Are Patents anti-competitive?

But Android’s success has yielded something else: a hostile, organized campaign against Android by Microsoft, Oracle, Apple and other companies, waged through bogus patents. They’re doing this by banding together to acquire Novell’s old patents (the “CPTN” group including Microsoft and Apple) and Nortel’s old patents (the “Rockstar” group including Microsoft and Apple), to make sure Google didn’t get them; seeking $15 licensing fees for every Android device; attempting to make it more expensive for phone manufacturers to license Android (which we provide free of charge) than Windows Phone 7; and even suing Barnes & Noble, HTC, Motorola, and Samsung. Patents were meant to encourage innovation, but lately they are being used as a weapon to stop it.

A smartphone might involve as many as 250,000 (largely questionable) patent claims, and our competitors want to impose a “tax” for these dubious patents that makes Android devices more expensive for consumers. They want to make it harder for manufacturers to sell Android devices. Instead of competing by building new features or devices, they are fighting through litigation.

This anti-competitive strategy is also escalating the cost of patents way beyond what they’re really worth. The winning $4.5 billion for Nortel’s patent portfolio was nearly five times larger than the pre-auction estimate of $1 billion. Fortunately, the law frowns on the accumulation of dubious patents for anti-competitive means — which means these deals are likely to draw regulatory scrutiny, and this patent bubble will pop.

We’re not naive; technology is a tough and ever-changing industry and we work very hard to stay focused on our own business and make better products. But in this instance we thought it was important to speak out and make it clear that we’re determined to preserve Android as a competitive choice for consumers, by stopping those who are trying to strangle it. We’re looking intensely at a number of ways to do that.

We’re encouraged that the Department of Justice forced the group I mentioned earlier to license the former Novell patents on fair terms, and that it’s looking into whether Microsoft and Apple acquired the Nortel patents for anti-competitive means. We’re also looking at other ways to reduce the anti-competitive threats against Android by strengthening our own patent portfolio. Unless we act, consumers could face rising costs for Android devices — and fewer choices for their next phone.

It's not surprising that Microsoft would want to divert attention by pushing a false "gotcha!" while failing to address the substance of the issues we raised.