Wednesday, October 6, 2010

Solving the software patent issue: The Software patent clearing house

Motorola is suing Apple for infringing 18 of it's patents in it's phones and computers.

Apple is suing HTC for infringing it's patents.

Microsoft is suing Motorola for infringing its patents.

Nokia is also suing Apple, to which Apple countersued Nokia, all of course for patent infringements.

Lets not forget Oracle who is suing Google for infringing Java patents.

Now Microsoft is about to release it's Windows phone 7, and they've had to do quite a bit of catchup so it's quite possible they might have "infringed" on some vague and obscure software patent. So it wouldn't surprise me if - in order to complete the circle of litigation - either an Apple or a Google type company sues Microsoft on or about the release date of Windows 7.

It strikes me that all this circular ligation is forcing companies to spend an awful lot of money on lawyers who seem to be the only ones benefitting.

To remedy this situation I recommend that it's time for a Software patent clearing house.

Now what exactly would a Software patent clearing house do?

Basically it would be an organisation which has a central repository of all software patents. Whenever a company launches a software patent infringement suite against another company they would submit this suite to this organisation.

Since it's most likely that the company being sued would probably countersue with it's own patent infringement suite, The Software patent clearing house would be responsible for vetting and offsetting the patents of the first suite with the patents of the counter suite, and the only the company with a positive amount of patents left would be able to continue litigation.

To illustrate: Let say company A sues company B for infringement of six of it's software patents. Company B could then countersue company A for infringement of four of it's patents. The clearing house would then subtract company B's claims from company A's claims, leaving Company A with two patent infringements it can litigate for.

The clearing house could also provide a key additional service:

You could do data mining on the patent information and create a litigation index for companies which is basically a numerical value calculated to the perceived market value of the underlying patent. Companies with a low litigation index would have few patents while a company with many patents would have a high litigation index. Companies can then trade their litigation index points much like you could trade shares.

For example company A might have a high index but have a few bad quarters. They could then sell off index points (and consequently the patents backing the index points) which other companies could then buy bringing in cash for Company A. Company B who bought some index points can then use this index points to offset any patent litigation they might encounter, so if Company B get's sued by Company C they can use the index points to reduce the scale of the litigation, for example if they are being sued for infringement on six patents, they could trade off index points to the suing company to reduce the suite to a mere one or two patents. Company B could then even use it's own patent set to nullify the suite completely.

The price of the index points would be determined by the availability of index points on the market against the volume of litigation. No doubt this price would become one the standard indicators that you normally get from financial news services.

Furthermore Venture Capitalists could even buy index points up front, which would become a regular part of the the capital that they provide new startups.

Some companies might even have so many index points they could get out of the software altogether and start simply start trading these index points as a means of making money.

Of course the clearing house itself would need to charge fees in order to fund the operation, but think of what companies could save on legal fees, together with the allure of actually being able to earn cash of patents as opposed to getting into a major legal wrangling.

1 comment:

Dandré said...

One thing about this idea is that I don't think that there is enough manpower in the world to work through those patents and manage them for all companies.
That's probably why we see so many patent infringements these days is because companies shoot arrows in the dark hoping it might hit something.
Its the same old thing as between Microsoft and Linux. The developers make some enhancements to the Linux kernel or even to some of the window managers and Microsoft shouts "Infringement! Infringement!"
I wish they would do away with patents. It only benefits a few and hinders progress a lot. Can anyone name one benefit to patents except for the guy who submitted his first?