The US patent system was created to incentiveize inventors to share their brilliance, for the benefit of everyone, while at the same time assuring them protection of their intellectual property for a reasonable time in return. Originally the system applied to machines, with design patents and, grudgingly, software patents added over time.

An explosion of patent filings have created an overlapping morass of tens of thousands of patents held by hundreds of companies in the mobile computing space — and touched off a series of patent infringement lawsuits. The escalating conflict has reached new extremes, with essentially every important company in the mobile computing space in one or more dogfights against the others over patents, and working to arm their attorneys with larger and larger portfolios of patents with which to pursue their cases.

Nortel and Motorola: Worth more dead than alive?

Google was one of the last hold-outs in the patent arms race. Despite the utility of its early patent on PageRank and hundreds of search-related patents, Google was slow to file patents outside its core business, which has put its entire Android initiative at risk. As of this summer there were already 45 patent lawsuits involving Android and Android devices — some of which have resulted in injunctions against the shipment of Android products in some markets — like the Samsung Galaxy Tab in Australia.

Google was hoping to arm itself with 6,000 Nortel patents, for which it bid $3.14159 billion. Humorous as the bid amount was, the patent wars reached a new level when the portfolio was purchased for $4.5 billion — more than Nortel itself was worth — by a consortium led by Apple and Microsoft. Google, late to the party and feeling spurned by Microsoft, then acquired Motorola Mobility, including its array of 17,000 patents, for $12 billion. Google also spent another $1 billion for rights to 1,000 IBM patents covering a wide array of computing technologies.

Innovation: Casualty of war

Largely lost in the coverage of the war between these giants is the sea change it is creating for smaller companies. Patents are expensive and time consuming to file and pursue to issuance [Full disclosure: I have one patent that was paid for using some of our startup’s seed money in the 1990s. It was a huge time sink, although valuable to us. As we grew we incentivized developers to file patent applications, when we realized we would need them as a defensive measure. But we never thought of them as aiding in our innovation. Instead, they distracted valuable talent from other development tasks.] The growing thicket of patents makes it almost impossible to innovate without tripping across one or more of them.

Worse yet, many current patents are bogus, and wouldn’t stand up under scrutiny — fully one-half of those that wind up in court are overturned — but they are expensive to challenge. Small companies might be able to challenge one or two, but certainly can not do much against the sheaf of patents and army of patent attorneys fielded by the behemoths in this battle. Over time this will have a stultifying effect on innovation. If nothing changes, the acknowledged benefits of being able to read the research embodied in patents once they are published will be increasingly out-weighed by the shadow of patent infringement.

That statement may sound extreme, but take the simple case of determining whether a cell phone innovation is covered by a patent. A simple search of the US patent database reveals 108,767 patents which refer to “cell phone,” and another 8,000 to “cellphone.” Each patent is dozens of pages of difficult-to-read claims and implementations. Software patents are often especially difficult to read because for many years they had to be worded to sound like patents on a physical machine.

As an example, Apple has been granted a patent on “slide to unlock” in the United States, which is now being contested in court. The idea both seems fairly obvious and was used in a Windows CE phone prior to Apple’s filing, but nonetheless it is currently valid in the United States — it has already been thrown out in the Netherlands after Samsung brought out the older phone to demonstrate for the court. Imagine the work of having to challenge several patents in each country where a company sells products.

Much like the nuclear superpowers, the big players in the patent wars are quickly coming up with a strategy of MAD (Mutual Assured Destruction), which will result in an uneasy truce between them after a lot of money changes hands. The result will be even more power concentrated in the big companies at the expense of the little guys without nuclear-sized patent portfolios of their own.

Next page: Obama’s patent reform (kind of)