Why Apple-Samsung Proves that the Patent System Can Work

Like many in the tech industry, I closely followed the recent Apple-Samsung litigation and believe that the case will have meaningful implications for years to come.  What I find most interesting is not the jury’s decision – which could have gone either way for purposes of this commentary – but the underlying premise of this case, which is exactly the type of issue our patent system was designed to handle. I can even picture Thomas Jefferson, our nation’s first Commissioner of Patents, sitting in his study at Monticello, reading about the case on his iPhone and texting a note to Judge Koh congratulating her for her conduct of the case.

This case involved two companies with competing products, and each believed they had intellectual property that should exclude the other from participating within their marketplace. More importantly however, at least some of the patents being litigated were essential to the products’ design. In other words, they were inherently the reason that consumers would want to buy those specific products. This important concept – that true innovation must be tied to consumer preference – played out in a court of law, in front of a jury, and in a way that will have great significance for how the marketplace treats companies that innovate.  Unfortunately, this is a far cry from a majority of patent litigation we see in our system today.

In today’s environment, for technology companies, the vast majority of resources directed towards patent litigation have nothing to do with innovation or why our products are successful in the marketplace.  Instead, our resources are often spent defending against entities that don’t make or sell any product or service but simply try to extract revenue from companies based on the uncertainty of how damages are calculated within the patent system.

Because current law requires juries to weigh fifteen different factors in assessing damages, those who are sued for infringement that may relate to a single component out of thousands in a complex product have no way to predict what the jury might do if infringement were found. Litigation is thereby turned into a casino game rather than a fair system for resolution of a dispute.  What you end up with after these scenarios play out are often unmeritorious settlements which only serve to perpetuate the cycle.  This is the antithesis of what a good commercial law system should offer in terms of certainty.  The current process drives a misallocation of capital into litigation games instead of R&D and is the opposite of what the rule of law is all about.

Finding a way to overcome this uncertainty should be a top priority for the courts and Congress in the year to come.  Fortunately the Federal Circuit, the court that hears patent appeals, and some judges in patent cases are starting to take a closer look at the abusive and unpredictable outcomes that many trials have produced.  Judge Posner’s recent decision in the Apple-Motorola litigation is a must-read for anyone who wants a clear explication of these issues:  http://www.scribd.com/doc/97979866/6-22-Posner-Opinion.

The Apple-Samsung case not only proves that our system can still work but also reflects the genius behind our patent system, which allows true innovators to protect the value of their inventions from imitators for a limited period of time, in return for making the nature of their inventions public.  This litigation represents exactly what the Founding Fathers were hoping would be the effect of the patent system when they incorporated it into the Constitution so many years ago.