As Microsoft buys Nokia’s mobile business, is patent law a threat to business competition?

YESThere are many reasons why Microsoft decided to buy part of Nokia, but it is clear that one of them was for patents. In the US, the patent system is – in some cases – highly anti-competitive and allows for-profit firms like MPEG-LA to abuse their market power by charging excessive license fees. As the economist and Nobel laureate Gary Becker has argued, “essentially, patents should be considered a last resort, not a first resort, to be used only when market-based methods of encouraging innovations are likely to be insufficient, and when litigation costs will be manageable”. In the UK, we are fortunate enough not to have such a flawed system yet. Not only is the UK free of patent trolls, but it is viewed as a model in Europe for patent disputes. Though property rights need to be upheld, we can learn from the US, and indeed Microsoft, how a faulty patent system provides perverse incentives and is costly to consumers.

Dominique Lazanski is head of digital policy at the TaxPayers’ Alliance.NoPatents are valued by inventors – some 500,000 per year apply for a patent in the US. The system does not allow you to stop other people from coming up with new ideas (as has been claimed), nor does it allow you to validly patent something old. On the contrary, a small inventor can get a patent and use it to oblige big manufacturers and importers to pay him for the use of his invention. Patents help small firms to be competitive by enabling them to protect their inventions while their business grows. Nonetheless, there is much debate around “trolls”. But if you are infringing a patent, it doesn’t much matter who owns it. Universities are not manufacturers, but they collect hundreds of millions of dollars for the use of their patents. Regrettably in the US, unlike in Britain, if you successfully defend a patent infringement suit, you cannot retrieve your costs from the losing party. Given the cost of legal actions, some are forced to pay up rather than defend themselves.

Kerry Tomlinson is head of engineering patents at Dehns.