Responsible patent protection can help bridge digital divide

Internet connectivity has changed that way that business is done in the 21st-century high-tech digital economy, but more must be done to ensure that minority-owned businesses and entrepreneurs are leveraging technology to succeed in today’s competitive business climate. One of the untold stories about minority entrepreneurship is the paucity of black business owners in the high-tech sector. African-Americans today own only 5.5 percent of all U.S. businesses, and an even smaller percentage — 4 percent — own high-tech enterprises.

While we as a nation need to work much harder to craft new and creative policies that reduce barriers to start and develop businesses to ameliorate this troubling reality, we also must support the minority-owned tech businesses operating today so they and their employees can compete fairly, grow their operations and flourish in the digital economy.

{mosads}That is why the field of intellectual property (IP), specifically patent law, is so important to the National Black Chamber of Commerce and our members. Many of the 100,000 African-American owned businesses that our organization represents hold patents and compete against other firms that do as well. Those who work to advance minority business have a strong interest in maintaining the proper balance between protecting patent-holders and their intellectual property while preventing abuses of this very same protection.

By “abuses,” I mean individuals or companies that use the patent laws not to protect what is rightfully theirs, but to inflict legal and financial damage on competitors. One form of this is practiced by so-called “patent trolls” who specialize in claiming ownership of basic ideas, such as sending a photocopy to email or offering free Wi-Fi in your place of business. The litigation costs for troll targets can range from $2 million to $8 million, according to one estimate. Many companies reluctantly settle out of court to avoid these unjustified costs.

Then there’s a different sort of IP abuse that can increase barriers and add new costs to business and individual consumers alike. African-Americans have historically been hampered by a disproportionate lack of Internet access, but fortunately, modern smartphones and wireless broadband are helping to close this technological “digital divide.” But for many African-Americans, the cost of a smartphone is still too high and is a leading factor in slowing broadband adoption. Getting technology into the hands of African-Americans is absolutely critical, but ongoing litigation like the high-profile Apple and Samsung cases are an example of how patent disputes can work against the digital progress of minority communities.

In a May verdict, a federal jury awarded Apple $119.6 million in damages from Samsung. But that was nothing like the eye-popping $2 billion in damages — or a whopping $40 per device — that Apple was seeking. Adding $40 to the cost of a smartphone would surely price out a large segment of low-income communities. And in an earlier case currently under appeal that was focused on design patents — or shapes of Apple devices and icons — Apple was awarded $930 million, which equated to Samsung’s total profits on sales of infringing devices. Awarding total damages for design patents on a modern smartphone comprising thousands of patents incorrectly interprets the law and will drive up costs, limit consumer choice and severely hamper the future competitiveness of the American smartphone market. It also sends a message to all would-be competitors: Stay out of the smartphone market and steer clear of Apple’s products or you’ll pay dearly. All of these outcomes will widen — not help close — the digital divide in our communities.

This is a bad business practice of IP abuse that everyone should be concerned about. It is our hope that the appeals court will not condone this abuse, but will instead reach a rational determination that copying of a minor design patent should not result in the award of total profits absent an affirmative showing that the copied design is the primary driver of the sales. We also strongly encourage Congress to keep a watchful eye on how this doctrine develops, as its intent appears to be completely misinterpreted by abuses such as Apple’s.

As our communities continue to innovate and change the way in which we communicate, I hope that the precedents set by patent trolls and Apple alike do not ultimately become the norm. Great things, many of which are made possible by sensible IP law, are happening online. But to successfully expand the percentage of black-owned technology businesses and bridge the digital divide, big-time corporate entities must set the right precedents so that startups can follow suit. In a world where we make less and communicate more, in a lot of ways, our communities and businesses depend on it.

Alford is the president and CEO of the National Black Chamber of Commerce.