Thirteen days after the popular European music site hit the U.S., San Diego firm PacketVideo slammed it with a patent infringement suit (PDF). PacketVideo claimed Spotify infringed U.S. Patent number 5,636,276 -- titled "Device For The Distribution Of Music Information in Digital Form" -- and demanded damages and an injunction.
"So much for innovation," says Tom Ewing, an intellectual property attorney. "Welcome to America, Spotify. You pay to play or you don't play at all."
PacketVideo, court records later disclosed (PDF), is a wholly owned subsidiary of Japanese telco NTT Dokomo. Spotify and PacketVideo settled for an undisclosed amount.
Representatives of all three companies refused comment for this story.
"Many of the basic building blocks of commerce and industry are [already] patented -- so if you build new technology, you probably infringe," says Colleen Chien, a professor at Santa Clara University who specializes in intellectual property (IP). One example of this is Spotify, which entered the online music business in the U.S. only to find that much of its technology was already patented by another company. (See sidebar at left.)
Abuses abound, experts agree. "The current patent system, despite all attempts to reform it, is fundamentally broken," says Julie Samuels, staff attorney at the Electronic Frontier Foundation (EFF).
"Whether it's filing huge numbers of patent applications, or aggressively licensing baskets of patents, or even defending yourself appropriately in just one patent lawsuit, the patent system has become to a large extent the sport of kings," says patent attorney Tom Ewing, a Silicon Valley intellectual property (IP) attorney and founder of Avancept, which tracks IP activities.
Last year, bankrupt Nortel auctioned off more than 4,000 patents; an Apple-led consortium, including Microsoft and Research In Motion, bought them for $4.5 billion.
In this series
"Only the largest tech companies can afford to play the full patent game," Ewing says.