Patent Warfare: The New Tech Tax

The technology sector continues to be bogged down with patent fights over who created the myriad software, widgets, and gadgets many of us now rely on. Mountains of cash are at stake, but more importantly, these cases may stall innovation.

Hewlett-Packard Co. (NYSE: HPQ) and Oracle Corp. (Nasdaq: ORCL) are the latest defendants in patent infringement litigation brought last week by Judah Klausner’s Klausner Technologies Inc. The technology behind visual voicemail is at the heart of Klausner’s suits... again. He claims that enterprise messaging products from HP and Oracle that let users visually identify and then retrieve voicemail infringe on his patents.

Such moves are part of an overall patent-litigation trend that is keeping the lawyers busy and adding to the cost of doing business in technology.

Robert Rosenberg, president of Insight Research Corp., a telecommunications market research firm in Mountain Lakes, N.J., says a huge industry has grown out of intellectual property suits -- to the benefit of the litigators. “It is tremendously lucrative,” he says. “It’s the cost of doing business,” and that cost is passed along to consumers.

Abuses of patent law have distorted the nature of intellectual property, Rosenberg says. “It’s broken. It has been for years.”

Klausner, who also has patents for the electronic organizer and the PDA, is no stranger to litigation. He previously sued -- and settled with -- AT&T Inc. (NYSE: T), Apple Inc. (Nasdaq: AAPL), and a laundry list of other companies over similar claims regarding visual voicemail.

He typically works out licensing agreements with these companies, so it may be a matter of Oracle and HP coming to terms with him. That is not always the case when hot technology is being fought over.

Apple and Samsung Electronics, for example, are hunkered down in patent warfare pitting Apple’s iPhone and iPad against Samsung’s Galaxy phones and Galaxy Tab tablets.

Apple claims that Samsung chose to “slavishly copy” its technology, rather than developing new products on its own. Good luck trying to buy the Samsung Galaxy Tab 10.1 in Australia, where it was banned from sale in September thanks to a preliminary injunction granted to Apple. Samsung has launched a counterstrike with cross claims filed in an Australian federal court.

The war is being fought on many fronts. Samsung filed a preliminary injunction in October to block iPhone 4S sales in Australia and Japan. Samsung also wants to halt sales of the iPhone 4 and iPad 2 in Japan, based in part on patent infringement allegations. Samsung claims that Apple’s wireless devices have gotten “a free ride” on Samsung’s technology for power consumption control, user interface, and data transmission. Samsung previously filed similar litigation in France and Italy to bar Apple’s products.

In a righteous world, you would think these companies would face off like rival samurai who want the right to cross the same bridge. The fight would be fierce but end with a clear victor and even some begrudging respect between the belligerents.

In the real world, conflicts are a lot messier than that -- and usually end with expensive settlements. Klausner wants licensing revenue from the companies he sues; he is not trotting out products to compete with Oracle and HP. Apple and Samsung, however, are brawling in the consumer electronics aisle.

The bottom line is that the patent lawsuit trend is making it harder than ever to own technology rights. Patents exist to protect inventors from being cheated out of revenue they deserve, but innovators must work harder to create technology that the courts don’t find derivative in nature. In the end, consumers just want products that work well, and they will render their own judgment with their wallets.