Apple Wins in Court; Innovation Loses

Last week a U.S. jury sided with Apple in its patent case against Samsung and awarded Apple $1.05 billion. Robin Feldman, an intellectual property law professor at the University of California Hastings Law School, said this just before the verdict:

“The trial is evidence of a patent system that is out of control. No matter what happens in this trial, I think people will need to step back and ask whether we’ve gone too far in the intellectual property system.”*

Readers of this blog know that I have been opposed to the current US patent regime; I argue that it’s too easy to get a patent and too easy to defend a patent. This blocks innovation because patent holders are allowed to prevent others from building on and improving their patents. That’s a problem because innovation is incremental; every new step forward always builds on a long chain of prior innovations. If any one link in the chain is allowed to block all future enhancements, then innovation stops.

I’ve had iPhones for about three years and I love them. But my first iPhone replaced my Palm Treo 650, and I loved my Treo, too. My Treo did just about everything the iPhone did, so I never really thought the iPhone was particularly innovative. If you never had a Treo, check out this list of iPhone/Treo features:

  • Check your email anytime? Palm Treo had that.
  • Surf the Internet with a touch-screen browser? Palm Treo had that.
  • Touch the screen to follow a link to another web page? Palm Treo had that.
  • An app store, where you could buy and download cool apps like games and productivity software? Palm Treo had that.
  • A music player for your MP3 files? Palm Treo had that.
  • Bluetooth wireless connectivity? Palm Treo had that.
  • Sync your contacts and calendar with your computer? Palm Treo had that.

See what I mean? Really, the only truly new thing in my first iPhone was the WiFi ability and the GPS feature. And the iPhone wasn’t the first phone to have WiFi, and it wasn’t the first portable GPS device either. I agree with this Google spokesperson, responding to the jury verdict:

“The mobile industry is moving fast and all players, including newcomers, are building upon ideas that have been around for decades.”*

Samsung wanted to show jurors evidence that the iPhone was inspired by older products, including those by Sony, but U.S. District Judge Lucy Koh refused to allow the evidence. (For a technical reason: Samsung failed to disclose these examples of prior art during the fact discovery period.* I wonder if the verdict might have been different if the jury had seen this evidence?)

So what were the six patents Samsung was judged to have infringed? It actually was fairly difficult to find this information on the Internet; most media outlets decided this was “too much information” for the typical American. (I found the interactive graphic with the following information on the Wall Street Journal web site here and a detailed summary of the six patents here.)

  1. Utility patent ‘163. Enlarging documents by double tapping the screen.
  2. Utility patent ‘381. When you scroll to the top or bottom of a web page, the display “bounces back”
  3. Utility patent ‘915. Screen can distinguish between single-touch and multi-touch gestures. You can pinch to zoom in, and do one-fingered scrolling.
  4. Design patent ‘087. The ornamental design of the back of the iPhone.
  5. Design patent ‘305. Rounded square icons on the home screen interface.
  6. Design patent ‘677. Ornamental design of the front of the iPhone, with edge-to-edge glass and a front speaker.

The jury threw out the seventh Apple patent: Apple had a patent for the iPad shape, a rectangular shape with rounded corners, and the jury decided that no company could patent a geometric shape. (A victory for common sense.)

Take a look at the detailed, side-by-side comparisons of the iPhone and the Samsung products judged to infringe, on all six patents, here. Yes, I have to agree, those Samsung phones look a lot like those iPhones. But come on, they look the same because they’re both black rectangles with rounded edges!

After I spent some time “under the hood” of the details, I’m left with a couple of reactions. First: Apple spent a lot of money to apply for all of those patents over the years. I think it’s scary when any company really thinks they should have the right to patent a rectangle with rounded corners. Or the right to patent the ability to scroll a screen using your finger. Remember my old Palm Treo? Yes, I scrolled it with a stylus. So changing it from a stylus to a finger gets you a patent?

Second: It’s scary that a jury voted against Samsung. I don’t blame the jury, they were simply following the court’s instructions and the law as it currently stands. The problem is with the law. So now every company is going to be filing patents for triangles, parallelograms, three finger touches, scrolling with two fingers moves slower than scrolling with one, you name it. Come to think of it, I’ll bet most of those ideas already are patented. No doubt some company already has a patent for a trapezoidal phone shape. Coming soon to a court near you, and you heard it here first!

What ever happened to the “nonobviousness” doctrine? Under patent law, an idea is supposed to be nonobvious before a patent can be valid.

Apple’s official statement says that “stealing isn’t right.” That is embarrassingly simplistic. I prefer Samsung’s official statement:

Today’s verdict should not be viewed as a win for Apple, but as a loss for the American consumer. It will lead to fewer choices, less innovation, and potentially higher prices. It is unfortunate that patent law can be manipulated to give one company a monopoly over rectangles with rounded corners, or technology that is being improved every day by Samsung and other companies.

There will be one or two more rounds in this fight: Samsung will appeal to the U.S. Court of Appeals for the Federal Circuit, and then possibly to the Supreme Court. Stay tuned.

1. http://www.huffingtonpost.com/2012/08/26/apple-jury-patent-trial-samsung_n_1831855.html?utm_hp_ref=technology

2. Jessica E. Vascellaro and Don Clark, “Apple victory shifts power balance.” WSJ, August 27, 2012, pp. B1, B4.

3. http://designpatentattorney.com/blog/ “Samsung main life-line would be to unearth and introduce close prior art designs.  However, here, due to an apparent failure to abide by discovery deadlines, the court is preventing Samsung from relying upon many of its best prior art references at the trial.  Thus, this case serves as a stark reminder of the drastic consequences that can arise when a party fails to meet discovery deadlines.”

Do Patents Increase Innovation?

The answer, according to a new study, is NO.

There’s a lot of evidence that property rights in general lead to more successful economies: countries that have laws to protect individual property owners experience more rapid economic growth.  Some economists have argued that this should hold true for strong patents, too–after all, a patent is a property right, just like owning a farm or a house.  But even though strong property rights lead to higher growth, that’s not true for strong intellectual property rights.

A recent paper by James Bessen and Michael J. Meurer* collects a wide range of evidence.

Historical evidence: Most patents are granted in industries that demonstrate little innovation.  Through the 19th century, most inventions were not even patented (only 11% of British inventions displayed at the 1851 World’s Fair, for example).  A study of important innovations at the 1851 and 1876 world’s fairs found that countries with patent systems weren’t any more innovative than countries without.

Cross-country evidence: An “intellectual property rights index” was calculated for each country, and there was no relation between a country’s score on this index and its economic growth.  Increasing IP rights tend to be correlated with R&D spending, but it turns out the causality goes the other way: first a country starts spending more on R&D, and then later they increase IP rights strength.

Natural “economic experiments”: Following changes in IP law, what happens historically?  Japan increased patent scope in 1988, and this has not resulted in greater innovation nor in increased R&D spending (beyond what would have been expected without that change).  The U.S. changed its treatment of software inventions in the 1990s, but this did not result in an increase in patents by software firms.  (Instead, patents went up in companies known for “stockpiling large arsenals of patents to use as bargaining chips”.)

Surveys of companies find that most inventions are not patented; instead, companies rely on trade secrets and on their first-to-market advantage, or on complementary products and services.

The one exception is pharmaceutical companies, where patent protection seems to increase innovation.  But for other industries, it turns out that the costs of getting, enforcing, and defending a patent are much higher than the profits to be earned from it.  In 1999, for example, the total profits from patents in all U.S. public firms (excluding pharma) was about $3 billion, but their litigation costs associated with those patents were a whopping $12 billion!

The authors’ conclusion?  “in most industries today, patents may actually discourage investment in innovation.”

*Bessen & Meurer, August 2008, “Do patents perform like property?” Academy of Management Perspectives, pp. 8-20.

The Lone Genius Loses to the Team

What’s your visual image of a brilliant scientist? A nerdy man in a lab coat, working late in some basement laboratory with beakers and test tubes? Someone typing at a computer in their office? Well, clear your mind of that image, because science today is all about collaboration and teamwork. This is the message of a truly impressive study published in SCIENCE magazine 18 May 2007. Three professors at Northwestern University, Stefan Wuchty, Benjamin F. Jones, and Brian Uzzi, analyzed huge databases–of 19.9 million scientific papers over 50 years, and 2.1 million patents–and found that collaboration is rapidly becoming the norm in science and in invention.

They focused on a few key numbers. First, the databases allowed them to determine which papers, and which patents, had one author, two authors, or more. Two or more authors means that the creation was collaboratively generated. In science, the average team size (number of co-authors) doubled over 45 years–from 1.9 to 3.5 authors per paper. Of course, science has become a lot more complex, and requires a lot more funding, and that might account for the larger team size. But the databases also had data about the social sciences and the arts and humanities; social science research hasn’t increased in scale and cost the same way particle physics and medicine have. And surprisingly, even in the social sciences, collaboration has become a lot more important. In 1955, only 17.5% of social science papers had two or more authors; in 2000, 51.5% of those papers did. And although papers in the arts and humanities still are mostly sole authored (over 90%), the trend over the last 50 years has also been toward more collaboration.

But what about quality and creativity? Can we find out if the collaboratively generated papers are any better? Fortunately, the databases allowed the researchers to determine the impact and influence of each paper, and of each patent, because those databases keep track of how many times the paper or patent was cited by a later publication. More citations means a more influential paper; and more citations have been shown to correlate with research quality. And guess what: over the 50 year period studied, teams generated more highly cited work in every research area, and in every time period. The implication is that teams generate better scientific research than solitary individuals.

One final interesting finding is that the creative advantage for teams has increased over the last 50 years. Although teams generated more highly cited work back in 1955, by 2000 the advantage of teams over sole individuals had become even greater. In 1955, team-authored papers received 1.7 times as many citations as sole authored papers; in 2000, they received 2.1 times as many.

In a later issue of SCIENCE magazine (14 September 2007) several letters challenging this research were published; the authors convincingly responded, by providing additional data. There’s no question that teams do better science than solitary individuals, and that the trend is working in teams’ favor.

It’s Obvious (KSR v. Teleflex)

How do you translate a new idea into a profitable innovation? One of the first steps is to get a patent, to make sure that no one else can steal your idea. To receive a patent, you have to show that your idea meets three criteria: it has to be novel; it has to be useful; and it has to be not obvious. It turns out that this notion of “nonobviousness” is very hard to define, and this is a pressing issue among patent lawyers today.

Yesterday and today, I’m a participant in a conference at Lewis and Clark Law School, in Portland, Oregon, where scholars from different backgrounds are trying to work out this complicated notion of nonobviousness. I’m one of 16 scholars; three of us are psychologists who study creativity, and the others are lawyers, economists, and R&D managers at high tech companies (including IBM and Microsoft).

The issue is timely, because in April, 2007, the Supreme Court decided a case about nonobviousness–the first case they’ve taken on this topic since 1966. A company named Teleflex had received a patent for combining two existing patents. The first prior patent was an adjustable gas pedal, so that drivers with short legs could move the pedal forward. The second patent was for an electronic sensor that could detect how far down the driver had pushed the pedal; the sensor would send an electronic message to the carburator, thus getting rid of the wire cable that used to do the job. Teleflex had been granted a patent for an adjustable pedal with an electronic sensor; they had sued another company, KSR, who had later come up with the same combination and was selling the product. KSR argued that the combination was obvious, and therefore that the Teleflex patent should be invalidated.

Every major player in the U.S. economy took sides in the case, because the potential was that the Supreme Court could radically raise the standard for receiving a patent, making life harder for inventors, university technology transfer offices, and small high-tech companies. Larger companies (Microsoft, Cisco), generic drug manufacturers, and open source software advocates hoped that Teleflex’s patent would be overturned, and hoped that the Court would specify a harder-to-meet standard of nonobviousness.

The unanimous, 9-0 decision overturned the patent, on the grounds that the combination was obvious. And this was a hugely important decision, because the Court rejected the standards that the Patent and Trademark Office, and the lower courts, had been using to determine obviousness.

The Court’s decision is complex, and leaves a lot of issues unresolved. But overall, I think the Court made the right decision, because I believe this new decision allows collaborative webs to innovate more smoothly (in the way that I describe in my book, Group Genius). What are your thoughts?