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Against Monopoly

defending the right to innovate

IP and Protectionism

Monopoly corrupts. Absolute monopoly corrupts absolutely.





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Nokia v. Apple and Patent Protectionism

See Nokia: Apple iPhone Violates Our Patents: A few choice excerpts:
In a statement, "Nokia said Apple has refused to pay for use of intellectual property developed by Nokia that lets handsets connect to third-generation, or 3G, wireless networks, as well as to wireless local area networks. "Apple is attempting to get a free ride on the back of Nokia's innovation," Ilkka Rahnasto, Nokia vice-president for legal and intellectual property, said in the statement.
This implies apple copied their patented inventions. but copying need not be shown for infringement, and you can bet they will not rely on this in pressing their case. They are trying to have it both ways: to darkly hint Apple copied them, while being happy to persecute Apple for non-copying acts that still infringe their patents.
The Finnish handset giant said Oct. 22 it has filed suit against Apple ... in U.S. District Court in Delaware, accusing its California-based rival of infringing patents for core technology that allows the iPhone to make calls and connect to the mobile Internet. Although Nokia ... has sued rivals such as Qualcomm ... over patents in the past, the latest lawsuit came as a surprise and represents an escalation of increasingly contentious competition with Apple.
So ... the filing of the lawsuit is how they are engaging in "increasingly contentious competition." How much more clear could it be that these patents are nothing but anti-competitive devices used for protectionism?! It's obvious to everyone.
The loss of smartphone share is doubly frustrating to Nokia because it sold phones with computer-like features years before Apple. During the last two years Nokia has launched a series of handsets with iPhone-like touchscreen interfaces, but none has generated quite the same buzz as Apple's devices....
So they are losing out in competition, so using legal weapons instead.
Apple, like all mobile-phone makers, relies on such standards to make its devices compatible with carrier networks. Nokia says it has contributed its intellectual property to global standards bodies, but demands to be compensated for the use of its patents in commercial products. "Apple is expected to follow this principle," Nokia's Rahnasto said in the company's statement.
So, Nokia contributed to a standard with the very goal of making a standard that everyone would start using. Apple starts using it--bam, they sue them. Nokia is leveraging the monopoly the state granted them. Horrible.

[Mises blog cross-post; StephanKinsella.com cross-post]


Comments

Yes, Nokia is definitely using their patents as weapon against Apple. But at this case it is preemptive strike. Apple was able to secure several obvious patents related to the use of touch interface and gestures. Apple had use those patents against the Palm. So If I have to take a guess Nokia is suing Apple after Apple refused to license Nokia to use the touch interface. We both know what will happen. Apple and Nokia will work-out cross-license agreement between them and life will continue as we know it. The loser will be the consumer. When you buy a phone form Nokia you will pay small fee to Apple and when you buy iPhone - Nokia will get some payment.

Apple vs. Palm: the in-depth analysis

SAL-e:

The loser will be the consumer. When you buy a phone form Nokia you will pay small fee to Apple and when you buy iPhone - Nokia will get some payment.

Your statement is an assumption and is not based on any facts. It is just as likely that there net result will be no fees between the two. Or, if there is a fee, there is likely insufficient price elasticity to permit either company to pass the cost on to the consumer. The loser ends up being the company paying the net fee since they take a marginally smaller profit than they otherwise would have. The consumer is unlikely to notice anything at all.

Sal-e: "Yes, Nokia is definitely using their patents as weapon against Apple. But at this case it is preemptive strike. Apple was able to secure several obvious patents related to the use of touch interface and gestures. Apple had use those patents against the Palm. So If I have to take a guess Nokia is suing Apple after Apple refused to license Nokia to use the touch interface."

Then why did Nokia approach Apple with license-royalty requests first? No, I think they just want Apple's money.

"We both know what will happen. Apple and Nokia will work-out cross-license agreement between them and life will continue as we know it. The loser will be the consumer. When you buy a phone form Nokia you will pay small fee to Apple and when you buy iPhone - Nokia will get some payment."

Even if this were true, the money spent by these companies in amassing their patent warchests, and in engaging in sabre-rattling and litigation and negotiation and settlement is not trivial, and adds to their cost, and thus increases the costs borne by consumers and/or otherwise harms them and society in general. I.e., it's a transfer of wealth from society and consumers to IP parasites like myself. Thanks!

Mr. Kinsella,

I have been observing the technology industry and especially the software industry for more then 15 years. I was strong believer in IP. But about 10 years ago for the first time I start notice the inconsistency between the theory and the practice of IP law. I try to build my knowledge on the subject and the more I learn the more I realized that IP law is build by and serving a small group of people. That is how I discover the "Against Intellectual Monopoly" book by Michele Boldrin and David K. Levine. From my observations so far I have notice that different companies have very different strategy of using the IP.

There are companies that are using IP only as defensive weapon. Companies like IBM, Red Hat, Novell and others are in this group. They participate in Patent Pools in order to avoid expensive law-sues. One example is Open Invention Network (OIN).

There are other companies that are actively using IP as weapon against their competitors. In this group I would put companies like Apple and Monster Cables. Once I have heard, but have not verified my self, that Apple spends more money on their legal department, then on R&D. Apple's tactics are:

1. Try to patent everything. If they get the patent they will actively use it against competitors.

2. If they can't get a patent because someone had patent it already they will infringe on the patent. If they get sued they just will settle out of court. But they will not seek or give license ahead of the time. For example they released iPhone knowing that it was TM of Cisco.

The third common strategy I have observed: The Company is to try to secure needed license, but if they fail they will use one of the two paths:

1. Infringe and if get sued fight using all available resources. Or,

2. Preemptive strike in order to force cross-license agreement.

In this category I would put Microsoft, Cisco, and others really big companies. I guess Nokia is following the same strategy against Apple. For example MS sued TomTom after they failed to buyout TomTom.

It is just big game for people with big pockets. Most likely they enjoy playing, but as you say only real winners here are the patent attorneys. Some one has to pay the bill and in this case is the consumer. I have the same question "Why the society is tolerating this?" Currently there is big debate in Washington DC about the health reform, but I hear nobody asking the question: "Why health care is so expensive?" I think that current patent regime is big part of the problem.

Thank you, SAL-e

Sal-e: "There are companies that are using IP only as defensive weapon. Companies like IBM, Red Hat, Novell and others are in this group."

I think you are confused. IBM makes a billion dollars a year licensing. You don't get people to pay for a license without a threat of a lawsuit.

"They participate in Patent Pools in order to avoid expensive law-sues. One example is Open Invention Network (OIN)."

Or to protect their cartel by erecting barriers to entry.

" 1. Try to patent everything."

IBM is the #1 patenter. You don't think it does this too?

"2. If they can't get a patent because someone had patent"

You don't understand patent law. It is not previous patents that prevent you from getting a patent. It is prior art.

" it already they will infringe on the patent."

No. This is not correct.

" If they get sued they just will settle out of court. But they will not seek or give license ahead of the time. For example they released iPhone knowing that it was TM of Cisco."

TM or patent? Are you confusing them? Understandable, but why have a vociferous opinion then?

"It is just big game for people with big pockets. Most likely they enjoy playing,"

? first, what about the small players? Second, big companies don't "enjoy" playing the patent game. This is a bad hypothesis--it makes no sense at all.

"TM or patent? Are you confusing them? Understandable, but why have a vociferous opinion then?" No, I don't confusing them at all. I know that here are three types of IP. Patents, Copyrights, and Trademarks. They all have different set of laws, but they often are grouped as IP. I probably did not pick the best example here and I am sorry. The fact is that companies are using all three forms of IP as a weapon against their competitors. In this case Apple released iPhone and they knew that Cisco owned the trademark for it. Cisco file a law-sue and Cisco and Apple settle out of the court. Why Apple did it? Why they did not make the deal with Cisco before releasing the iPhone? I have seen this approach by Apple in other cases that involved patents.

About OIN: "Or to protect their cartel by erecting barriers to entry." This is true in some patent pools, but not in the case of OIN. OIN also gives patent protection to non-members. The sole purpose it to protect users of Linux. OIN helped TomTom against Microsoft. Recently Microsoft sold packet of Linux related patents to AST but the real buyer was OIN. http://www.linuxpromagazine.com/Online/News/Open-Invention-Network-Buys-Microsoft-Linux-Patents

"You don't understand patent law. It is not previous patents that prevent you from getting a patent. It is prior art." I am software engineer not a lawyer. Note taken, but my statement was partially correct. You can't get a patent if there is prior art, but if two people apply for patent at the same time only one of them will get it. In US is the first to "invent", but in EU is the first to file. Right?

"I think you are confused. IBM makes a billion dollars a year licensing. You don't get people to pay for a license without a threat of a lawsuit. " Let see how much confused I am?

If I am starting a new business (or new product) and I don't have patent to get cross-license with IBM I would have 2 choices:

1. Infringe IBM's patent and hope that I will not be sued by IBM, or

2. Go to IBM and ask for License.

Now I have to make a choice risk my business if IBM files a law-sue or IBM sells the patent and the new owner files a law-sue or simply take option 2. I believe most companies will choose to pay license to IBM. That is one way how IBM is making money of licenses.

Of course IBM could go around demand payment, but so far I have not seen evidences to support this.

Also at least in one case IBM had been sued by "Patent troll" over Linux related software and IBM was about to win the case and forced the patent holder to drop the case and give free license to IBM and any Linux user. I am sorry that I could not remember exact details of the case. I have lost the link.

So yes IBM is number 1 patent filer and probably patent holder, but so far I never seen IBM to use those patents as tool to attack their competitors. This could change in the future of course.

On other hand Microsoft owns more then 10000 patents and has history to use them aggressively. " it already they will infringe on the patent." No. This is not correct. Currently if you are found to infringe a patent and you know about it you will have to pay triple award. Is this correct? As result of this in many companies engineers are not allowed to look any patents and believe me you can not design a new product without infringing somebody's patent. So in today's software industry everybody is infringing patents.

Best regards, SAL-e

Not sure if this is true, but I heard from at least one source that Nokia is just trying to head off patent litigation against itself by Apple, whose patents Nokia has purportedly infringed. Can anyone debunk/substantiate this?
@Gena777

I think you got your answer by today's news:

IT BEGINS: Apple Sues HTC For Stealing iPhone Technology


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