Thursday, December 28, 2006


The Reliance / Essar-Hutch merger and patents

Why patents are a failure in technology

As the financial world is going ga-ga over Reliance Communication's offer to take over the Hutch-Essar GSM network, very little is being said about why this is happening. The managements will, of course, talk about only financial aspects. The fact is, Reliance has been dabbling with moving over to GSM for a while. People are also talking about differences with Qualcomm, the provider of CDMA technology.

While it is possible to brush off the move as a pressure tactic on royalty profiteering, (if you do not toe our line, we will not do business with you). the fact that this is the best real world example of how technology patents are getting inefficient.

Patents are, for jurisprudence, ``Statutory rights'', which means you have them because the law grants them; unline right to life and personal liberty, which are considered ``natural'' or ``fundamental'' rights. While deciding scope of protection to be granted to statutory rights, legislatures have immense freedom and discreetion; and unlinke the judiciary, legislatures are under no obligation to justify their decisions.

Thus, legislative decisions can be rather ``arbitrary'' in a loose sense. One of my favourite exampe of this ``loose'' arbitrariness is the law of Limitations, which (for example) specifies 3 years as the period for instituting suits for recovery of money lent. In exercise of its ``loose'' arbitrariness, the legislature decided that this should be precisely 3 years; but it could have chosen 5 or 2 or 4 years.

In a similar fashion, while deciding scope of ``statutory rights'', the legislature has immense freedom; and this freedom is often manipulated by the people with access and ability to influence the legislators. The privilege of access and influence over legislators is often politely called ``lobbying''. Unfortunately, in a democratic world, interests which have only little or small financial burden due to proposed legislative moves will fail (most often, be inable) to respond to such lobbying; resulting in the legislation overprotecting the successful interests.

The legislation governing intellectual property regime has fallen prey such over protection.

And Reliance Communication, in spite of its Billions of Rupees of investment in CDMA technology is now a prey to this situation.

Whatever the rival interests on the CDMA war would say, for consumers like me, the fact remains that choice of handsets is limited if we decide to choose a CDMA provider. And as long as this remains the situation, consumers are not going to exactly flock to CDMA mobiles/fixed sets.

And the shrewed technicians they are, the Ambanis know the pulse of the consumers, and will take the right decision. For them, the investments in CDMA can be ``written down'' as depreciation and other expenses.

But, very few will talk or be ever aware of the harm caused by episodes like this, and attribute such harm to technology patents.

I used to be very anti-patents earlier. However I have now realized that we do need them, but probably for actual "innovations" and not frivolous additions; and probably for shorter periods of time. 20 years for a patent is absolutely insane in today's fast moving technology.
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