Android makers to pay them unreasonably high licencing, those are the only hopes Apple and Microsoft have to still be part of the game. Apple and Microsoft are finished.

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    1. You are funny. Apple commands 66% of mobile profits. “part of the game”….lol

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      1. No they don’t. Stop reading Apple fanboy news, Samsung just their Android business is a bigger smartphone maker than Apple.

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        1. I would happily read the official Samsung release that states exact shipment/sales figures (they won’t even announce smartphone shipments) and also states their mobile operating profit as exceeding Apple’s. Please provide that link, thanks.

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          1. Samsung is practically state owned, they represent more than 20% of South Korea’s GPD. They don’t have to tell you anything.

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            1. State ownership gives you the right to make up crap and lie? I don’t follow the logic.

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            2. Perhaps you need to look outside of your silicon valley and realize none of these technologies are made in the silicon valley, except perhaps Android. That core jealousy and them seeing this business run away from them is the only reason those outdated silicon valley companies are suing and getting bogus media to talk about it.

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            3. My last several comments have largely been rebuttals to your lies about Samsung. None of my statements claim any unique strenth or expertise for anyone, let alone one or more companies in SV. Not sure what you’re trying to blabber about now. Especially the absurdity that somehow Android is a uniquely innovative, Silicon Valley grown group of technologies that can’t be claimed of others.

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            4. Charbax, It’s difficult to see how anyone could shed a tear for a company that’s earning billions on the backs of its competitors — other than a Google employee or indefatigable fanboy.

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    2. you can always tell a fanboy.  They are the ones that don’t understand words that an average 7 year old learns, like LOSING/LOOSING.

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    3. HTC is the only known, large Android distributor paying Microsoft for access to their patents; they are also making the largest profits of any Android ODM — what makes anything above ZERO “unreasonably high licensing”?

      And in what way is Google being picked on more than anyone? Apple is being sued by about 8 companies (I can think of NTP, Kodak, Acacia Research, Elan, Motorola, Nokia, etc…) not to mention non-mobile patent suits. Every Google supporter wants to paint Apple as a scorched earth aggressor: they have sued 2 companies first (HTC and Samsung) and counter sued 2 others (Nokia and Motorola). And I don’t think the Samsung suit is your typical case; they have a very strong argument mostly based on copyright and trademarks. They have already settled one suit. Why isn’t it unreasonable for Apple to pay legal fees, settlements, and patent licensing fees.

      Moreover, there is no evil cabal: the motivations of Oracle, Microsoft, and Apple couldn’t be more disparate.

      The pathetic thing is that Google’s own supporters act as if Android will fall off the face of the earth if their growth rate is slowed from already 50% market share and growing at whatever absurd rate each day or if it were to actually have a cost between $0 and $30 per install license. That’s not having much faith in the actual technology.

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      1. Samsung is making the largest sales and largest profits on Android, Apple is asking courts to stop all Samsung sales worldwide, read it up. They are afraid. Apple never invented anything. There are smartphones with similar icons and design years before the iphone and ipad were released.

        HTC is a Microsoft customer on Windows Phone. For no other reason is HTC paying microsoft money which Microsoft can say is Android money when in fact it is nothing other than part of thw Windows Phone licencing disguised as Android licencing. Microsoft does same every time they see threat in Linux. Sue for patents, Microsoft never invented anything.

        Apple, Microsoft, RIM joined forces to buy Nortel patents to use them against Android. Nothing else. You read it up.

        Android shall have $0 licencing, there is no reason we can’t have a licence free open source and totally free software. End of story. Microsoft, Apple, Mpeg LA can go away, let them go out of business.

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        1. Samsung is making the largest sales, they are not making the largest profits. Yes, Apple is asking Samsung to stop copying them and they have a strong case.

          What’s all this read up crap? I’m fully informed. Now, where you may be wrong is: Apple, Microsoft, RIM joined forceds to sue Google. Are you sure? Rumor is RIM and Microsoft only got a license and Apple is the holder of the patents. What if Apple also only wants to use them defensively and withhold them from Google. (You know: what Google wanted them for?) They did after all already have to explain how they were going to use them to the DOJ before they were even allowed to bid.

          And I didn’t ask if we could have a free mobile OS; I asked why can Google only compete if it is free. Just because we could have a free OS or it could be nice, does not mean that Google has a de facto right to make Android free and (potentially) use other companies’ IP. Heck, they do have the right and privilege to pay for any potential costs and underwrite it for its developers though; they do it for several other products.

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          1. Software patents are all BS and nothing more. For one, everything has been invented before, All software patents are completely worthless pieces of junk, stuff that can only get through 1 or 2 compeltely corrupt small town texas courts. You go ahead and think that is correct.

            Second, you have no idea how much of Samsung’s $20 Billion yearly profits and $340 Billion in assets comes from their smartphone business, there are in no way required to give you that information, go ahead and guess all you want. HTC is not the biggest Android smartphone maker regardless from quantity, revenues or profit.

            In fact, Samsung is now selling more Android smartphones than Apple is selling iPhones. And before Christmas, Samsung alone will also overtake iPad in tablet sales. Android tablets will way overtake the iPad.

            If you think Google would create Android breaching stupid software patents think again, they’ve got the most talented software patent lawyers working for them. Regardless the fact Apple lawyers make 10x more money than all other silicon valley company lawyers combined.

            The fact is simply this, Apple, Microsoft, RIM, are completely desperate. They have no idea what to do on this market other than to try and sue Android with as much BS patents as they can, their only hope is for some courts somewhere to somehow order the blockade of Android sales, it is their absolute only hope to have any significant market share in this future Smartphone and Tablet market.

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            1. I never said I thought the patent situation was correct or good.

              You jsut went from saying that Samsung is the largest and most profitable smartphone developer, to saying you have no idea. Why did you lie in the first place?

              HTC is most assuredly the most profitable (on a unit basis) Android developer. Yes, I know enough about Samsungs financials to say they make a much smaller profit per phone than HTC.

              Yes, I would think Google is capable of making mistakes; only a completely delusional fanboy would say they are infallible. Moreover, didn’t you just say the patent situation makes it impossible for companies to comply and remain patent non-infringing even if they wanted to?

              The only desperation I’m seeing is in fanboys like you and Lucian and from Google’s PR.

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            2. Google is not desperate, far from it. But it’s their right to clearly point out when the rest of the industry are trying to cheat.

              Samsung has over $200 Billion yearly revenues, over $20 Billion in yearly profits. They manufacture parts in nearly all smartphones, HTC included. Samsung is best positionned to completely replace Nokia in developing countries with their line of cheap Galaxy Android smartphones and they dominate the high-end by producing the absolute best smartphones. It’s only a matter of time until their Super AMOLED Plus screen production is in full production volume and for phones like Galaxy S2 to sell more by themselves than any latest iPhone. Samsung has more smartphone profits than HTC. That thing is for sure.

              And if you want to suggest HTC is making more profit per phone based on them now having to use LCD while Samsung uses their more expensive Super AMOLED Plus, that argument is discarded by the fact Samsung makes more profits using their own Flash memory, Processor and other components which HTC has to buy from suppliers, Samsung included. And, Samsung just as well sells LCD based smartphones as well from the low end to high end.

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            3. Let’s agree that not a single data tracking firm agrees with your specious claim that Samsung is the largest smartphone distributor and that neither you or Samsung are willing to present a single shred of evidence to support that claim. Let’s also observe that you can’t back up any claim regarding profit, but you were willing to lie about it several times.

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            4. Let’s agree you don’t know what you are talking about. Everyone who understands the industry knows Samsung has already overtaken Apple in terms of smartphone sales and is clearly the fastest growing smartphone maker http://www.bloomberg.com/news/2011-07-24/samsung-may-have-surpassed-nokia-apple-in-second-quarter-smartphone-sales.html

              HTC, Motorola, LG, Sony-Ericsson, Archos, Huawei, ZTE, everyone is making huge profits thanks to Android, HTC is doing great as are everyone else. HTC is not selling any Windows Phone. Yet they still feel they need to have those ties with the Microsoft. They have M$ people pitching them ideas about Windows 8 etc and in exchange, that is why they agree to “licence” Android from Microsoft, which is none other than complete bogus and not based on reality.

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            5. You linked to an article prior to quarterly announcements that says “maybe.” Every article since says close, but no, Apple was the largest.

              No, very few of the companies you name are making profits at all, never mind “huge profits.”

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            6. Go back to reading MG Siegler and other such sources of yours. Samsung does not give you numbers but most respectable analysts know Samsung has overtaken Apple and is now the biggest smartphone maker. And go dream somewhere else if you don’t want to realize Android single-handedly turned the business around for Motorola, HTC, Samsung, Sony-Ericsson, Archos, Huawei, ZTE and many others, basically anyone that uses Android automatically grows, expands, increases market share, revenues and profits. Every single Android maker is growing all thanks to Android and nothing else. RIM, Nokia, HP would also all be growing in this market if only they’d care to embrace Android instead of insisting being on the losing proprietary side.

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            7. Show me any current report estimating Samsung actually sold more phones this quarter than Apple. Show me one financial statement that doesn’t show Motorola, LG, and SE posting losses in smartphones this quarter. Please.

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            8. “Google is not desperate, far from it. But it’s their right to clearly
              point out when the rest of the industry are trying to cheat.”

              The industry isn’t “cheating”. Patents are formulated and protected by law here in the United States. Face it. Google is being run by a bunch of arrogant boys who thought that they could ignore patent-holders’ rights and try to co-opt their technology without paying for it. The truly amusing thing is that Google apparently thought that, because they’re giving away Android ostensibly for free to ODMs, that nobody would sue them. Well, to say that they miscalculated is a huge understatement. Google is going to have to license the patents it should have licensed in the first place; and, if they refuse and take their chances in court, they will probably have to pay treble damages for willfully infringing. The emails revealed in court thus far show that Google was aware of its obligations to license the patents but wilfully decided against it.

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            9. “Software patents are all BS and nothing more. For one, everything has
              been invented before, All software patents are completely worthless
              pieces of junk, stuff that can only get through 1 or 2 compeltely
              corrupt small town texas courts. You go ahead and think that is correct.”

              You’re delusional. There is fundamentally no difference between software — and firmware/microcode executing in hardware. And few people would argue that hardware shouldn’t be patentable  I love how people that own nothing and create nothing like to argue that those who invest shouldn’t be able to profit from their inventions. Want to know what that produces? Welcome to China. Where there is zero respect for intellectual property, people copy each other’s rubber dogshit technology, and everyone races to the bottom on price and quality. Have you actually seen the cars that China produces? I saw an amusing video recently where they did offset crash-testing. The result: Epic Fail. In a market where you can’t leverage your intellectual property to protect yourself from being ripped-off by your competitors, the result is constant price-undercutting and creation of crap. But, hey, maybe you like buying crap.

              The problem that I have with Google is that they’re leveraging a monopoly in search to dump Android onto the market at below-cost, and in a manner intended to undercut competitors. This is horrible for the free market. It will force competitors out of the market, and will eventually create a discincentive to innovate.

              What I would prefer is to see all of the mobile OSes have a similar price structure. This will ensure the greatest amount of competition. Let them compete on technical merit, not on artificially low prices from a monopolist.

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  2. notoleranceforwhining Saturday, August 6, 2011

    People are silly if they even listen to Google whine about patents.  Android is a great product, was put out to market quickly, and has been a huge success.  Those reasons alone don’t justify copying someone elses patented ideas.  If you want to use an idea that is patented, most companies -including Microsoft – are willing to license the patent.  Google doesn’t care about using patents for their products, otherwise they would have joined the consortium to buy into the patents, or would pay royalties and charge for the versions of android that have others IP in it that require licenses. If Google had bought into the consortium for Nortel Patents, it would have not given them any leverage over others in the consortium, and that was the whole point for Google.  They didn’t “want” the IP to use themselves, they just wanted it to hold over others heads to use others IP without paying them. 

    What is wrong with Apple and Microsoft trying to profit from their hard earned & patented ideas?  Why would google think they can use anyones patents for free?  Google doesn’t give out their search algorithms for Apple, Yahoo, and Microsoft to use for free.  They charge me .50 cents every time someone clicks on my ad that I have with them for my small business.

    Android isn’t simply a free OS that is given out of the goodness of Google’s heart.  It is what Google is counting on to drive search traffic to them, and then making a mint by giving ads back.

    Now, I agree the Patent system is a mess, but it is the best mess we have right now.  Would it be better to be like China and have little major innovation because everyone just copies IP and the inventors don’t get their share of the revenue to keep innovating?  I don’t think readers would give much sympathy if it were a company in China making copies of Apples Iphone, or John Deere tractors.

    Sometimes it is best to act first, and ask permission later, but just don’t whine about it when asked to account for for your impromptu actions.   Android is here to stay, but I don’t have a problem if Google has to pony up a $15 license fee to msft or aapl to pay for IP because it still will only take 30 clicks from users coming to my site to pay for that license at .50 cents a piece.

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    1. “What is wrong with Apple and Microsoft trying to profit from their hard earned & patented ideas?”

      I think you missed the entire point of this article. The point was that these patents are NOT hard earned. They are trivial or obscure ideas that get patented, that even the developers themselves would be ashamed to admit they participated in patenting them. A “patent” is NOT a technology or an invention. You can NOT use a patent to invent something. It’s simply a legal construction to stop others from copying your “idea” – not your “invention” (copyright is more appropriate for that, actually). Do you really think only one person in the whole world has a certain idea? Ideas should never be patented. Ideas mean nothing without execution. 

      So why shouldn’t other companies be allowed to use a certain idea, that they probably came up with themselves, to have a *better execution* of it, just because someone patented the idea before them? How does THAT help innovation and growth, if you can’t simply use a similar idea to build something?

      The patent system does not do what it was build for – to encourage innovation, growth and start-ups to be built. They let some companies hold legal monopolies on ideas, and usually those companies are big corporations, not the start-ups, and it always puts the start-up in a weaker position.

      Do you really think people should go through the patent database everytime they try to build something? So they should look at hundreds of thousands of patents before they even build something? Is that how it works in real world? You can’t build anything complex anymore without having most of what you built infringe on some patents – EVEN if you didn’t deliberately copy anything. And that’s why copyright would be much better suited for patents, because it means you can still build a similar idea, but without copying the exact code of others. But in the end, even copyright is silly in the digital world. Copyright is not compatible with a digital world of sharing and almost free copying and distribution.

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      1. PeaceInMyTime Sunday, August 7, 2011

        If patented ideas are trivial or obscure, a creative company would have no difficulty working around them or avoiding them all together.

        Google should be careful what it advocates since the foundation of the company is patented search algorithms — ideas — that some advocate should be free for anyone to execute.

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      2. Your missing the fact that several of these patents have been strongly upheld in court. You may not like that, but again, it is the game. Secondly, I didn’t see you crying for Microsoft during the Eolas case. I don’t see you defending Apple from NTP, Kodak, Acacia Research, Elan, etc…. You are quite specifically arguing from a perspective that Google is in a unique position. They aren’t. The only think different about Google is that they were stupid to ignore the game, are playing it badly now that they have woken up, and are still whining about it.

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  3. PeaceInMyTime Saturday, August 6, 2011

    Sorry, Google is extremely hypocritical.  The company’s foundation is software patents, specifically search algorithms.  Yet Googles “uses” other’s IP, often giving it away as its own for free.

    The best analysis I’ve read is: http://fireballed.org/linked/2011/08/04/google/

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  4. notoleranceforwhining is right . . . Google is essentially stealing IP, saying they shouldn’t have to pay for it because they are giving it away for “free”, and then making huge profits by driving their mobile search results.    Google is indirectly profiting from stolen ideas.   What ever happened to my “Do no Evil?”

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  5. I love how the delusional Google fanboys act like poor wittle Google is FORCED to play by the same rules even though they don’t want to. If they got those Nortel patents, it isn’t as ifthey would have allowed others to use them. they wanted them to make money…period.

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  6. >  This is stupid. It’s a colossal waste of time and money, bolstered by patents that may or may not have actually been read and a trial system that assumes each patent is valid until the patent office decides otherwise. It’s a game of chicken (or a protection racket, if you prefer) in which companies accused of patent infringement have limited defenses

    What a bunch of one-sided nonsense. You’re just repeating evil Google propaganda.

    Say you’re a small company and you spend few million on R&D over several years and you develop a revolutionary product. And you file a patent to protect all the R&D expenditures.

    Are you telling me that this is all a waste and that EVIL company like Google should be able to COPY (like they’ve done with almost everything they’ve “invented”) for FREE??? ARE YOU TELLING ME THAT I AM AN IDIOT FOR EXPECTING PROTECTION!??!

    Give me a break! Patent system is not perfect but it does provide some protection from evil companies like Google that just copy other’s work and release it for FREE and slap their shitty ads all over it.

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  7. It’s pretty simple.

    The days of Android being free, and based on others IP, are quickly coming to an end. Don’t cry. Don’t prolong it.

    Either pay others for using their IP or come up with a work around.

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  8. What is noble about stealing others IP and content. Google does it regularly through all its services, please understand beyond fanboyism.

    Any one who thinks that Android is open source DOES NOT know what open source is. Open source is not free software, that is available dime a dozen. So try and understand open source then you will understand why most people think it is not open source in the true sense, NONE OF GOOGLE PRODUCTS ARE TRULY OPEN SOURCE. Google just uses that term in its PR to give a false sense of openness to google. Everything google does eventually feeds back to Googles money making services. So android being given away for free is not CHARITY, don’t be in that illusion. Oracle is not suing for no reason and Google realizes that they will have to pay, and to Microsoft and to anyone else who decides to go after them.

    Make no mistake Google is in this for the money it HAS NEVER been about anything else, they leech on your information and make money off of you and your information (so even Google search is also not really free if you think about it). They have been caught lying many times and they are equally evil (if Microsoft or Apple or Oracle is so). If the patent system is screwed then it is equally screwed for all companies. Just ask Microsoft (or Apple etc) for the hundreds of millions of dollars they had to pay for equally trivial patents. 

    So google should just Man up and pay what is due and do business just as every one else is, it is part of the game. No special treatment should be given to Google for any reason especially the illusion of Google being open and free and the saviour.  

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