It's easy enough to forget that the smartphone patent wars are still rumbling along. The actual competitive issues were all settled some years ago, the market has entirely moved on from the issues that were being discussed. However, the court cases over those patents carry on: and that's exactly what is wrong with the system that we've got at present.This isn't the place to deal with the technical issues, that's for my more technical colleagues. But we do have a deeper economic problem here. For patents (and copyright, trademarks) exist to try to solve an economic problem and it's becoming obvious that the system we've got at present isn't working well to solve that specific problem.
The news of the latest episode in the case:
A U.S. appeals court on Friday overturned a $120 million jury verdict against Samsung, finally handing the South Korean smartphone maker a significant win in its longstanding patent feud with top rival
Apple .The U.S. Court of Appeals for the Federal Circuit in Washington, D.C., said
Samsung Electronics Co Ltd did not infringe Apple's "quick links" patent, and that two other patents covering the iPhone's slide-to-unlock and auto-correct features were invalid. The court also said Apple was liable for infringing one of Samsung's patents.
Our problem is not this specific court ruling. Nor is it even the issue that was being battled over. The problem is the length of time it all took:
The US Court of Appeals has overturned the 2014 verdict of a California federal court that held Samsung guilty of infringing on Apple's smartphone patents and directed the former to pay $119.6 as damages.
A 2014 verdict? But that's two entire generations of phones ago! And that decision stems from the various suits originally filed in 2011. That's five generations of this technology ago: and that's what is wrong.
The case is one of two major suits between the companies, part of a global patent war that began in April 2011 when Apple accused Samsung of "slavishly" copying the iPhone. An Apple victory in the other case, involving the patented designs of the phone, was upheld on appeal and is awaiting possible consideration by the US Supreme Court.
Again, our point here is not who is right and who is wrong, whether Apple should have beaten Samsung or vice versa. What we are concerned about is whether the patent system itself is fit for purpose. And it's not entirely obvious that it is, in which case we need to go back and examine the basic economics of why we have a patent system in the first place.
We think both invention and innovation are great things. We're absolutely certain that they're what lead to increasing living standards over time. Since we like the idea that our future selves will be richer than we are, that our children richer again, thus we like to encourage invention and innovation. However, we have a problem here. For much of that invention and innovation is what is known as a "public good". This is something that is non-rivalrous and non-excludable. Take, say, Newton's Equations. They very definitely help us make sense of the world, they've led to all sorts of other advances. However, they're also terribly easy to copy. They're non-rivalrous in the sense that if I use them to go to the Moon (they're good enough for that, we only start to need Einstein when we go to Mercury) that doesn't preclude other people using as much of them as they need to make sure that apples fall out of trees. And they're non-excludable, in that there's no factory making them which can then decide who gets them. We can't actually stop people using them once the knowledge is out there.
Invention and innovation, well, depends upon exactly what it is but tend to be, are public goods of this form. Once someone has invented something it's easy to copy it. And that's our problem. It costs, sometimes very substantial amounts of, money to invent something. But if, once invented, anyone can copy it then how can the inventor make a profit? And if that's so, then why will people take the effort and cost of inventing something? The most obvious example here is pharmaceuticals: it costs the thick end of $1 billion to get the FDA to approve your new drug for sale. Why would you spend that if three weeks later anyone could copy your new drug?
Our answer is that we deliberately invent something called intellectual property. This comes in various forms, patents, copyright and trademarks. It's theoretically possible to get a patent on the code that operates this website, the look and feel of it is trademark and the actual content, the articles are copyright (not wholly and entirely true, the code would also be copyright, also it might not be novel enough for patenting, but close enough for now).
But note that this system must be in balance. We want to protect those original innovators but we're not keen on preventing people from going "Wow, that's a good idea but it would be even better with this tweak to it". What we call derivative innovation instead of original. That's our first problem and that brings us to the Tabarrok Curve:
We're pretty sure we've got this balance wrong. As Matt Ridley points out:
Dr. Tabarrok argued in his 2011 book “Launching the Innovation Renaissance” that patents cannot encourage innovation if they raise its costs. In fields where innovation is a cumulative process, he argued, restricting patents would cause firms to lose some of their monopoly rights, but they would gain the opportunity to use the innovations of others. “The result is greater total innovation.”
Patents are supposed to prevent imitation, but in practice, imitation is often more costly than innovation. Most patent disputes are not about firms copying each other’s inventions but about two companies discovering simultaneously the next step in an innovative process. Yet patent law can’t easily handle that type of situation.
This Apple Samsung case is showing us another fault with the system. Yes, we want to protect real innovation from copying. Simply because we think that produces more innovation over time and thus makes us all richer. And we also want to allow as much derivative innovation as doesn't interfere with that aim. For, don't forget, we've invented this intellectual property idea entirely out of thin air, in order to achieve a goal. That goal being to maximise innovation. It's no use people shouting "
And taking 5 years to decide (assuming that there won't be yet more appeals) in a market with a new generation of devices at least every year simply isn't timely. Those competitive issues over who gets to sell what based upon copying or innovation have receded way back into the mists of time. None of the products under discussion are still on sale and haven't been for a couple of years now. Whatever market opportunity either party had, either Apple or Samsung, is dead and gone now. But we're still trying to decide over who should have that market opportunity? It's just not working.
My own opinion on the underlying issue is that we should simply abolish software patents. Treat it all as copyright: the important difference here being that a patent covers a way of doing something or the doing of that thing. Copyright covers the exact way that that thing is done. This article is copyright: people cannot just take this exact order of words and replicate it. But absolutely anyone can write an article about how patent law isn't quite up to snuff in an economic sense. Perhaps the same should be true of software: you cannot copy my code but of course you can try another method of doing that cute thing I've worked out how to do.
But that's not the important point in this story to me. I'm much more worried about the economic issue here. Deciding upon patents several years after those patents have any real world meaning just isn't doing what the patent system is supposed to do: protect innovation in order to increase the amount of innovation that happens. We may or may not need to change the scope of the patent system but we absolutely need to increase the speed at which the courts decide upon the issues.
