Powerful patents can stifle innovation and competition.
The future of wireless Internet access in America is unclear--but it will be decided soon. The debate grew more serious last month, when the Trump re-election campaign announced its support for a government-controlled 5G network.
There are many things to like about the idea of open, standardized access to the wireless airwaves, as promoters of the idea have argued. But there's also a major problem: The plan would be a massive payout to a company hand-selected by the Trump administration, for a perhaps unexpected reason--patents.
The Trump campaign proposal would essentially allocate a range of wireless spectrum, the radio frequencies by which mobile phones and all other wireless devices communicate, for open access to fifth-generation (5G) network devices. Those devices would need to follow a set of coordination rules for determining when to communicate, lest they end up interfering with each other--like people who talk over each other at a crowded dinner party. That coordination technology is at the heart of the business of Rivada Networks, the Peter Thiel-backed company that has been an outspoken supporter of the open-access 5G plan.
There is debate over whether open-access 5G is a good idea; indeed, my colleague Jim Baker has written about some key national security and implementation issues. But companies like Rivada don't just have ideas. They have patents on those ideas.
Rivada has a sizable worldwide portfolio of at least 40 patents on "dynamic spectrum arbitrage," the coordination technology needed for 5G open access. The company has described its patents as "sweeping" and covering the "full range" of "dynamic wireless network sharing." Those patents give Rivada a government-backed privilege to demand payments from--or even stop--anyone using the company's open-access technology, and to sue those who refuse.
It would be one thing if technology like Rivada's were successful in the market and the company reaped the rewards of its patents through competition. But by lobbying the Trump administration to adopt a national standard, Rivada stands to earn far more. Every phone, tablet, or other wireless device would be required by fiat to comply with open-access standards--and thus to use Rivada's patents. That one company would be able to extract payments from potentially every player in the $3.9 trillion mobile technologies and services market. Even worse, it could choose winners and losers in that market through strategic patent litigation.
A patent owner playing gatekeeper to 5G does not make for a competitive or innovative market, despite the superficial appearance of competition among those who must pay tribute to the gatekeeper. The Federal Trade Commission's lawsuit against Qualcomm and recent decisions issued by the International Trade Commission attest to the inefficiencies and convolutions of technology markets dominated by monopolistic patent licensors. Those disputes involved voluntary, private standards; it is easy to imagine how a federally mandated standard could be far worse economically.
There is little reason to believe that the government could sidestep a patent morass were it to impose a national 5G standard. A 2015 paper by Tejas Narechania details the many times that patents have come into conflict with government objectives like public health or safety. Far too often, the patents win.
That a company like Rivada could play patent puppeteer over a national 5G standard illustrates a larger problem looming over the U.S. economy. Over the last few decades, patent owners have successfully lobbied Congress, the courts, and the White House to increase the power and strength of patents, making them easier to get, easier to use, and more valuable in lawsuits.
For a small inventor in a garage lab who needs all the help the law can give, powerful patent rights can be attractive. But that is not innovation today. Now, patents are complex instruments intertwined with key technologies, ubiquitous industries, and government regulations. In this new environment, a seemingly innocuous policy idea, like open access to wireless networks, could have dramatic consequences because of the threat of an anticompetitive patent.
Charles Duan is the director of technology and innovation policy at the R Street Institute, a nonprofit, nonpartisan think tank based in Washington, D.C.
