It’s been hard to go anywhere in Silicon Valley during 2011 and not have patents come up over the course of a friendly discussion about the state of our world. Yet there’s one place where Silicon Valley residents are encouraged not to think about the ramifications of our out-of-control patent system: the engineering departments of major tech companies.
For various reasons legal, strategic, and practical, several companies in the tech industry actively discourage their engineers from thinking about whether concepts and products under development might have already been patented, according to several sources interviewed by paidContent. This mindset endures despite the patent-related ramifications that Google’s mobile division has found itself dealing with day after day during the past year, the rise of patent trolls as an economic threat, and the existence of companies that do nothing but hoard intellectual property.
It’s not clear that everyone in tech thinks this way. Samsung, for example, told reporters that it designed the new Galaxy Nexus, the latest and greatest Android phone, as to avoid Apple’s patents in light of the legal battle those companies are waging over the iPad and the Galaxy Tab. (Those remarks were later dismissed by a Samsung executive as “rumor,” despite the fact that a fellow executive spoke the words.)
But Google (NSDQ: GOOG) certainly does. “As an engineer we just don’t think about patents, we leave that to other parts of the organization to think about,” said Hiroshi Lockheimer, vice president of Android engineering, in response to a question about Samsung’s comments during an interview the day after the launch of the Galaxy Nexus two weeks ago. “We focus on doing good products for the user.”
While that may seem like an explosive statement given Google’s legal troubles, other tech companies contacted by paidContent (all did not want to be named, and several others did not respond to inquiries) concurred, most saying that there’s a reason they hire smart and expensive lawyers to review these types of issues before a product enters the market. They were less forthcoming about the process involved with that review, and who ultimately makes the decision between canceling a surefire winner that appears to tread on others’ intellectual property and rolling the dice on the skills of the legal department to extricate the company from any messes.
–Patents Out, Not In: It’s not that tech companies are ignoring the value of patents. On the contrary, engineers at just about any tech company are actively encouraged to submit patent applications for nearly anything interesting or innovative that they produce.
But that sort of illustrates the problem. With so many tech patents (and especially mobile patents) applied for and granted each year, there are more than a few patents that would seem to overlap. And given that patents aren’t truly judged on their merits until the legal process is well underway, it can be difficult to figure out from afar which patents are enforceable and which are junk.
That’s why most tech companies tell their engineers to invent and not worry about patents, said Colleen Chien, assistant professor of law at Santa Clara University School of Law, and author of a patent study entitled “Predicting Patent Litigation.”
“At the tech companies, more the hardware and software companies, the policy is not to search too much before you make a product. Innovate first, and then work out the property rights later,” Chien said.
In other industries this isn’t necessarily the case. For example, in pharmaceutical and biotech, researchers are much more aware of issued patents as they go about their work, Chien said. That’s because scientific advances tend to share a common language: for example, there are only so many ways to describe a chemical compound, and the precise formula of that compound can be understood by even first-year chemistry students. There are also fewer patents in play in those industries.
In the tech industry, however, there is no such shared language. What is a smartphone? Well, it’s a phone, a mobile computer, a messaging device, a digital storage unit, a media player, a camera, a handheld gaming console, and a mobile wallet.
People use those terms interchangeably in patent applications and in marketing materials, and as a result it’s never entirely clear whether something that would be considered an invention in one category could possibly infringe a patent in another category. And some business-model patents can be vague enough to seemingly cover anything.
–See No Evil: Companies also encourage this patent ignorance as a defense mechanism should they later be hauled before the court. If companies are found to have searched for prior art or existing patents in the product-development phase (which can probably be reconstructed from e-mails) they can be subject to triple damages should the product in question be found to violate patents, Chien said.
“It can open a can of worms,” said one in-house attorney who did not wish to be named. Not only can such searches come back to haunt a company later, but they can also stifle the creative process of an engineering staff given how broad some patents can be interpreted by someone not well-versed in intellectual property.
Most companies offer basic patent education as part of a new-hire orientation or periodic review. But that information tends to be presented in much more general terms, such as declaring a healthy respect for intellectual property to be company policy, encouraging employees to patent ideas, and outlining some basics about how the patent system works (or doesn’t).
When it comes to specific products, however, the lawyers are the ones who are supposed to prevent products that could become potential patent problems. No one would speak about how that process works: such as, if lawyers have the authority to kill projects outright, if work-arounds or redesigns are suggested by legal, or if product-driven and engineering-friendly executives routinely dismiss the concerns of the legal department in order to jump into a fast-moving market.
–Unintellectual Property: For most big tech companies, this strategy works because they have actively built up a patent portfolio over time.
“We create IP (intellectual property) out of business necessity; we patent the IP to protect the IP,” said a legal representative for a storied Silicon Valley tech company. “That’s fundamental for us.”
In other words, “on a systemic level, the patent détente has allowed companies to ignore the patents that are out there,” Chien said. “Ignorance of the patents was actually OK, because you could reassert” your own patents when sued and reach a settlement, she said. For example, Apple is suing Android makers left and right, but is paying Nokia royalties as the result of a settlement worked out with a company that holds a strong mobile patent portfolio.
This is not necessarily true in two situations that are hanging over the world of intellectual property in the tech industry. For one thing, amassing a portfolio of strong patents does nothing to protect companies from lawsuits filed by patent trolls, or “non-practicing entities” as they are diplomatically known within legal circles. And trying to find potentially infringing patents among the 250,000 or so that are said to read on the mobile world in one way or another could drive one insane: “the futility of search makes people not want to engage in it,” Chien said.
The other involves Google, a company that followed the Silicon Valley norm of encouraging engineers to invent things without worrying about patents only to forget about the second part: making sure you have something to protect yourself should you miscalculate your patent exposure. As a result, Google is hoping it will be allowed to spend about one-third of its cash ($12.5 billion) to buy Motorola and its horde of patents before legal action threatens the existence of Android as we know it.
Google is perhaps one of the most engineering-driven companies the tech industry has at the moment, and it has articulated its disdain for the modern patent system at several points during 2011. And when judged by their peers, Google’s engineers aren’t all that different from the rest of the industry when it comes to managing patents concerns; that’s simply not their job.
But Google has clearly failed to manage this risk: while Android devices have yet to be found guilty of infringement on anyone’s patents, it’s certainly not going well. Microsoft is making a fair amount of money from the ten licensing deals it has signed with Android partners, and Apple has won significant victories in Europe and Australia that threaten the legality of Android products in several countries.
Google said that lawyers sit on product councils with engineers and are involved with product-planning decisions, but declined to elaborate on specifics. Those lawyers may start to get more power over the years, because if the engineers aren’t supposed to think about patent concerns, then certainly by now Google has realized that someone needs to monitor its exposure to the patent system and, if necessary, either cut a licensing deal to preserve an exciting product or just say no.