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Battles Over Patents a Top Concern for Tech Companies

Kim Hart

About 150 executives and policy experts from the largest technology and telecom companies convened in Aspen this week to talk about some of the most pressing issues in the industry. In addition to the debate over the 700 megahertz spectrum auction and online privacy, patent reform was a hot topic.

Several economists pointed out the flaws in the current patent system that have led to an explosion of law suits in the past few years. Patent litigation has gotten so out of hand that it may end up limiting innovation instead of protecting it, said Michael Meurer, a law professor at Boston University. He said a lot of patent infringement happens by accident. In fact, 65 percent of firms do not search for similar patents before starting to develop their own technology, he added, and the U.S. Patent Office needs to raise the bar for issuing patents. His reasoning: If the quality of patents improves, there will be less of a chance a patent will be involved in a law suit.

Fewer patent lawsuits means big savings for tech companies that increasingly find themselves embroiled in heated battles over intellectual property. Mark Chandler, general counsel for Cisco Systems, said the company spent $45 million last year in patent litigation. Every time a case is filed against the company, it costs $3 million in legal expenses just to examine the claim, he said. If it ends up going to trial, the price goes up to $10 million.

"We've seen the rise of an industry built around leveraging litigation techniques rather than the actual technology," Chandler said during a panel discussion at the Aspen Summit, an annual event put on the the Progress and Freedom Foundation, a market-oriented think tank in Washington. "These people are purely driven by litigation rather than innovation."

Others say the threat of litigation is the only way to get companies to discuss potential solutions to infringement problems. Many intellectual property experts say the debate will heat up this fall as more cases are weighed and companies search for more ways to protect themselves against the costly suits.

By Kim Hart  |  August 21, 2007; 9:46 AM ET  | Category:  Kim Hart
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"About 150 executives and policy experts from the largest technology and telecom companies convened in Aspen..."

The key word here is "largest"...

What is good for Cisco or Intel is NOT good for small high-tech upstart

Those huge multinationals just want to use all new technologies from small upstarts and universities for free, by gutting patent enforcement.

The first noticable effect of this so-called "reform" will be decline in venture funding for promising upstarts with revolutionary technologies, and this is precisely what those large companies want: they are all affraid to lose their market dominance to some future upstart of tomorrow...

Patent "reform" must be stopped NOW !!!

Posted by: little guy | August 21, 2007 4:04 PM

Wrong doers always want to "reform" the rules so that their wrong-doing is no longer illegal.

Tort "reform" is mostly about wrong-doers who do not want to be held accountable for their intentional or negligent infliction of bodily harm to others.

DUI "reform" is about drunkards who want to blame others for having been on the same road at the same time.

Patent "reform" is about 800 pound industry gorrilas being able to do whatever they want, including crushing underfoot any independent inventor who happened to get to a new technology space first.

Posted by: step back | August 22, 2007 7:54 AM

All this talk of a need for patent "deform" is but a red herring fabricated by a handful of large tech firms as a diversion away from the real issue...that they have no valid defense against charges they are using other parties' technologies without permission. It's not about reforming the system. It's about legalizing theft!

The objective of these large firms is not to fix the patent system, but to destroy it or pervert it so only they may obtain and defend patents; to make it a sport of kings. Patents are a threat against their market dominance. They would rather use their size alone to secure their market position. Patents of others, especially small entities, jeopardize that. For example, the proposed change to eliminate the use of injunctions would only further encourage blatant infringement. Any large company would merely force you to make them take a license. They would have little to lose. Everything would be litigated to death -if a small entity can come up with the cash to pursue. That's what these large multinationals are betting against. This legislation in regressive, not progressive.

Sadly, some legislators and other parties have been duped by these slick firms and their well greased lawyers, lobbyists (some disguised as trade or public interest groups), and stealth PR firms. Don't be surprised to find the Washington lobbyist scandal spreading into the patent deform proceedings.

When corporate America agrees to not use our inventions without consent, American inventors and small entities will agree to stop suing them.

Stephen Wren

Posted by: steve | August 23, 2007 12:25 PM

I just looked and CSCO is down a mere $0.18 per stare today. This is a major information technology company with a market capitalization of over 183 billion dollars and with over 6 billion shares owned by investors. Just in today's stock market they have lost over 1 billion dollars for their investors and they are meeting in a luxury resort concerned over a corporate litigation cost of 0.045 billion dollars for an entire year?

There has to be more than money involved in this meeting; ego perhaps?

Posted by: Rusty Mase | August 23, 2007 1:36 PM

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