Why A Patent Verdict Against Samsung Is Bad News for Startups

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Last night, I tweeted this:

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The full story is here, which you should go ahead and read. But the gist is that Samsung lost a $15.7 million verdict in the Eastern District of Texas (the hallowed home of patent litigation) to Rembrandt, a party that claims to own the technology behind the Bluetooth 2.0 standard.

My tweet got a lot of attention (way more than my average missive), including countless replies basically calling me an idiot. Rather than engage with the twitter trolls (see what I did there? Clever, no?), I decided this would be a good time to talk about the patent troll problem and what it means for big companies and startups alike.

For starters, if you think I am particularly worried that Samsung, a huge company, lost a $15.7 million lawsuit, you don’t understand my feelings on patent reform, how the troll model works at all, or, apparently, how the patent system works. Let me tell you what I—and anyone who cares about protecting startups and innovation in this country should—care about.

Last week, when a jury found Samsung infringed three valid patents that supposedly cover the technology behind the Bluetooth 2.0 standard, it conferred on the patent owner, a company that neither makes nor sells anything, a monopoly on that standard. And, according to the Ars Technica article, which cites the patent owner’s complaint, Rembrandt asserts that these patents don’t just cover Samsung’s products, but “all products using Bluetooth 2.0 and later.”

So here is the problem: The inventor and the owner of the patents (two different parties) had nothing to do with the implementation of the popular Bluetooth 2.0 standards. In fact, so far as the story goes, the inventor has had no part in producing anything but 100 patents, which he sells to the current owner to use in patent litigation. Not to create new technologies (the type of progress of science and useful art the Constitution contemplated when it enacted a patent system), let alone to grow new businesses and create jobs. Instead, they serve as a tool for him and the patents’ current owner to extort money out of companies who do want to do those things.

Which is why I tweeted last night that this is very bad news for startups. Bluetooth technology is key to today’s growing technology marketplace. And it’s a market that is already regulated to some extent by the Bluetooth Special Interest Group (SIG), which maintains the technology’s standards. This is a particularly important point: tech companies rely on the concept of interoperability, meaning that anyone can use Bluetooth technology and it will work with different devices across the board. Currently, the SIG facilitates this in the Bluetooth space.

Before this verdict, a company who wanted to use Bluetooth could work with the SIG, a one-stop shop, to get access and necessary legal rights to the proper technology. But now there is a giant unknown: will Rembrandt sue? Demand a license to use Bluetooth? If a startup asks a lawyer about its new project that implements Bluetooth 2.0 or later, it’s likely to get an answer that someone else owns that technology, and it should either not work in that space or get ready to pay up.

I really am not overly concerned that Samsung finds itself on the hook for a $15.7 million verdict (though that’s not good news, either). I fundamentally care about the chilling effect that cases like these have on further innovation and—as I tweeted last night—on startups. Right now, we have a system that is, simply put, broken. We need real reform to get it back in working order, where everyone—big companies, startups, and garage tinkerers—are incentivized to innovate and create.