There’s an arms race gripping the tech world, and the weapons of choice are patents. Microsoft is spending more than $1 billion to buy 800 of them from AOL, a move that underscores just how fierce–and lucrative–the idea wars have become, especially as more Web activity shifts from PCs to smart phones and tablets. Thanks in part to its Exchange e-mail patents, for example, Microsoft gets a cut from roughly half of all sales of phones that run Google’s Android operating system. Google, in turn, is spending $12.5 billion to acquire Motorola Mobility, whose patents include mobile devices and wireless technologies.
These stakes have spawned many high-profile lawsuits (see below). But the big loser, says patent expert Jim Bessen, is innovation. Intellectual-property laws originally empowered inventors. Now they’re used as ammunition by tech giants and greedy “patent trolls”–firms whose sole business model is to extract license fees, often under threat of litigation. “It’s corporate warfare, not actual competition in the marketplace,” says Bessen.
A new bill signed by President Obama last fall aims to fix this mess by speeding up the patent-approval process and cracking down on frivolous lawsuits. But with billions at stake and so many “vague, unclear and dubious” patents already granted, says Bessen, the current litigation wars could rage well into the future.
BATTLES
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PACTS
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SOLD
‘Instagram is not going away. We’ll be working with Facebook to evolve … and build the network.’
KEVIN SYSTROM, a co-founder of the photo-sharing app Instagram, which Facebook acquired for $1 billion
PRETTY FLY
$790
Monthly fee for Surf Air, a new airline that as of May will offer members unlimited California travel between Los Angeles, Santa Barbara, Palo Alto and Monterey. Jet Blue and Minnesota’s Sun Country Airlines have had success with similar promotions