Why patent reformers must tread lightly

Washington is looking at various proposals to alter the patent system, ostensibly to “protect” innovation. This is very worrisome, and the experiences of actual innovators – including myself– are essential to provide context for that debate.

In 1971, I had just moved to Fairchild Semiconductor from Bell Labs, where I had been doing a lot of research on an area called charge-coupled devices (CCDs) – the technology that would ultimately drive the digital imaging market – everything from camera phones to night vision. The research I was doing was pure research, not product development. Our job was to invent, while others gave thought to turning the results into business success.

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That combination, research that enables economic growth, is a powerful engine. Bell Labs created everything from stereo to photovoltaic cells, from the first transistor to the first laser, from binary code to C language and UNIX and boasted no fewer than 13 Nobel Laureates among its staff. So I had just left Bell Labs and joined Fairchild, and I developed a system for manufacturing CCDs that became, to this day, the industry standard. My work was captured in United States Patent 3,931,674, “Self-Aligned CCD Element Including Two Levels of Electrodes and Method of Manufacture Therefor.” I was 28 years old.

11 other patents joined that one, but Fairchild was unable to turn that technological discovery into economic success, and eventually fell apart. Being ahead of the market means you’re innovating, but it also sometimes means there’s no market yet. By the time the market for CCDs eventually took off, all of it based on our methods, the industry had relocated largely to Japan. Every one of the companies that came to define digital imaging was using our method, the de facto industry standard, to manufacture them.

My patent had also “relocated”: to Loral Corporation, which had acquired that portion of Fairchild. Loral was able to reap significant benefits in licensing the patents. Again, it was win-win: we’d invented the technology, and others were using it to achieve tremendous business benefits. There was no reason for anyone – the licensees, who’d achieved so much in a business sense, or me, who’d made the technological innovation, or Loral, which had acquired the asset – to feel the slightest bit awkward. Everyone was making money, because licensing works when the licensee is doing great business.

Listening to the ongoing patent debate today, I wonder if my story would still be viewed as a success.  For example, my invention became a standard across an industry, which for any inventor is the ultimate goal.  Today, Washington is trying to reign in standard essential patents.  Also, neither Fairchild nor Loral ever made products based upon my invention.  In today’s parlance, that would make them non-practicing entities, at least with regard to those inventions.   To some people in Washington today, that could make Loral a patent troll.  And once those labels are used, the patents – which were marvelous innovations – become bogus and the companies making money from them become bad guys.

This view is short-sighted and un-American. One of our country’s greatest strengths is our ability to understand and value challenge and risk and the importance of not backing down in the face of it. The reason we don’t back down is we understand the rewards that those efforts can bring. It is what drives American research, innovation and our global competitive edge.

Let me offer another observation based on my experience.  When I joined Apple as its CEO in 1996, the company had hit very hard times: the first item on my agenda was to ward off an effort to dismantle the company. Working with a number of very fine people, we righted the ship financially and placed the company on the path that has led to great success.  Apple is now a dominant player in the largest market in the world – mobile technology.

Of course, Apple was not a first mover in the cell phone industry.  They were a computer and consumer device company with a good eye for design. When they brought that eye for industrial and application design to the wireless handset, they revolutionized the business and almost instantly became market leaders. It’s one of the great success stories of our time.

However, Apple’s first devices was built to leverage the capabilities of 2.5G and 3G, technology that other companies had been working to develop for the better part of a decade, which itself was built on the shoulders of previous technologies, none of which Apple had participated in building. Apple’s work in advancing a product is not to be minimized, but neither should the work that preceded it. Just as my CCD innovations at Fairchild enabled Japanese device makers to make compelling products, Apple’s success in advancing mobile devices was built on the efforts of their predecessors, who risked, invented the core technology, and deserved a portion of the ultimate success.

What fuels American innovation is the willingness to embrace risk, and throw resources at complex things to get there first, with the expectation that rewards will ensue. Our patent system provides us with the guarantee that this spirit will be valued and protected. We must ensure quality patents and legitimate practices – no one thinks suing a coffee shop that offers Wi-Fi is a good idea – but let’s make sure we continue to protect and incent the innovation that has made us the global leader we are today.

Amelio is an American scientist and business executive. He was CEO of National Semiconductor (1991-96) and Apple Computer (1996-97). He is a fellow of the Institute of Electrical and Electronics Engineers (IEEE), a venture capital investor, and a director of multiple companies.

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