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Why Sonos Has Already Lost Its Patent Suit Against Google
All it would get is money, not protection of its inventions.
January 10, 2020, 6:35 PM GMT+1
Photographer: Justin Sullivan/Getty Images
Joe Nocera is a Bloomberg Opinion columnist covering business. He has written business columns for Esquire, GQ and the New York Times, and is the former editorial director of Fortune. His latest project is the Bloomberg-Wondery podcast “The Shrink Next Door.”
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If you’re not a patent aficionado, you have probably never heard the phrase “efficient infringement.” Not to blow the punch line, but it’s yet another example of how big tech companies use dubious means to squeeze their smaller rivals. When critics complain that Facebook, Google, Apple and Amazon are squashing innovation, this is the sort of tactic they’re talking about.I first heard the phrase some years ago when I looked into a patent dispute between Apple Inc. and the University of Wisconsin. The Wisconsin Alumni Research Foundation, which owns the university’s patents, had sued Apple over its use of an innovation that university scientists had dreamed up and patented in the mid-2000s. Apple had installed it in iPhones and iPads without bothering to negotiate a license and had been using it with impunity for years before the case finally went to trial. A jury found for the foundation in 2015 and ordered Apple to pay $234 million.
That was actually a victory for Apple. Consider: Apple got free use of valuable technology that it took from a smaller, less powerful entity. Losing at trial was unfortunate, perhaps, but the $234 million was just another business expense. Pocket change, really, considering Apple’s size.
How common is this kind of move? Boris Teksler, Apple’s former patent chief, told the Economist recently that “efficient infringement, where the benefits outweigh the legal costs of defending against a suit, could almost be viewed as a ‘fiduciary responsibility,’ at least for cash-rich firms that can afford to litigate without end.” In other words, stealing patented technology is practically required if you’re focused on shareholder value. And who isn’t these days?What brings this to mind is a lawsuit filed by Sonos earlier this week against mighty Google. The suit contends that the search giant (2018 revenue: $136.8 billion) has been infringing patents that belong to the smaller company (2018 revenue: $1.1 billion) since 2015, specifically those covering wireless home speakers. Google and Sonos were once allies; now, Google’s Chromecast devices, which use the technology in question, compete directly with Sonos’s audio systems. Among other benefits, this alleged infringement allowed Google to reap “$3.4 billion in Google Home revenue in 2018 alone,” according to the Sonos complaint.
For three years, according to the complaint, Sonos tried to get Google to focus on the infringement, sending the larger company notices informing it that it was violating as many as 100 of its patents. The two companies held talks to settle the matter. But with negotiations getting nowhere — at least in Sonos’s view — it sued Google over five of the most important patents.Needless to say, Google says it did nothing wrong and that it developed its technology independently of Sonos. (This, by the way, is not a particularly strong argument; independently derived technology can still infringe another company’s patents.) “We dispute these claims and will defend them vigorously,” said Jose Castaneda, a Google spokesman.Well, of course Google will fight the case. That’s what efficient infringement is all about. Assuming Google uses the standard playbook, it will first go to the patent office and employ a relatively new process called the inter partes review to try to have dozens of Sonos’s patents invalidated. Even if that fails, it will soak up 18 months or so and several million dollars. Then it will file motions and countermotions to drag the case out as long as possible. That should consume three or four more years. And if, in the end, Sonos wins, all it will get is money, which is one thing Google has plenty of. What Sonos will never be able to do, even if it prevails, is stop what it contends is the infringing. Thus, just like Apple in the Wisconsin case, Google wins even if it loses.
“What is the definition of a patent?” asked Brian Pomper, the executive director of the Innovation Alliance, which represents small and medium-size patent holders. “It means you have the right to exclude others from your invention.” He added, “How can a patent be meaningful if you don’t have the right to exclude others?” But that’s where we are. Companies like Sonos have virtually no leverage to stop bigger companies with deep pockets from infringing their patents. In a sense, this state of affairs is one of the unintended consequences of the scourge of patent trolling that was so common 15 years or so ago. Patent trolls were companies that bought up broad patents and then sued hundreds of companies, claiming infringement. Many companies paid just to be rid of them.In 2006, with the issue of patent trolls much in the air, the Supreme Court decided a case, eBay Inc. v MercExchange, LLC, that flipped patent law on its head. Before the eBay case, plaintiffs who could show their patents had been infringed could almost always obtain an injunction preventing the defendant from using the infringing technology. That meant that the infringer would have to pull products off the shelves, or find a work-around, unless it negotiated a license as part of a settlement, which was often the result.In its eBay decision, the court established a four-part test that judges had to apply to grant an injunction. As a practical matter, this complicated test, which includes whether the plaintiff would suffer “irreparable harm” and even whether the public interest would be served if an injunction was granted, means that judges stopped granting injunctions. The decision put a huge damper on the business model of the patent trolls, but it also took away the leverage small companies needed to protect their patents.Five years later, Congress passed the America Invents Act, which made changes in patent law. One of those was the creation of a Patent Trial and Appeal Board, which could rule on the validity of already-granted patents. This, too, had its benefits; for instance, it makes it easier for generic drug companies to challenge Big Pharma’s patents. But it also gave the big tech companies another useful tool: They could force patent holders to spend time defending their patents instead of moving forward with their lawsuits.
With all the leverage now on the side of Big Tech, is it any wonder that efficient infringing became standard operating procedure? (Quick reminder: Google denies infringing Sonos’s patents.)As anyone who has a Sonos system knows, it makes a terrific product. But consumers can get an audio experience from Google and Amazon that may not be quite as good but is less expensive. (Sonos says that Amazon has also infringed its patents but that it doesn’t have the financial wherewithal to sue both Google and Amazon at the same time. In its response, an Amazon executive stressed that Sonos was a partner and that it was working to integrate Sonos and its Alexa digital assistant.)For now, at least, the Sonos brand is strong enough to hold its own against these giant companies. But without the ability to protect its patents, you have to wonder how long that will be the case. Without true patent protection, innovation is harmed. That’s what Sonos v. Google truly represents.This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.To contact the author of this story:Joe Nocera at firstname.lastname@example.orgTo contact the editor responsible for this story:Daniel Niemi at email@example.com