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The Apple (AAPL) iPhone features a flawed voice recognition service, Siri. And the patent battle that wiped out its inventor and his three decades of work is a great example of why America's current patent system needs a revamp.
On October 6th, I was lost on a back road in central Massachusetts. My wife turned on her iPhone and asked Siri to tell us where we were. Siri's answer: Lansing, Michigan. If Siri worked right, it would have told us we were in Holden, Mass. -- it was only off by about 750 miles.
Nevertheless, Siri exists and Apple owns it. But according to the New York Times, Michael Phillips spent three decades "inventing software to allow computers to understand human speech."
In 2006, he co-founded a voice recognition company, Vlingo, and its technology was incorporated into Siri before it went in the iPhone and was the subject of partnership negotiations with Apple and Google (GOOG).
But then our busted patent system intervened in the form of a threatening phone call from the CEO of Nuance Communications (NUAN), a big voice recognition firm. The Times reports that Nuance offered Phillips two choices: sell Vlingo to Nuance or face a barrage of patent litigation.
Nuance owned a "broad voice recognition patent" that it used to file six patent lawsuits against Vlingo. Phillips redirected $3 million of his company's R&D budget to defend the suits, lost his partnerships with Apple and Google, and sold his company to Nuance in December 2008.
Like many things in America, patents were set up with a good purpose that has been twisted beyond all recognition by large corporations. For example, freedom of speech is a basic right but the January 2010 Supreme Court Citizens United decision turned money into speech and now those with the biggest bank accounts have the power that goes along with that money-mediated speech.
Patents were established to give inventors an incentive to take the risk of coming up with new technologies in exchange for protection against others who would steal the idea before the inventors could commercialize it.
In theory, an inventor should only get a patent if an invention is "novel (substantially different from what exists), not obvious (one can’t patent a new toaster simply by expanding it to handle five slices of bread), and useful (someone can’t patent an invisibility machine if invisibility is impossible)," according to the Times.
But thanks to our over-taxed patent system, those tests are not applied rigorously. A patent lawyer who spent seven years as an examiner told the Times, “If you give the same application to 10 different examiners, you’ll get 10 different results.” And that means that patents get issued for pre-existing ideas --for example, the crust less PB&J patent was granted to two men in 1999 and later acquired by JM Smucker (SJM).
Meanwhile, the economic costs of our flawed patent system are huge. Two Boston University professors found that 20% of the funds that software and some kinds of electronics would have spent on R&D is diverted to patent litigation -- assessing what they call a patent tax.
And that patent tax could be over $50 billion across all industries. A Stanford University analysis found that since 2010, the smartphone industry spent an estimated $20 billion on patent litigation and patent purchases. And the number of district court patent filings has tripled in the last 20 years to 3,260 in 2010.
Here are the five biggest reasons to scrap our current patent system:
- It does the opposite of its original purpose. The process by which Phillips was stripped of the fruits of his labor -- that lets Apple profit from Siri -- is a compelling example of how companies with deep pockets can turn the patent system into a weapon that accomplishes the opposite of its original purpose. Instead of allowing Phillips to profit from his invention, it let Nuance buy it after diverting Vlingo's R&D budget to patent lawyers.
- It rewards vague concepts rather than specific prototypes. Too often, patents are granted for general concepts described by inventors and with enough money to pay litigators, those concepts can be used to invalidate the work of engineers who build those concepts into real products. For example, the Times describes Apple's Invention Disclosure Sessions in which, beginning in 2006, Apple lawyers started listening to engineers describe vague concepts -- such as "software that studied users’ preferences as they browsed the Web" -- and turned them into patents. Since genius is 1% inspiration and 99% perspiration, we should have a patent system that tilts the bulk of the rewards to those who do the perspiring.
- Overworked patent examiners can't do their jobs right. The Patent Office's 7,650 examiners received "more than half a million applications last year, and the numbers have kept climbing," according to the Times. The effect of this is that patent examiners have "two days to research and write a 10- to 20-page term paper on why I think [a patent application] should be approved or rejected," as an experienced patent examiner told the Times. The standards for granting a patent may be sound but the Patent Office lacks the people to apply them.
- Preemptive patent filings by big companies crush innovators. Apple's application for patent 8,086,604 -- now known as the Siri patent even though Vlingo and Nuance were not battling over it -- was rejected nine times before Apple's 10th tweak won it the coveted patent. This is just one example of how "large companies with battalions of lawyers can file thousands of pre-emptive patent applications in emerging industries," according to the Times.
- It diverts money from innovation. It is impossible to know how much better off consumers would be if the money spent litigating patents had been spent on paying engineers to design and build innovative products and services. But the $20 billion spent on smart phone litigation is nearly 23 times Apple's 2011 R&D budget of $876 million.
If some of that money had been spent improving Siri, maybe it would have told us that we were in Holden instead of Lansing on Saturday.
