In 2007, I wrote why software patents are not a good idea.  It’s easy to find examples of patent abuse but its not often to find a company that uses patents that stifle a whole industry.  Such may be the case with the Apple iPhone.

I purchased an iPhone shortly after it came out, because I recognized that it was a revolutionary device.  It was not a case of superior specifications, as many devices have better hardware.  It didn’t even run on the latest 3G network until the second generation.  Rather, it was a superior design, which featured an intuitive user interface that did not try to compete on the number of features but on usability.  Apple fully deserves the billions of dollars it has made and will go on to make from its device.

Yet something curious has happened. When Apple introduced the iPhone, those who recognized its revolutionary potential expected the innovations and design concepts it introduced to percolate to the rest of the industry.  To an extent, that is happening, but key iPhone technologies -a capacitive touchscreen with multi-touch, a 3-axis accelerometer, proximity sensors, graphics acceleration integrated integrated into the UI, and a number of other key innovations have not been found in competing products.  Part of the reason for this has to do with the particular culture and expertise found at Apple, but its indisputable than the 200+ patents covering the iPhone have gone a long way to discouraging competitors, who offer alternatives lacking key features – until now.

Palm, the company who created the first popular PDA is coming out with the Palm Pre, the first device to brazenly infringe many of the key iPhone patents.  Apple is already making threatening gestures, so an apocalyptic legal battle is almost certain.  Palm is the first company to go against Apple head on because  its status as the one-time leader in the PDA and mobile phone market makes it the only company capable of challenging Apple’s leadership.  While the Palm Pre clearly borrows ideas from the iPhone, the iPhone itself uses many of the innovations first patented by Palm as early as 1996.  Today Palm is a marginalized has-been for whom the Pre is a desperate gamble to save to company, but it still has the patent portfolio of a market leader.

The question of who is the bigger infringer in this battle is besides the point.  The issue is that the patent system is limiting innovation to large companies who have established sufficiently large patent portfolios to pose a credible threat of retaliatory patent lawsuits.  The best that new competitors can hope for in this environment is to be aquired by the giants or to establish their own patent portfolios – rather than create products than people want to use.