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by Brett Thomas on August 29, 2012 in Editorials

With the billion-dollar judgment day at hand, Brett finally pulls his editorial pen out in an examination of juries, educated decisions, and a rebuke of patent law’s current direction and its chilling effect on future innovation.

So by now, you’ve all heard the news from countless sources – The jury deliberated long and hard, and with all facts put before them it became clear that Samsung is guilty of patent infringement to the tune of $1bn dollars now owed to Apple. Yes, that’s one BILLION dollars… insert your own Dr. Evil impression here. It’s clear as day in reading the jury’s decision and logic…

…Oh, wait, they specifically told the judge that they didn’t HAVE to render that information…

…And these same people who became overnight patent experts, led by a foreman who was clearly experienced because he had filed a patent of his own before, couldn’t even add their totals…

…And chose $0 owed for the only product that actually has ever received a preliminary injunction from sale (The Galaxy Tab) due to clear violation…

…wait, WHAT?! And that decision was worth $1 BILLION DOLLARS?!

Houston, we have a problem.

The debate has grown much worse based on the fact that it is Apple that got the award – a company that is either celebrated or reviled, but very little in between. Just to remind you all, Apple is not the first to try this – nor do I think it ever expected this size of an award… it’s quite unprecedented. Microsoft used this same tactic against Sony right at the launch of the PS3 by using Immersion as its little pawn. Oracle and Google have gone round and round on one that was actually somewhat valid (the Java patents) ever since Oracle bought Sun… as long as you leave out the fact that Oracle is quite literally a patent troll at this point, and little more.

So let’s take that out of the equation, because I don’t want to talk about Apple, Samsung, who invented what wheel or anything else vaguely related to the specifics of this case outside of the tremendous bill due and the breakdown of what products manage to make the totals. Apple vs Samsung is really Company X vs Company Y, the problem is the system in which X and Y now choose to do battle.

A long time ago, companies used to make products. Does anyone remember that? They made lots of products – and if one’s product was better quality, better price, or better marketed, it often made better sales. Competition happened on the showroom floor, where every customer was a victory to be won. The true victor was decided with market penetration and brand recognition. Those “in the know” read reviews, those who were less knowledgeable either copied off of those who they thought knew things or paved their own way blindly. The industry was a lot like fashion, come to think of it… just with a purpose.

Nowadays, it seems quite possible that we can generate the entire GDP of a small nation simply by saying “we thought of it first!” The patent suit goes to a trial where a jury of “peers” (read – people with little to no experience in patents, technology, prior art, etc) seemingly throws darts at a list of decisions and the highest score wins that round. The victor gets the promise of a boatload of cash that inevitably gets pared down after multiple appeals to the court of common sense, after costing both companies and the courts a boatload of cash and sending several lawyers’ children through Ivy League universities.

We could blame the jury… hell, I think we SHOULD blame the jury, at least in part, especially in this case. They refused to read the instructions, justify their decisions or even deliberate for any fair amount of time. They missed key facts in the case, such as the Samsung Galaxy Tab. They messed up common sense portions of the law by citing Samsung as guilty for inducement of a patent infringement (i.e., intentionally making money off of a known infringement), but stating that the device itself infringed on no patents. Many of the jurors clearly stated that they felt they knew nothing about the rules in the case and largely followed the foreman’s guide because he had filed for a patent before. In the meantime, the foreman even stated at one point: “When I got in this case and I started looking at these patents I considered: If this was my patent and I was accused, could I defend it? On the night of Aug. 22, after closing arguments, a light bulb went on in my head. I thought, I need to do this for all of them.”

Duh.

So yeah, we could definitely blame the jury…but at least SOME of them actually DID understand parts of what they were looking at. The nine-member panel had several engineers and a couple people familiar with technology patents. So instead, maybe we should consider that the jury was given one hundred pages of instructions prior to deliberation. That set of instructions doesn’t even really outline the basic legalities, it instead demands what can and cannot be considered from the evidence and nitpicks rules that are already vastly complex. Whether they understand technology or not, laws this complicated are being ruled on by people given $25 a day to not only give a verdict, but to have to come to grips with and understand the system laid out before them.

That system is already so complicated as to demand some of the highest dollar-value attorneys in the world to represent it with any true understanding… yet we expect to pull nine people off of the street (have you ever watched any reality TV? You KNOW how dumb the average person can be…) and have them render an intelligent, coherent verdict. To this equation, add the fact that many of the patents in question are for what could only be considered nit-pick design elements to begin with, written to carefully sidestep the fact that the UI itself is not patentable. The whole patent system has grown (mostly through the courts) to subvert its own rules, and we now have to ask people who are not experts in the fields of patents or business to determine both the defensibility of the patent and its impact on a business.

We could blame the US system in general for this, and laugh at its failings… but we also know that the entirety of international patent law has been cobbled together from the US and British patent laws, and that even the WTO leans heavily on decisions made here. That means that decisions like this $1bn dollars (which can be upped to $3bn at the judge’s discretion due to treble damages) become prior precedent for future findings and makes patent trolling that much more of a lucrative company policy. Since it will be more lucrative to fight in the courts than in the stores (do you know how much it takes to hit $1-3bn profit on sales? Samsung’s total profit for the year last year was $10bn), we can expect companies to hire even better lawyers to make even trickier patents.

Not all of this is bad – separating idea creation from manufacturing actually helps to increase standarization – if Apple and Samsung both stopped manufacturing and instead started leasing patent rights, manufacturers could pick and choose the best of each field. The manufacturers then compete to implement the standards better than the last guy for a little less, decreasing the cost of the overall product. For big companies with big patents and big wallets, this becomes a perfect way to do business. Competition becomes what ideas you own, not what is done with those ideas.

Where it sucks – and I mean sucks – is in the field of innovation. Juries don’t even need to understand the difference between willful copying and accidental but separately reached design similarities. I’m not saying that Samsung wasn’t guilty of the first (Did you LOOK at the Galaxy Tab? Come on…), but two companies in the same market space are going to develop similar ideas at times. Samsung got truly busted by an email from Google warning it of similarity and urging redesign – but a small company would never have had that kind of input to begin with. Further, a large company could go from raw sketch to patented production in the time it takes a small company to get the capital to truly move forward.

In fact, a small company would be at a severe disadvantage from the start, given that it could never hire a lawyer good enough to make sure that its idea hasn’t already maybe, possibly been covered by some other creatively twistable patent, or file a good enough one to protect its idea from the big guys if it can come up with something original enough. One can bet that each of Samsung and Apple’s US legal budgets far outweigh most companies’ entire operating capital. A single cease and desist could cost more to fight than the company is worth… even before a group of people with no understanding of the law begin to tear it limb from limb.

Patent law has historically been designed with the idea that innovation deserves to be protected from being stolen. I don’t think anyone in this case or any other is arguing against that very concept. However, we are reaching a true turning point in our culture – electronics are no longer “cutting-edge” developers in small companies with high R&D and higher profit margins for hitting it big. The market has matured, the big players have grown much bigger, and the very concept of what is or is not patentable has to be called into question.

In a mature market, the big concepts have already been invented. Each step after that is assumed to be on the shoulders of giants. Many things become commonplace to the point that users can “expect” that it’s how an item works, as well – things like icon spacing (patent 305) or tapping to enlarge a document (patent 163). Sure, somebody thought of that “first” – but is that truly a patentable idea? And if so, is THAT truly defensible as an important design quality? According to the jury, it sure is. So is coloring the back and front of your phone either black or white (patents 087 and 677, respectively).

The jury also found that distinguishing one touch from multi-touch (patent 915), which actually should be an important patent, was violated. This was Apple’s baby, and where we need to be careful about babies and bathwater – it’s a legitimate idea that nobody even thought of before the iPhone, and has redefined touch interface since. But certainly it should qualify by this time as FRAND? It’s been nearly 10 years. Consumers have grown to expect this interface as much as they expect a door handle to turn and a door to open.

When you become the market leader, you have to allow people on your shoulders at some point. It’s how the market continues to grow and improve and how you get the opportunity to make new cool stuff. It’s how you get to learn what you did wrong in an otherwise great product, so that you can build an even better one next time. Yes, you get the right to earn on what you built, but how long can you patent the color white, or rounded corners? How long do you get to sue for the development of a coding backend that was released under free licenses years ago? When is your settlement or damage award recognized as setting the barrier of entry too high, simply because you’re fighting another Goliath?

The simple truth about this particular award is that Samsung DID copy stuff – a LOT of stuff – and the penalty is right in line with being punitive enough for it to pay attention without being much of a chip off of its real worth – even at $1-3bn. But this fight isn’t about Samsung or Apple and what is fair in total, it’s about how we got there – with a system that is broken, defending several things that shouldn’t be defensible by people who don’t understand the difference. While these two giants duke it out over billions of dollars in the courts, innovators both small and large are standing back and watching in awe and horror, thinking: “Today, it’s Samsung… tomorrow, who’s next…maybe us?”

We are no longer protecting innovation – we’re starting to protect ourselves from it. It’s patently backwards.

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