Imagine you’re an entrepreneur who’s been working on developing a new technology for the last 30 years. After decades of hard work, you’re finally garnering interest from investors and the future looks bright.
All of a sudden, you get a call from the CEO of a much larger company who tells you he has patents that will prohibit you from commercializing your product. You having been blissfully unaware of his patents means nothing. You now have no choice but to stop creating or otherwise face legal action.
This exact nightmare scenario has been playing out all over the country. In 2006, an inventor by the name of Michael Phillips was on the verge of releasing his revolutionary voice recognition software. Think Siri before Siri.
Mr. Philips had been working on his technology for three decades and finally his hard work seemed to be paying off. Two great tech giants, Apple and Google, both approached Mr. Philips with promising partnership offers. And according to The New York Times, Mr. Phillips’ software eventually found its way into the early iterations of the now loathed and beloved Siri assistant.
All was going exceedingly well for Mr. Phillips. The American Dream seemed very much alive. But one day, in 2008, a competitor contacted him and broke the egregious news:
“I have patents that can prevent you from practicing in this market,” the competitor told Mr. Phillips, threateningly.
Overnight, Mr. Phillips’ life and career changed forever. He would not spend the next several years inventing new tech or bringing his voice recognition software to market, but instead, battling six expensive lawsuits.
According to The New York Times,
“Soon after, Apple and Google stopped returning (his) phone calls. The company behind Siri switched its partnership from Mr. Phillips to (the competitor) Mr. Ricci’s firm. And the millions of dollars Mr. Phillips had set aside for research and development were redirected to lawyers and court fees.”
This was not exactly a happy ending for Mr. Phillips or anyone rooting for the entrepreneur, the underdog or the American Dream…
It’s just one real life example of how larger tech companies take advantage of intellectual property laws to monopolize the marketplace.
When Big Tech companies have a monopoly, they don’t have to compete. When there isn’t competition, the monopolists can charge consumers outrageous prices. Monopolists know when consumers lack options and have nowhere to turn for better deals, they’re forced to pay whatever the monopolists demand.
While America is seeing a proliferation of monopolies across sectors— from the pharmaceutical to the banking, food, media and telecommunications industries — the focus of this article is how Big Tech specifically has consolidated its power under Trump to a degree never seen before.
Much like Big Pharma, Big Tech companies invest heavily in litigation designed to block their competitors from bringing cheaper, potentially better products to market. Many even spend more money “protecting” tech than creating it. According to political economist Robert Reich,
“The biggest technology companies are spending billions accumulating patent portfolios and then suing and countersuing one another. By purchasing Motorola Mobility for $12.5 billion in 2012, for example, Google gained ownership of 17,000 patents, many of which would serve as valuable ammunition in the smartphone patent wars that Google, Samsung and Apple were waging against one another. As White House intellectual property advisor Colleen Chien noted in 2012, ‘Google and Apple have been spending more money acquiring and litigating over patents than on doing research and development.’”
So while we think of these high tech companies as the world’s greatest innovators, they’re in reality more focused on hoarding the greatest intellectual property.
Stanford University found that from 2010 to 2012, at least $20 billion was spent simply purchasing and litigating patents, or as The Times put it, “an amount equal to eight Mars rover missions.”
You may say that’s an obscene amount of money to spend on litigation alone, but suing over patent infringement has become these Big Tech companies’ bread and butter. In 2012, Apple won $1 billion in a blockbuster patent infringement case against Samsung. According to The Times:
“Apple has filed multiple suits against three companies — HTC, Samsung and Motorola Mobility, now part of Google — that today are responsible for more than half of all smartphone sales in the United States. If Apple’s claims — which include ownership of minor elements like rounded square icons and of more fundamental smartphone technologies — prevail, it will most likely force competitors to overhaul how they design phones, industry experts say.”
But Apple is by no means the only tech giant playing this predatory litigation game. In 2015, Samsung ranked second among all tech companies in the number of patents added to its portfolio. IBM took home the gold that year, adding an additional 7,355 patents to its already robust IP portfolio, making IBM the single most patent-rich U.S. company in 2015.
In fact, IBM’s been granted more patents than any other company for 25 years straight.
In 2017, the U.S. Patent and Trademark Office granted more than 320,000 total patents, which marked a historic uptick for the office. Of those 320,000, just 50 companies — including IBM, Samsung, Apple, Google and Amazon — accounted for 30 percent of all the patents granted. Clearly, patents in the U.S. are becoming consolidated in the hands of very few major companies.
Under Trump, this trend is accelerating. In 2017, IBM blew its previous records out of the water, securing an unrivaled 9,043 new patents. Nearly crossing the 9k mark was Samsung, which, with 8,894 new patents granted last year, also beefed up its patent portfolio to levels never seen under past Presidents.
A senior tech leader at IBM told me, “The company sees patents as trophies.” When speaking with him, I couldn’t help but picture IBM as a giant trophy hunter. But whereas Trump’s sons were slaughtering animals, IBM was ideas.
Trump often boasts about his “strong” economy. Indeed, his first year in office saw tremendous innovation in the technology space, but only by a handful of multinational corporations. In fact, nearly 18 percent of all U.S. patents granted last year went to IBM and Samsung alone. Talk about a monopoly.
While Trump has personally attacked Big Tech’s richest man, Amazon CEO Jeff Bezos, and criticized his company for not paying enough taxes, it’s important to note that 1) Trump admits he didn’t pay taxes for years and 2) Bezos has only grown wealthier under Trump and his company, more powerful. Not only did Amazon secure more patents under Trump than any other President, but it upped its already large lobbying spending, much to Trump’s apparent chagrin. Amazon doubled its number of in-house lobbyists since Trump’s election and spent more than it ever has, $13 million, on lobbying alone.
Amazon is perhaps the most interesting case study here because the company has been spending more lobbying dollars each year since 2008, and clearly, is seeing a healthy ROI. “In 2012,” Robert Reich explains, “Amazon quietly pushed the Justice Department to sue five major publishers and Apple for illegally colluding to raise the price of e-books, yet in 2014 the department didn’t question Amazon’s tactics for squeezing better terms from publishers.”
So Amazon’s getting the Justice Department to act against its enemies while at the same time coming to its defense when Amazon’s in trouble. That’s the very definition of political clout.
In many ways, the Big Tech companies of the 21st century have consolidated their power exactly as the largest pharmaceutical companies have. They’ve used their wealth to purchase political power and then used that political power to get even richer.
How then can entrepreneurs from smaller companies be expected to compete with this type of power? They can’t. One of the main reasons startups are in decline is that entrepreneurs can’t afford to out-lobby and litigate Big Tech. Put simply, Amazon and the other tech giants of the 21st century figured out exactly how to dominate the greatest democracy that money can buy.
They’re operating at a time when money and politics are inextricably linked in America. So why wouldn’t they all cash in and design a game that more easily allows them to all cash out?
The reality is that while Trump feeds his base populist rhetoric, Big Tech companies are spending record amounts on patents and lobbying, both of which are intended to limit competition and increase their political power.
All of that is bad for consumers.
As far as Trump’s personal investing goes, it’s worth noting: his single largest stock market holding is in Apple, where he had as much as $6.5 million invested in 2015. His second largest holding is in Microsoft and Google’s parent company, Alphabet, is another one of his biggest investments. So even though Big Tech has been consolidating its power long before Trump, it’s no surprise that the culmination of its power happened under Trump, who himself gains from Big Tech’s growth. In fact, never before has there been a sitting President who’s personally gotten as rich from Big Tech ripping us off.
To make a shitty situation even worse, what we have in this country is a patent system that sides with big businesses and stifles entrepreneurs. We have a patent system designed by the rich and powerful, for the rich and powerful.
What we need in this country is to protect inventors and ensure that they can indeed profit from selling proprietary goods and services, but we also need to limit their power. Because the flip side to all of this is that we also need to ensure that consumers can purchase what they need, at a reasonable price point and that if they choose to invent products of their own, they have a fair shot to compete without being manhandled by powerful corporations with thousands of patents and large teams of lawyers set to sue them.
Much like steroids were to the MLB in recent years, patent trolling and lobbying are Big Tech’s performance-enhancing drugs that the tech jocks use to edge out the competition.
What we need in this country are new antitrust laws or enforcement of existing laws to keep monopolists in check. Back in 1911, a company by the name of Standard Oil accounted for 87 percent of all refined oil sales. In other words, it had a monopoly. So the U.S. government, using the Sherman Antitrust Act, broke the monopoly up.
Well today, under Trump, Big Tech keeps gaining political and economic influence. Apple, Trump’s biggest stock holding, just became the world’s first trillion dollar company. Facebook just crossed 2 billion users. Google powers 81 percent of searches. Half of the money Americans spend online goes through Amazon. If there was ever a time to apply antitrust laws, now is the time. Meanwhile, our bought-and-paid-for politicians and broken patent system allow these monopolies to consolidate their power even further.
Last year, when Amazon acquired Whole Foods, the startup Blue Apron’s value tanked, as investors feared Amazon would enter the meal-delivery space. Likewise, as reported by The Economist, when Facebook announced its online dating pivot, the share price of Match Group fell 22 percent in a day.
No wonder there’s been a recent startup slump across sectors. Big Tech companies are so big they can swallow up or swat away the competition.
That’s not only hurting fellow inventors and fellow technologists. It’s also hurting consumers. It’s also killing the competitive spirit of capitalism and limiting the universe of innovators with the resources to improve technology.
The ultimate question is: do we really want to live in a country where the Big Tech companies go unchecked in their relentless pursuit of more money and power, or do we want an American Dream that’s big enough to share?
What do you think?