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Without Patents, Anti-Counterfeiting Efforts Won’t Fly

Two headlines from two publications I read every day — EBN and The Wall Street Journal — stand out today as examples of how interdependent the global supply chain has become. Both articles report a sea change in a practice that defines the global high-technology business: intellectual property protection. And the trend is positive.

Even though patent battles being waged by the likes of {complink 379|Apple Inc.} against rival (and supplier) {complink 4751|Samsung Electronics Co. Ltd.} seem to have more at stake than IP protection — such as shutting a competitor out of an entire market — patents are one of the only ways to pursue a legal remedy against counterfeiting.

As Contributing Editor Bruce Rayner points out, the US government isn't shying away from discussing the dangers of counterfeit parts in military and aerospace equipment. (See: Military Hardware Security Compromised and Why Is Counterfeiting Getting Worse?.) Although it's a far cry from the kind of vigorous enforcement that's really needed to stop the flow of bogus goods, government and industry are finally in agreement that additional steps must be taken to prevent catastrophic failure in mission-critical equipment and aircraft. Without patents, defending charges of high-tech counterfeiting don't stand a chance.

Patents are notoriously hard to file and enforce — a situation that the US Patent Office believes it is beginning to remedy. (See: Patent Reform at Last, but Does It Go Far Enough?.) Although I have doubts patent reform is going in the right direction, the WSJ article reports that startups, at least, are beginning to rethink the value of patents. Patent filings among startups are on the rise, according to the Journal, as companies seek to protect innovation and invention. Although startups may still face the prospect that an Apple may come after them at some point, the bigger fear is that technology can be stolen out from under them with no legal recourse.

It is still difficult to enforce patents in countries such as China, where the idea of private ownership of an idea is still a foreign concept. But without some sort of basis for a claim, such as a patent, there is very little opportunity for any legal remedy. In fact, in the report “Foreign Spies Stealing US Economic Secrets in Cyberspace” cited by Rayner, the solution to cyber-espionage is better data protection. There is very little discussion of prosecution, although that was not the original intent of the report.

The fact remains that one of the biggest problems with the US patent system is the risk of litigation from a competitor and “submarine” patents — a practice under which an inventor hoards patents for the purpose of challenging a future invention with the hopes of a big payoff.

However, the fact that the Semiconductor Industry Association, the Department of Defense, the Department of Justice, and the US Customs and Border Patrol are focusing on the international aspect of patent protection is a step in the right direction. It is still up to the US government and the International Trade Commission to help small companies to prosecute international violations. Startups don't have deep pockets to defend against challenges from the Apples of the world. But if private industry and associations band together with government agencies, more can be done to protect the national interests of US inventors.

It is too bad that the momentum is coming on the heels of the discovery of counterfeit goods in defense equipment and aircraft. Counterfeit parts have been appearing in consumer and industrial equipment for as long as anyone can remember. Tech companies have prosecuted cases in foreign counties with some success: Analog Devices Inc. has had a number of high-profile patent infringement victories. If high-tech continues to band together to defend innovation, the net results can only be positive for the global electronics industry.

17 comments on “Without Patents, Anti-Counterfeiting Efforts Won’t Fly

  1. Nemos
    November 11, 2011

    I have mixed feelings about the major subject of the article. From on hand I realize how self-destroying is to have counterfeit parts in the Market but from the other hand I don't appreciate much how Apple uses the patent laws against its competitors. I know it is a very complicated situation specially if we link the counterfeit with the patent laws.

  2. Ariella
    November 11, 2011

    That's a good point, Nemos. I am in favor of protecting one's designs and intellectual property but not in favor of using that as a pretext to squash someone else.

  3. DataCrunch
    November 13, 2011

    Counterfeiting is a huge problem and a global challenge and without the world business community and governments in sync on trying to stamp it out, then it will continue to be troublesome.

  4. Taimoor Zubar
    November 14, 2011

    I agree with the discussion here that a trade-off needs to be achieved when it comes to patents. The patent and copyright laws should seek to protect ideas of individuals and companies so as to encourage innovation and new development, yet at the same time too much protection by the law will result in abuses and misuses of the system – just what Apple is doing.

  5. jbond
    November 14, 2011

    I am all for patent protection, and in fact we need an even better control of the system. The fact that there is billions to be made in the counterfeiting business, businesses and countries need to stand together to fight this. The biggest issue I have is with companies stock piling patents to prevent another company’s innovation or to cash in on other peoples inventions. If they are going look at some reform with the patent laws, they should also look into the issue of stock piling patents to shut competitors down.

  6. Mr. Roques
    November 14, 2011

    Well, I doubt patents will be the solution to counterfeiting. The Chinese companies are not even trying to hide that they are copying from a 'patented' product. The issue is with enforcing the law. 

    I believe that small companies are thinking of patents as assets, and when Apple values them they see how many patents they have and that impacts the overall value.

  7. prabhakar_deosthali
    November 15, 2011

    I see here how IBM opened its personal computer architecture to the whole world and how the whole world started making PCs as IBM compatible. A win-win situation where all those PC makers prospered along with IBM. A whole new industry got created and is thriving even today as those PCs have become as essential as a table and chair in every office and home.

     

    Why not adopt a similar strategy rather than going for those clumsy and time consuming procedures of patent protection and then those long drwan legal battles?

     

    For example if Apple can license their technology to likes of say Samsung, tomorrow Samsung will be able to legally produce Apple-compatible Iphones! All those legal wars , counterfeit parts from the unscruplous sources will vanish.

    So like AMD started making CPUs which were Intel compatible without officially declaring so , with licensing agreements companies will be able to produce genuine second source parts with a tag “xxx-compatible” to gurantee the same features and performance and reliability as the original company parts.

     

     

  8. Eldredge
    November 15, 2011

    @prabhakar – IBM doesn't adopt the strategy you propose across the board. In fact, for several years running, IBM generated the largest number of patents year over year in the same timeframe that the PC proliferation was occurring. They continue to place a high focus on patents.

    Apple couldn't license their technology if they didn't own the IP.

    Unfortunately, any assignment of property sometimes brings with it legal contention of ownership. But the purpose, as stated in the constitution, is “to promote the progress of science and the useful arts, by securing for a limited time to authors and inventors the exclusive right to their respective writings and discoveries.”

  9. Eldredge
    November 15, 2011

    @Mr. Roques – You are right, enforcement is the issue. And the burden of discovering infringement and enforcing the patent rests with the patent owner. Philosophically that makes sense – after all, who can recognize infringement better than the patent holder? But at the same time, the effort and cost one must use to discover and protect takes away from further investment in new technology.

  10. Himanshugupta
    November 15, 2011

    the crux of the problem is to identify the patent theft. Another problem is the law enforcement, as others also identified. Stricter law enforcement will not only help putting a stop on patent infringment but also benefit other copying/stealing of softwares, entertainment, healthcare products etc.

  11. Mr. Roques
    November 15, 2011

    Whoa, I can't picture that, not even in a Disney movie. Promoting innovation is very important to maintain relevance in today's World but patents have not been the solution. I think they need to make patents more specific, require more details.

  12. stochastic excursion
    November 15, 2011

    Marketing a product that is branded with another company's name without that company's permission goes beyond patent infringement.  Fraud and other criminal statutes cover practices such as this.  Then again, the kind of marketplace deception that is either condoned or illegal is very dependent on culture and longstanding practice. 

    US patents are largely used to keep researchers who work for established businesses from taking their technology to other companies.  Unclear that the countries who participate in counterfeiting can benefit from such a system at present. 

    To really protect start-ups and to avoid the dishonest use of the system, the patent system simply has to be smarter.  In this age where arbitration is used instead of litigation, it's surprising that technology-savvy third parties aren't used to register or certify IP.

  13. bolaji ojo
    November 15, 2011

    I've been digging into the patents issue and disputes that have engulfed the wireless handsets market and cannot imagine anyone winning other than lawyers. I am not blaming them, just noting that at the end all these companies will have to reach an “amicable” cross-licensing agreement but not before they've paid millions to lawyers.

  14. Eldredge
    November 16, 2011

    Unfortunately that is often true. It does show how much patent property is worth to the companies in the rapidly changing technology realm.

  15. Mr. Roques
    December 23, 2011

    Crazy thought: Apple sells the right to use the patent to small chinese companies, they make them change a few things but overall, the same technology… the Chinese, in turn, give them a share of the profits. Apple wins! 

    They have an issue when a company that can compete with them is the one making the infrigement (Apple vs Samsung).

    What do you think?

  16. Mr. Roques
    December 23, 2011

    Does it have to be in the 'treaty-level' enforcement? How can the US enforce the US law in China?

  17. Kunmi
    December 31, 2011

    Counterfeiting is an incurable marketing disease. Patents has nothing to do in the cause of total eradication.

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