Do we have the technology to succeed?

Saturday 8th November 2008
Article written by: Wes Jones

Baldwins Intellectual Property was delighted to once again be a principal sponsor of the recent AmCham-UPS Success and Innovation Awards. The United States is New Zealand’s second largest trading partner and it was great to applaud and celebrate New Zealand firms achieving exceptional success with such an influential economy.

With that in mind it is no wonder so many firms want to export their innovations to that market, particularly within the technology sector. One of United States’ most well known brands is Google Inc. Google Inc., had revenues of around USD3.5 billion in 2007.  Would you like to compete for a slice of that market?  Maybe you can!  Google’s core patents are under threat from new US Patent Office policies on what is patentable.

The issue raised by the US Patent Office is whether software is patentable.  Software is usually protected by patent as a process for performing a task.  The policy presently being followed by the US Patent Office is to regard processes as not being patentable unless they “result in a physical transformation of an article” or are “tied to a particular machine.” 
The problem is that, in software, processing is performed on information rather than articles.  Also, the US Patent Office has signalled that it does not regard a general purpose computer to be a particular machine.  The Patent Office policy is presently being tested before the Courts.  If it is held to be correct then it may have dire consequences for the validity of software patents.

Google Inc. has a patent portfolio that has grown exponentially in recent years.  It now numbers over 1000 patents and patent applications.  The company clearly sees the patent system as a way to maintain a competitive advantage, and appears to file patent applications early, on technologies that it sees as the company’s future, to ensure that its future technology position is secure.  One example is the patent applications for the “gPhone”.

Others also clearly perceive Google’s patents to be highly valuable. The best known, and possibly most valuable, patent in the Google portfolio is the original patent for the Google PageRank™ technology.  PageRank™ uses the link structure of the web as an indicator of an individual page’s value. In essence, a link from page A to page B is interpreted as a vote, by page A, for page B.  These “votes” allow a numerical value or weighting to be placed on each page.

The original PageRank™ patent is US6285999 (typing that text into the Google search engine will allow the patent to be viewed in seconds, for those of you who are curious to view the original document).  It is owned by Stanford University rather than Google, since the inventors (and founders of Google) were attending Stanford at the time they devised the process. Google has exclusive license rights on the patent from Stanford University.  The university received 1.8M shares in exchange for the patent. The shares were sold in 2005 for $336M.

The PageRank patent hasn’t been filed outside the US which says something about the importance of the US market in the global ICT environment.

What can we take from all this in New Zealand?  Firstly, the patent system provides a vehicle for proprietorship of visionary new developments.  Small companies can benefit from the patent system and use it to grow.  Research institutions such as our Universities can also benefit, particularly if they implement policies such as those adopted by Stanford which was clearly prepared to license the rights.

Google’s success has essentially been built on its intellectual property. It does not have factories producing consumer products, and the location of Google is not critical from a logistical perspective – only information is delivered.  The US is a huge and valuable market in which Intellectual property rights are respected.  Why can’t New Zealand companies pursue that market and replicate Google’s success?

If the Courts do undermine US software patent rights, we can always use the software ideas developed by others to compete, but it would be far better for New Zealand’s future if we were to become a leader through developing our own new technologies.

AmCham – UPS Success and Innovation Awards were held at the Hyatt Regency Auckland on Wednesday 24 September
Tim Jackson, Partner, Baldwins Intellectual property was on the judging panel.

Importer of the Year from USA – Tidd Ross Todd Ltd
Investor of the Year either to or from the USA – Fonterra Co-operative Group
Exporter of the Year under $500.000 – Thureon Ltd
Exporter of the Year $500,001-$5Million – Wellington Drive Technologies Ltd
Exporter of the Year Over $5Million – Endace Ltd
Supreme Winner - Fonterra Co-operative Group

Congratulations to all the winners and finalists!

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