There is a potential conflict between the two that we ought to revisit as the nature of technological advance itself undergoes profound changes.
Vonage Holdings Corp. says bankruptcy is among the potential risks from its continuing patent litigation with phone giant Verizon Communications Inc., as the Internet calling start-up’s problems deepen….
The case pits the second-largest U.S. telecommunications company, Verizon, against a start-up that once promised to revolutionize the phone world by offering discounted Web-based calls. Instead, Vonage’s existence is now in question as competition from cable and phone companies mounts and its legal woes have worsened.
A federal jury in Virginia ruled last month the company had infringed on Verizon’s patents, and a judge ordered an injunction on its service….
Last week, Vonage said it would reduce its staff of about 1,800 by 10% and pare marketing spending in an effort to cut costs. Founder Jeffrey Citron reassumed the title of chief executive officer after Michael Snyder stepped down. Vonage’s share price has fallen more than 80% since the start-up went public last May.
Nattering Naybob was deeply disturbed by the jury’s decision:
[Alleged infringement of patents 711 and 574]: the “inventors” at Verizon “created” what could be called DNS for phone systems. This alleged patented “technology” is used by an Open Internet standard called ENUM , standardized in RFC 3761; “The E.164 to Uniform Resource Identifiers (URI) Dynamic Delegation Discovery System (DDDS) Application (ENUM)” copyrighted in April 2004 by The Internet Society….
[Alleged infringement of patent 880]: this appears to be a public/wireless/cordless gateway setup for wireless VoIP. The claims made in patent 880 are for the normal use of the SIP REGISTER method as defined in RFC 3261 copyrighted in June 2002….What Verizon claims as unique is simply the act of performing these operations over a WiFi gateway.
Naybob concludes that Verizon is simply abusing our legal system in an effort to quash a small
I don’t pretend to be an expert on the technical details of the patent suit, on which Naybob provides a good deal more discussion. But I do know that from the perspective of economic theory, there is a fundamental tradeoff inherent in patent protection. On the one hand, enforcing a patent puts the government in the position of supporting and sustaining monopoly power, which as a general rule works to the detriment of consumers. The justification for this government-sponsored inefficiency is the desire to create an incentive to develop the new technology in the first place. The key question in a case like Verizon is whether the social need for their original research was sufficiently strong that we should now deliberately stifle further innovation and competition in the market to make sure Verizon continues to be compensated for their research. My impression as an outsider is that for many of the advances that we have seen in this area, it is competition itself rather than the hope of monopoly protection that has been the major factor motivating firms continually to innovate.
I also recently read Michael Crichton’s Next. Crichton’s gotten a bit preachy in his last two books, and I don’t much recommend this one for its alleged plot. But the book does raise a relevant social issue as to whether courts ought to be in the business of enforcing patents for individual human genes. Again the relevant issues are, How much (if any) slower would scientific progress in this area proceed in the absence of this specific patent protection, and how does that potential social benefit compare with the social harm from using government power to create and enforce a monopoly? I also recommend (as always) Dave Altig’s take on this point.
We have come a long way from the days when the U.S. Patent Office was first created. Perhaps it’s a good time to revisit exactly what we want that institution to accomplish.