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Disruption: success or failure of the patent system?
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NHK interview about Apple v. Samsung Sept. 5, 2012
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Greetings!
 
Potentially causing huge disruption of the status-quo, the jury in the US Federal court room of Judge Hon. Lucy Hearan Koh on August 24, 2012 unanimously decided that: - Samsung knowingly and willfully infringed on several of Apple's patents and other intellectual property, and
- awarded Apple a ten digit amount (1,049,343,540.00) in damages from Samsung (because the jury decided that the infringement was willful, Judge Koh might actually triple these damages)
NHK interviewed me about this landmark case - click here to watch the video clip (my interview after 9:00 mins).
This remarkable jury decision has led to passionate discussions of the patent system - some comments below. |
 | | click to watch NHK video (interview after 9:00mins) |
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Here some notes I took in preparation to my NHK interview:
1. Success or failure of the patent system?
The spectacular jury decision led to passionate discussions about the US patent system and its implementation in the courts. As I will explain below, these discussions almost all neglect some major points.
Some of the arguments fall into the patent=monopoly class: the argument is that this decision is a failure of the patent system, because monopoly=bad. The argument here is that patents award a limited monopoly for a limited time to the inventor (actually, in most cases not to the true inventor, but to the current owner of the patent). Indeed, the patent system is a kind of contract between the inventor (rather: current owner of the patent) and society, where the inventor explains the details of the invention instead of keeping his/her invention secret, in exchange for a monopoly for exploiting this invention.
The reality is, that to be successful in business, you need to have the opposite of a commodity, ie you have to have a unique product or service without competition = a monopoly, instead of a commodity which needs to compete on price (for details on this point, read Peter Thiel's recent Stanford lectures). Therefore, those companies which have unique products with little competition (because of the patent and intellectual property protection system) have high profit margins and can grow spectacularly (e.g. both Apple and Samsung, or Microsoft with PC operating systems and office productivity software).
Why is it that so many highly inventive creative people are against the patent system, and think its a failure? Maybe its because practically all employees sign away their rights to be directly rewarded for inventions, and the rewards come much more indirectly via promotions, bonus, or the negotiation power when switching jobs. Thus most employed inventors are decoupled from the benefit side of the patent equation. Actually, employee inventions are handled quite differently in different countries, and in Germany employee inventors can receive very considerable cash rewards because of Germany's "Arbeitnehmererfindungsvergütungsgesetz" (yes- this tongue-twister is one single German word).
Actually, our patent system is very very old and has grown with our culture for over 500 years. The first known patent law in 1474 in Venice granted inventors exclusive rights to their inventions as part of Venice's economic policy.
Patents are part of the US Constitution of Sept 17, 1787: "To promote the progress of science and useful arts, by securing for limited times to authors and inventors the exclusive rights to their respective writings and discoveries". The first patent under the US Constitution was granted on July 31, 1790 to Samuel Hopkins in Pittsford, Vermont for the "making of pot ash and pearl ash by a new apparatus and process".
The first patent on US soil was actually granted earlier, in 1641 to Samuel Winslow for a new method of making salt by the Massachusetts General Court.
Thus patents have grown to be part of our culture for the last 500 years or longer, and our patent system is highly unlikely to go away anytime soon, even if it may seem that the patent law might "reduce consumer choice".
Actually, I think that it would be better if more inventors would remain in the "driver's seat" with patents benefiting the inventors directly and thus enabling them to invent and innovate even more and faster - agile venture companies are one way to achieve this.
2. Impact on Samsung
The jury awarded a ten digit amount in damages to Apple from Samsung. Actually, this amount is not payable right now, however Judge Koh may triple this amount, because the jury decided that the infringement by Samsung was willful.
Even if tripled by Judge Koh, the damage amount which Samsung might have to pay is less than 1/3 of Samsung's net after tax profit last year, thus Samsung very likely will remain an extremely successful and prospering company even if Samsung has to pay tripled damages to Apple, and might even grow faster, encouraged to innovate in new directions.
Since Samsung is likely to appeal, higher courts could change this amount again, or even eliminate it. The courts might also force Samsung to withdraw infringing phones and tablets from the market - which could be potentially more damaging than the cash damage award.
3. Judge Lucy Hearan Koh
I was extremely impressed by all I read from and about Judge Koh and her achievements and personal history - she is the first US District Court Judge of Korean descent. It is reported that Judge Koh's mother escaped from North Korea as a child by walking for two weeks across the 38th Parallel, and later earned a PhD in Nutrition from the University of Maryland.
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