Tag Archives: patents

German Company sues Apple for $2 billion.

An article in USA Today dicusses how IpCom, a German patent holding company sued Apple for $2 billion. A “patent troll” is a term commonly used to describe the company because of its tendency to buy patents with no intent to use them. IpCom has over 1,200 patents with no plan for them in manufacturing.



The company benefits from the license fees and royalties that result from enforcing patents. The ethical question here is  deciding if IpCom’s actions are morally right. The Act Utilitarianism theory may say that the action is morally wrong because it creates more unhappiness because they are suing the company for producing a product that advances society that would not have gotten produced otherwise. While rule utilitarianism would have said they were morally right if the number one rule is something like, “do not violate the patent”.

$2 billion is a lot of money and IpCom was denied their claim. But were they morally right to sue Apple in the first place?

The War of the Androids

Google vs. Samsung

Samsung owns the vast majority of the market share for Android, 29.6% in fact.  That may not seem like a big number, but it dominates the competitors: in Q4 2013 alone Samsung shipped 86 million phones.  That’s on top of a platform that already owns the vast majority of smartphone OS market share at a good 81%.  This puts Samsung in a very good position to dictate what the current state of Android is….and it’s very far removed from creator Google’s vision.

It starts with Touchwiz as pointed out in a recent Forbes article.  A Samsung technology to provide a new user experience and frontend to Android that replaces or adds many different features to the Android smartphone.  Some good, some bad….while many critics argue that Touchwiz is a terrible and bloated interface, you can’t argue with sales numbers and hardware.  This extended to other Samsung products including it’s popular television sets and a new OS in development at Samsung to replace Android: Tizen.  But that hides the core of the “Android experience” as it’s been dubbed in the media.  And Google wants Samsung to sit down, shut-up and keep licensing Google technology.

This is where Motorola came into play.

Acquiring Motorola for 12.5 billion dollars and then selling it for 2.91 billion on the surface seems like a bad business decision.  And surely enough there were many pundits that made that call.  But what the majority are forgetting are the numerous patents acquired from the sale for mobile technology (around 17,000 to be precise).  This sale occurred in 2011.  A few years later, Google decided to use Motorola to teach Samsung a lesson.

Enter the Motorola Droid RAZR, X and G.  Three popular phones that run almost bare stock Android.  The purpose of these phones were simple, show users what fast, simple Android could do on it’s own.  Google also began focusing more effort on the Nexus line, dropping Samsung as the manufacturer and taking on LG to release the Nexus 4.

Clearly the growing popularity of these phones and the market share of Motorola under Google was threatening to Samsung.  So they decided to cut a deal in which they would license Google technology for 10 years.  Effectively cutting off Tizen and with promises that Samsung would stop cutting out stock Android apps for it’s own Touchwiz interface.

The next day, Lenovo bought Motorola from Google for 2.91 billion dollars.

Newegg defeats patent troll

A “patent troll” is a company that is set up just to make money off of patents it owns. Usually, such companies do not do any R&D themselves. Instead, they strategically purchase patents from other companies, especially companies that are going bankrupt or having other financial difficulties. Then they use these patents to make money from other larger companies. They say, “Hey, you use technology that we have patented. Either pay us some royalties or we will sue you.”

It is important to be aware that patents are different than copyrights. A copyright covers the creative work itself — that piece of data itself, as written or recorded. Examples include source code, an executable binary, some song lyrics, a book, a musical recording, a photograph, a video, etc. A patent covers an invention, in other words, an idea. So, for instance, you could have a certain kind of pulley system patented. And you could have the blueprints (or CAD drawings, etc.) copyrighted. Roughly, the patent covers the idea, while the copyright covers a data object.

According to Title 35 §101 of the US Code, the things you can patent are these: “any new and useful process, machine, manufacture, or composition of matter, or any new and useful improvement thereof”.

Well, what if someone had a patent on e-commerce? That is the issue in this Ars Technica article about the legal fight between Newegg and Soverain Software. (Read the article. It’s great.) Soverain Software is a patent troll, in the sense described above. And, at one point, they acquired a patent for the idea of an internet shopping cart. They didn’t actually do the “invention” or file for the patent. Apparently they got it from a software outfit that was going out of business in 2001. Well, who uses web shopping carts? Everyone. Soverain has sued the likes of J.C. Penney, TigerDirect, Avon, Victoria’s Secret, Best Buy, Office Max, Home Depot, IBM, and others. Not all the cases have been resolved, but Soverain was pulling in millions of dollars.

Newegg was also being sued by Soverain, and they said, “This is bullshit.” (That’s a quote from Newegg’s Chief Legal Officer.) Instead of settling with Soverain, they fought. Finally, they got Soverain’s patents declared invalid. This saves them and many other e-commerce businesses tons of money.

It seems extreme to be able to patent an idea as general as internet shopping cart. But are there other ideas that potentially should be covered by patent protection? What would be the justification for that? Would copyright be enough by itself?

My guess is that act utilitarianism would favor a policy of no software patents but some level of copyright protection for software and source code. However, I haven’t worked through the act utilitarian evaluation step-by-step. Furthermore, there are many ways copyrights can be structured, and that is another complication. We will be talking about this more in class in a couple of weeks. But please weigh in with your initial thoughts!