When Apple announced last year that all iPhones would come with a voice-activated assistant named Siri, capable of answering spoken questions, Michael Phillips’ heart sank.
For three decades, Phillips had focused on writing software to allow computers to understand human speech. In 2006, he had co-founded a voice recognition company and eventually executives at Apple, Google and elsewhere proposed partnerships. Phillips’ technology was even integrated into Siri itself before the digital assistant was absorbed into the iPhone.
However, in 2008, Phillips’ company, Vlingo, had been contacted by a much larger voice recognition firm called Nuance.
“I have patents that can prevent you from practicing in this market,” Nuance’s chief executive, Paul Ricci, told Phillips, according to executives involved in that conversation.
Ricci issued an ultimatum: Phillips could sell his firm to Ricci or be sued for patent infringements. When Phillips refused to sell, Ricci’s company filed the first of six lawsuits.
Soon after, Apple and Google stopped returning phone calls. The company behind Siri switched its partnership from Phillips to Ricci’s firm. And the millions of dollars Phillips had set aside for research and development were redirected to lawyers and court fees.
When the first lawsuit went to trial last year, Phillips won. In the companies’ only courtroom faceoff, a jury ruled that Phillips had not infringed on a broad voice recognition patent owned by Ricci’s company.
It was too late. The suit had cost US$3 million and the financial damage was done. In December, Phillips agreed to sell his company to Ricci.
“We were on the brink of changing the world before we got stuck in this legal muck,” Phillips said.
Phillips and Vlingo are among the thousands of executives and companies caught in a software-patent system that federal judges, economists, policymakers and technology executives say is so flawed that it often stymies innovation.
Alongside the impressive technological advances of the last two decades, they argue, a pall has descended: The marketplace for new ideas has been corrupted by software patents used as destructive weapons.
Vlingo was a tiny upstart on this battlefield, but as recent litigation involving Apple and Samsung shows, technology giants have also waged wars among themselves.
In the smartphone industry alone, according to a Stanford University analysis, as much as US$20 billion was spent on patent litigation and patent purchases in the last two years — an amount equal to eight Mars rover missions. Last year, for the first time, spending by Apple and Google on patent lawsuits and unusually big-dollar patent purchases exceeded spending on research and development of new products, according to public filings.
Patents are vitally important to protecting intellectual property. Plenty of creativity occurs within the technology industry and without patents, executives say they could never justify spending fortunes on new products. Academics say that some aspects of the patent system, like protections for pharmaceuticals, often function smoothly.
However, many people argue that the nation’s patent rules, intended for a mechanical world, are inadequate in today’s digital marketplace. Unlike patents for new drug formulas, patents on software often effectively grant ownership of concepts, rather than tangible creations. Today, the patent office routinely approves patents that describe vague algorithms or business methods, like a software system for calculating online prices, without patent examiners’ demanding specifics about how those calculations occur or how the software operates.