Thursday, August 18, 2011

The Technology Arms Race Heats Up

Nestled amidst today's distressing headlines about plummeting markets, Eurozone debt, falling mortgage rates, and other generally bad news, is a story about Google buying struggling mobile phone company Motorola.

Why you might ask would an Internet giant like Google splash out $12.5 billion to buy a company that last led the mobile phone industry when Charles In Charge was a TV hit? Simple: for the patents.

Patents have become the latest weapon in a technology arms race that is heating up between major industry players like Google, Microsoft and Apple. Motorola holds some 17,000 patents, which Google intends to use in order to create a kind of legal defense shield for companies like HTC and Samsung that use Google's Android operating system.

According to Boston University lecturer, James Bessen, patents have become "legal weapons," for technology companies. And unfortunately the tech firm arms race for patents has implications that can be connected to the sorry state of the markets today.

With most major tech firms in a highly litigious frame of mind, software engineers are devoting time and resources to writing patents and reworking existing products to avoid lawsuits, rather than designing new software and products. And when a company like Google will drop $12.5 billion on a company like Motorola, just to give itself legal cover, things don't bode well for independent entrepreneurs trying to innovate and break into the tech world. Lest us not forget that the tech world was founded on the ideas of independent innovators!

This potential hindrance on new innovation and development is bad for the tech industry and the economy as a whole. Unfortunately, it's not a new phenomenon. The patent legal arms race in technology can be traced back to the mid-1980s when then-struggling calculator manufacturer Texas Instruments, decided to see if it could make some money on its patents by suing companies that it alleged had infringed on them. The strategy worked so well it not only saved TI, it was later adopted by IBM when it ran into troubles ten years later.

Ironically, just as we fear old Soviet nuclear warheads could fall into the wrong hands, many tech watchers now fear that old tech patents could fall into the hands of "patent trolls." Patent trolls are essentially non-practicing corporate entities that wield patents solely for the purpose of filing lawsuits against those who allegedly infringe upon them.

Unfortunately the government is at present, not poised to do much in regard to the patent troll problem. While patent reform legislation is in the works, analysts say it will have little effect on the tech industry. It seems that the tech patent arms race is likely to continue in its escalation before the foreseeable future.

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