At the beginning of the month I was writing about the idea of IP being the foundation for collaboration. Any reading about IP that I have done in the past points out the need to have all parts of the IP system in place for any one of them to work. Strong laws, a process and infrastructure to grant the protections, and an effective (and active) enforcement mechanism. Thus, my discussion of the idea that with these elements in place, all actors may see the rules of the road and thus be willing to collaborate within the confines of that system. I really appreciated the comments that come into my blog, and am doing the reading suggested by folks. While I still think this is a powerful angle to consider, the news of late has been all about enforcement actions.
IBM is pushing software and process patent enforcement against Amazon, and they are embroiled in a few other high-profile IP cases as well. This past week, Microsoft has been in the news on two big cases. The first with Alcatel-Lucent, and the second with ATT. The first seeing the largest patent-related award in the history of the U.S. legal system and the second being heard in the Supreme Court. I’m not a lawyer, but it would seem to me that IP matters, and carries real implications for commercial participants. It would seem that everyone producing software for commercial use needs to recognize that IP is a real part of the landscape no matter what your opinion of the laws may be.
For years, Microsoft has been talking about the importance of IP. We went to the unprecedented step of providing our customers and partners with uncapped indemnification for IP infringement (still not matched by any other vendor, and here is the policy statement if you are curious). This is not something done lightly, nor is it without value. Microsoft stepped in and indemnified Dell and Gateway in the Alcatel-Lucent case and at the moment that carries a $1.5B price tag. (To be appealed for sure…) The whole point of the indemnification issue is to highlight how seriously we take the responsibility for standing behind our products. We pay more than 10x the amount outbound than we receive inbound on an annual basis in IP licensing fees to clear our products for commercial sale. And that is to say nothing for the approximately $7B we are putting into R&D on an annual basis.
At the end of the day, there are many in the software community who are directly opposed to software patents. There are software businesses employing strategies to use patents for proactive and reactive protections. There are those who see patents as a means for collaboration as well as transparency. Certainly, patents represent a challenge in the global community as people wrestle with the implications of providing products in multiple countries.
I certainly believe that patents provide incentive for innovation. I also believe that patents provide a foundation for organizations to collaborate. The research out there about this is a mixed bag with opinions on all sides, but one study I found interesting is the recent study by U.C. Berkeley Professor of Law and Technology Robert Merges. He found that even after 10-plus years of software patenting 1) the software industry remains far less concentrated than the average American industry; 2) the number of small software startups entering the industry is even greater than the number of new entrants a decade ago; and 3) the software industry continues to grow so rapidly and robustly that it now represents over 10% of all U.S. R&D, compared to only 1% of R&D in the days before software patenting first emerged.
These factors suggest that innovation is on the rise. It also suggests that in a world of increased transparency these innovators are not going to be able to depend on copyright or trade secret. Inventors have an increased incentive to depend on patent as a core pillar to protecting the uniqueness of their solutions. Simultaneously though, they are going to be finding new and inventive ways to share that very IP with others in order to create business opportunities.