Original Article:
Are Patents on Interfaces Impeding Interoperability?
by
Pamela Samuelson
93 Minn. L. Rev. 1943 (2009)
Innovating Between and Within Technological Paradigms
A Response to Samuelson
by
Peter Lee†
Patents on interfaces are problematic—sometimes. In Are Patents on Interfaces Impeding Interoperability?, Professor Pamela Samuelson lays a valuable foundation for distinguishing when they are and when they are not.1 She begins by reviewing the economic benefits of interoperability as well as the historical emergence of interface patents, which threaten to impede such interoperability.2 After surveying an impressive array of potential policy responses,3 she concludes that patentees generally face adequate incentives to allow access to proprietary interfaces.4 Therefore, she ultimately argues in favor of measured, targeted policy interventions to remediate the (rare) instances when interface patents actually impede interoperability.5 In this Response, I extend Professor Samuelson’s analyses to further explore the antecedent question of identifying when intervention is warranted. As we will see, moreover, determining whensuch patents warrant attention informs the question of what kinds of intervention are most appropriate.
In elaborating my Response, I rely heavily on the concept of technological paradigms. I adapt this term from philosopher of science Thomas Kuhn, who characterized “scientific paradigms” as coherent traditions of scientific practice rooted in unifying theory.6 By analogy to the technological sphere, I suggest that interfaces define technological paradigms: integrated systems of interoperability.7 Examples of technological paradigms include VHS, Betamax, and DVD, all of which define systems of interoperable components that are not interoperable with each other. Kuhn used the concept of paradigms to differentiate between two different types of scientific progress. Incremental progress proceeds as so-called normal science that refines and elaborates an established paradigm.8 However, truly “revolutionary” progress occurs via paradigm shifts—disjunctive leaps from one paradigm to another.9 As we will see, interface patents (and their modification) can promote both kinds of progress in the technological sphere.10
This Response highlights the importance of context in determining the social benefits and costs of interface patents. Compared to Professor Samuelson, I take a more salutary view of such patents—and non-interoperability in general—in driving certain kinds of technological progress. I argue that exclusive rights can provide incentives to invent valuable interfaces and encourage healthy competition between emerging technological paradigms. However, once an industry has coalesced around a single paradigm, the costs of strictly asserting interface patents likely outweigh their benefits. By considering industrial and informational developments over time, policymakers can calibrate policy interventions to maximize innovation both between and within technological paradigms.11 Because context-specific information is critical to such measures, I argue that ex post mechanisms such as remedies analysis, patent misuse, and regulatory action by antitrust authorities constitute the most effective policy interventions for addressing problematic interface patents.
This Response proceeds in three Parts. Part I examines the underappreciated benefits of interface patents and non-interoperability in promoting innovation between technological paradigms. The value of interface patents is highly contextual, however, and Part II argues that weakening certain interface patents—such as those covering industry standards—may be warranted to promote innovation within an established paradigm. Part III builds on these observations to argue against broad, ex ante regulatory measures in favor of targeted, ex post policy interventions that can exploit industrial and informational developments over time.
I. INNOVATING BETWEEN TECHNOLOGICAL PARADIGMS: TECHNOLOGICAL MULTIPLICITY, COMPETITION, AND DISPLACEMENT
The title of Professor Samuelson’s article is a fitting place to initiate a policy discussion. After all, before legislatures, regulatory agencies, courts, and industry actors consider modifying interface patents, they should be sure that a problem exists. Unfortunately, the extent to which interface patents impede interoperability is an exceedingly difficult question to answer. At a theoretical level, Professor Samuelson is certainly correct that firms have strong incentives to allow wide access to patented interfaces.12 Based on a dearth of litigated cases, as well as anecdotal accounts, Professor Samuelson reasonably concludes that interface patents do not produce significant blockage.13 As she acknowledges, however, there may be more inhibition than meets the eye; it is very difficult to enumerate development opportunities foregone because of interface patents.14 Professor Samuelson’s work thus invites further empirical inquiries to quantify the extent to which patents actually impede interoperability.15
Unfettered interoperability, however, is not always desirable. At a theoretical level, there are situations where interface patents—and the non-interoperability they facilitate—are quite critical to driving technological progress. These circumstances, moreover, depend heavily on industry dynamics. As Professor Samuelson recognizes, interfaces are valuable and often costly to develop.16 Therefore, based on the underlying logic of the patent system, exclusive rights can provide valuable incentives to invent and develop new interfaces. More importantly, interface patents provide a mechanism by which firms can appropriate the value of broader technological paradigms.17 Thus, for example, Microsoft’s patents on application program interfaces (APIs) help it appropriate the value of Windows, since other firms cannot interoperate with that system without utilizing those proprietary resources.18 Drawing from Joseph Schumpeter’s classic theory,19 patents on interfaces may promote the emergence of new technological paradigms through a process of “creative destruction.”20 According to this view, revolutionary new entrants challenge and ultimately displace incumbent technological platforms. In this manner, interface patents—and the value appropriation they facilitate—can spur technological paradigm shifts.21
Along these lines, exclusive rights may facilitate valuable competition among emerging, non-interoperableplatforms. Take, for example, the recently concluded format war between Sony-backed Blu-ray and Toshiba-backed HD DVD. Notably, the technology underlying both of these formats—which is critical to achieving interoperability among their respective components—is patented.22 Although the history of the format war is still being written, consensus exists that the more technologically robust format, Blu-ray, ultimately won out.23 Of course, one must balance these technological gains with the significant waste engendered by format wars; thousands of consumers who bought HD DVD players probably regret their purchases.24 However, establishing a dominant paradigm always entails some waste, as a victorious technology renders rival technologies obsolete.25
Even aside from facilitating the emergence of a single “victorious” paradigm, interface patents can produce a stable equilibrium of multiple coexisting platforms. As Professor Samuelson recognizes, competition among proprietary systems, as well as among open systems, can enhance social welfare.26 And as Professor Christopher Yoo has described in the copyright context, exclusive rights promote product differentiation that enhances both incentives to create and access to creations.27 While certain caveats apply to the patent context,28 there is reason to believe that various “fiefdoms” of interoperability, while not interoperable with each other, may offer a wide menu of functionalities that appeal to different consumers.29 Thus, progress involves not only replacing an incumbent paradigm with a new one (for example, CDs triumphing over cassettes), but by the simultaneous existence of multiple technological paradigms (for example, Microsoft Windows, Mac OS, and Linux).30 Interface patents and non-interoperability may thus facilitate greater consumer choice.31
II. INNOVATING WITHIN TECHNOLOGICAL PARADIGMS: PROMOTING “NORMAL” PROGRESS BY BROADENING ACCESS TO AN INDUSTRY STANDARD
While interface patents in “contested” industries may be salutary, they can be quite detrimental in other contexts. They may be particularly problematic when a patented interface becomes an industry standard.32 While Professor Samuelson recognizes that patented standards are problematic, I wish to accentuate their pernicious effects. When an industry has coalesced around a particular standard, the interfaces underlying that standard approach the status of “infrastructure,” which economic theory suggests should be widely accessible.33 Qualcomm’s patents on video compression technology provide a particularly striking example. In late 2001, two standard-setting organizations created the Joint Video Team (JVT), which aimed to develop a standard for video compression technology.34 Qualcomm participated in the JVT but did not disclose two critical patents that covered elements of the so-called H.264 standard, ultimately released in May 2003. Widespread adoption of this standard offered Qualcomm significant market power, and Qualcomm soon began exercising it. In 2005, Qualcomm sued Broadcom for infringing its patents by practicing the H.264 standard. The district court held that Qualcomm’s patents were categorically unenforceable because of Qualcomm’s failure to disclose them to the JVT.35 On appeal, the Federal Circuit narrowed the scope of this order, holding the patents unenforceable as to H.264-compliant products.36
Although one could quibble over the appropriate scope of Qualcomm’s injunction, this is clearly a situation where interface patents had potential to do much harm. Qualcomm’s patented interfaces were incorporated into an industry-wide standard, thus giving Qualcomm the right to exclude broad swaths of productive activity. In some sense, the Qualcomm case is an easy one for intervention because of the company’s bad-faith participation in the standard-setting process.37 Even outside of such malfeasance, however, the prospect of monopolizing an industry standard renders certain patented interfaces particularly troubling.38
This undue market leverage is present in other situations identified by Professor Samuelson as warranting some form of regulatory intervention.39 For example, citing “abuse of dominant position,” the European Commission compelled Microsoft to disclose specifications to allow interoperability with Windows-based technologies.40 In general, patents on standards represent a subset of patents on interfaces that commentators have found highly problematic.41 In all of these cases, when interface patents cover a technological paradigm that has become an industry standard, the social costs of the right to exclude likely outweigh its benefits. Exacerbating this costliness is the ability of the patentee to appropriate value exogenous to itself;42 the value of a patented interface standard may reside less in its technical merit and more in the simple fact that many parties have adopted it.43 Such patents may inhibit innovation within a dominant paradigm, thus preventing the significant gains to be realized from elaborating and refining an existing platform.44
III. THE IMPORTANCE OF CONTEXT: INDUSTRIAL AND INFORMATIONAL DEVELOPMENTS AND EX POST POLICY INTERVENTIONS
As Professor Samuelson recognizes, the virtues and vices of patents on interfaces, therefore, hinge considerably on context.45 Interface patents in immature or contested industries may spur rival technological paradigms that produce either a victorious platform or the healthy coexistence of multiple platforms. However, when an industry has coalesced around a single interface standard, exclusive rights on that standard may be highly detrimental. These observations highlight the importance of information in determining appropriate responses to interface patents.46 Industrial characteristics only become apparent with the passage of time and the emergence of ex post data. Thus, information is critical to Professor Samuelson’s observation that “if regulatory intervention of interface patents is appropriate at all, it should only be undertaken in a targeted manner to address specific harms.”47
This emphasis on industrial developments and information, moreover, lends itself to favor certain policy interventions over others. Ex ante interventions, such as removing interfaces from patentable subject matter, are likely to be blunt and over-inclusive.48 Furthermore, they foreclose the ability of patent protection to drive early stage technological innovation and paradigm definition. Rather, ex post interventions that can take account of industry dynamics and context-specific information offer clear advantages. This argument thus favors ex post approaches such as remedies analysis, patent misuse, and regulatory action by antitrust authorities for addressing problems associated with interface patents.49
Ultimately, these observations shed new light on an apparent tension within patent law. Many commentators note that patents represent an intrinsic trade-off between maintaining incentives to invent and constraining access to new inventions.50 While at first glance this trade-off appears limiting, policymakers should recognize that patent protection represents a policy lever that can toggle between two types of technological progress. Patents on interfaces can encourage firms to develop new interfaces (and entirely new platforms), thus ushering in technological paradigm shifts. However, when a patented interface becomes an industry-wide standard, relaxing exclusive rights may be warranted to promote “normal” progress within the paradigm. By recognizing the multifaceted functions that patents play51—and the environments in which they are most appropriate—policymakers can best harness the power of exclusive rights to promote multiple kinds of innovation.
Cite As: Peter Lee, Innovating Between and Within Technological Paradigms: A Response to Samuelson, 94 Minn. L. Rev. Headnotes 1 (2009), http://www.minnesotalawreview.org/sites/default/files/Lee_Innovating_Paradigms.pdf
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