Patented Games

Posted by Sunil Abraham at Mar 08, 2012 12:14 PM |
Some prefer Steve Jobs, patron saint of perfection, others prefer Nicholas Negroponte, messiah of the masses. While Mr Jobs may be guilty of contributing to the digital divide, Mr Negroponte may have contributed to bridging it with his innovation: the One Laptop Per Child, also known as the $100 laptop or XO. Sunil Abraham's column was published in the Economic Times on 8 March 2012.

Much ink has been spilt celebrating the contributions of both, but if we were to judge them by utilising evidence from the market, their technologies are used by a rather thin section of the pyramid.

For this writer, however, the real heroes are entrepreneurs from China and Taiwan who make technology that is used by millions of Indians and other consumers across the globe. Sometimes it comes with domestic branding and with all the right peripherals - for example, in India, the Popkorn, which costs only Rs 6,699. It features support for two SIM cards, a receiver for analogue terrestrial television, a receiver for FM radio, a 3.2-megapixel camera, boom-box style internal speakers and, most impressively, a pica projector. It ships with a tripod stand, external speakers, a torch and a laser pointer. It is a classroom in a box. At other times, it comes as a Shanzhai clone of a branded product - for example, the Blackcherry, at one-sixth the price-point with twice the number of cameras as the Blackberry. Some Shanzhai phones support four SIM cards and ship with a spare battery.

Dual- and quad-SIM support is critical in developing countries, especially Africa, where regulation has failed to rationalise interconnection costs. Most of the global south is yet to harvest the digital dividend, so TV reception is very useful indeed. And the additional battery is invaluable for rural entrepreneurs who are not sure whether their next halt will sync with the local load-shedding schedule.

The same with the focus on audio capabilities, reflecting the communal usage patterns. Unlike many expensive big-brand phones that require purchase of additional software, these phones often have in-built support for a wide variety of proprietary and open file formats.

These products are unavailable in the US and Europe because they would be sued out of the market by rights-holders or snuffed out by enforcement activities. David Drummond, Google's chief legal officer, says "smartphones might involve as many as 2,50,000 (largely questionable) patent claims". But there are three important differences for the Indian consumer. One, many of these patents are registered in the US, Europe and Japan and, therefore, prevent others from securing those patents in other jurisdictions. But it does not prevent Indian or Chinese entrepreneurs from using the patents. Two, unlike the US patent law, the Indian Patent Act does not consider "mathematical or a business method or computer program per se or algorithms" as inventions. And three, Indian courts, unlike their US and European counterparts, are less likely to grant injunctions preventing sale or use of any device.

Patent pools are a century-old policy tool for reducing royalties and uncertainty for manufacturers and consumers. In 1917, the US government forced aircraft patent-holders, including the famous Wright Brothers, into a patent pool that allowed 60 firms to produce planes at reduced royalty costs without worrying about litigation. Since then, the US government has issued thousands of compulsory licences in many different domains. Patent pools do exist in some areas of mobile technologies such as GSM and video file formats, but more patent pools are needed.

The Chinese government has used standards policy in the past to reduce outgoing royalties on information and communication technologies. They promoted or mandated indigenous standards either as a negotiating tactic with rights-holders or to benefit from cross-licensing of domestic IP. Some standards include TD-SCDMA, as an alternative to Qualcomm's CDMA, EVD as an alternative to the DVD standard, and CBHD as an alternative to Sony's Blu-ray. The potential savings were quite significant. In the words of Ma Jun, Deutsche Bank's chief China economist, "There is almost no profit for Chinese DVD makers as they have to pay about $7 in licensing fees to foreign patent holders per DVD player, which are sold at around $20 only - both at home and abroad."

In addition to patent and standards policy, royalty caps have been used to ensure access to innovative technologies. Till the end of 2009, the Indian government had imposed a royalty cap of 5% on domestic sales and 8% on exports. If a company wanted to pay higher royalties, permission had to be secured from an inter-ministerial Project Approval Board. Between 1991 and 2009, only 8,062 approvals were granted, indicating our government was keen to reduce outgoing royalties. Policymakers could reconsider reintroducing such royalty caps for devices that cost less than $200.

(The author is with the Centre for Internet and Society)

Read the original published in the Economic Times

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