Credit: Matthew Hurst, CC BY-SA 2.0, via Flickr
Today's smartphone is more powerful than a supercomputer of just 20 years ago. It is an immensely complex device. In fact, more than one in six (16 percent) of all active U.S. patents are smartphone-related. Because of this complexity, smartphones for the last several years have been the epicenter of intellectual property disputes in high technology. Nearly every mobile, software, chip and Internet firm has been involved in some legal battle.
Our intellectual property laws and regulatory agencies, however, are in many ways not suited to the realities of the modern smartphone world. Our rules never contemplated anything so complicated. In some cases, reform of the old institutions is in order. In other cases, merely a little common sense will do.
In the latest bout, Nvidia, a leading supplier of graphics processing units (GPU) is suing Qualcomm, the top maker of processors for mobile phones, and Samsung, whose popular smartphones and tablets contain Qualcomm chips. Nvidia claims that Qualcomm's mobile processors violate some of its graphics patents. These are highly technical questions of silicon and algorithm design, and courts are sorting through them now. In the meantime, Nvidia is demanding royalties for use of the technology, and the three firms are said to be negotiating terms of a license.
Nvidia, however, is taking its case a big step further. It has asked the International Trade Commission for an "exclusion order" of Samsung smartphones and tablets. An exclusion order is an import ban, an extraordinarily blunt tool that, in this case, could plunge the U.S. mobile ecosystem into utter chaos.
In 2014, according to Gartner, consumers purchased an astounding 308 million Samsung smartphones, or 25 percent of the world total. ComScore says 30 percent of the 184 million mobile users in the U.S. own a Samsung. And Samsung also sells millions of tablets every year in the U.S.
An exclusion order by the ITC would thus blow a huge hole in the U.S. mobile market, which by some estimates accounts for 3 percent of GDP. Nearly a third of the American mobile supply, which already suffers shortages because of overwhelming consumer demand, would vanish. Mobile service providers, app developers, Web content creators, and, most importantly, consumers would all be hurt.
So, how does a relatively minor patent dispute transform into a trade war? In part, because the original 1930 ITC law didn't contemplate the smartphone. How could it have? The ITC provisions in question today were designed to discourage the importation of simple counterfeit items, not to adjudicate hyper-technical questions, and certainly not in ways that could threaten an entire ecosystem.
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