In The Patent Game, There Are No Losers


“…the auto industry can learn from the experiences in the smartphone industry and reach more efficient results.”


Patrick Anderson by: Patrick Anderson | December 13, 2017

A Bloomberg article last week discussed the efforts behind automakers to create a joint licensing effort for next generation vehicle technology.  (See Carmakers are trying to steer past patent wars in bid for integrating Silicon Valley tech) The desire to avoid repeating the so-called patent wars of the smartphone industry is understandable, as Ford Global Technologies CEO Bill Coughlin explained: “No sane automaker wants to repeat these wars, where the lawyers were the only winners.”

I look at a statement like this much in the same way a libertarian looks at discussions about trade deficits. A world in which companies get rights to use proprietary technology while the creators of said property get compensation is one in which everybody wins. Abraham Lincoln famously said that the patent system

“added the fuel of interest to the fire of genius.”

Just as a rising tide lifts all boats, the longer and hotter that fire burns, the better off we all are in the long run.

However, when licensing deals only materialize through litigation, even the best of results place the parties in the position they should have been in the first place: with one party agreeing to grant access to technology in exchange for a price paid to the other party. So, in the micro view, this exchange appears to be a wash, while lawyers from both sides are paid. However, lost in this analysis is the fact that the lawyers are paid for services rendered, risk taken, and capital invested. Thus, in the micro view, this exchange is also a wash. Yet the viewpoint expressed by Coughlin wants to have its cake and eat it too by taking a micro view of the transaction between patent owner and licensee, but a macro view of the legal industry.

In reality, the auto industry can learn from the experiences in the smartphone industry and reach more efficient results. However, an industry-wide joint licensing effort is only part of the equation. Useful solutions to the technical problems of today and tomorrow will also come from outside the industry. It will be incumbent upon auto manufacturers to deal with these outsiders fairly and honestly in order to maintain an efficient licensing system. As Coughlin himself said, patent litigation will arise if “somebody is acting unreasonably.” This includes both unreasonable expectations in the value of technology and unreasonable refusal to negotiate fairly for rights to technology.

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