02 Nov 2016

Intellectual Property Issues and Internet of Things (IOT)

Internet of Things (IoT) also known as the next mobile internet revolution will transform the way businesses and consumers interact in a connected world. Over the years, technology has for long been a bellwether for a rapid growth in businesses across sectors. IoT is defined as the networking of physical objects by using embedded sensors, actuators, and other connected devices that collect and share data about the objects. The data captured from these devices can be used to optimize products, services, and operations. The technologists and industry pundits tout it as a future of network of things or physical objects embedded with sensors and network capability to capture and report data.

Sizing the opportunity
The role of IoT has been crucial in our everyday life both at the workplace and outside of it. Increased broadband penetration, surge in demand of devices having built-in wifi and sensors are streaming the IoT ecosystem. With technology cost going down and more devices are being created, IoT has the potential to change the way we work and live. Over the next few years, IoT will become the major growth driver for the innovations across sectors and deliver numerous benefits to corporates and consumers. According to a report by IDC, the global internet of things (IoT) market is projected to reach at USD 1.7 trillion by 2020 from USD 655.8 billion in 2014. While devices, IT services, and connected are expected to account for majority of the global IoT market and will capture a greater market share as the market matures. IoT has enormous opportunities for businesses and solve complex business problems in the competitive marketplace. Though IoT opens the door for endless opportunities but it also has many challenges. With billions of devices being connected to each other, more companies are prone to security threats. Many different technologies have come together to brew a perfect storm for IoT ecosystem.

Though IoT market is at a nascent stage, majority of the large corporates and startups have started embracing and are competing against each other. Also, large corporates including the likes of Google, Cisco, Huawei, and Microsoft are investing billions of dollars to develop IoT product offerings. With many startups and corporates are expected to enter the IoT space, there is an urgent need to protect the intellectual property that can add to legal woes. IoT companies will proliferate and will be more fragmented as market becomes more competitive. In the IoT ecosystem, it becomes imperative for the company to patent their technology to prevent any infringement suits from competitors, thus leading to expensive legal battles. Many technology companies have started using their patent stockpiles to sue competitors and have escalated to countless suits across the IoT industry. Additionally, the number of IoT applications has increased over 40 per cent as compared to 6 per cent increase in patent filing activity in other technology areas. There is no single company owning lion’s share in the IoT applications, however, they are building large defensive patent stockpiles.

Patents and IoT
The companies are litigating over IoT technology on patentability issues, joint infringement, and patent quality, thus posing several challenges related to the IoT ecosystem. For IoT and its convergence to exist, devices need to connect and communicate with each other using standardized technology. These devices connect from different commercial sources and should allow addition of devices on the existing architecture. If these standard technologies are patented, it will hamper the growth of IoT and will lead to infringing of patent by third parties. It is essential for policymakers to keep in mind the factors relating to standard essential patents while allowing patents for the standardized technologies. However, these standard essential patents owned by the inventors should be allowed for licensing and cross-licensing to third parties. The recent spate of patent litigation cases including the likes of Microsoft, Apple, and Samsung highlight the fact that there are many standard technologies that are patented and can lead to patent trolls. Additionally, the policy makers and regulatory authorities need to create rules/guidelines related to standard essential patents that will help the inventor or owner to take appropriate steps against the alleged infringer. Going forward, standard essential patents will play a crucial role to promote further innovation and development of the IoT ecosystem. Besides this, there are several issues that can hamper the growth of IoT system. For instance, the Indian patent office doesn’t allow patents for computer-related inventions such as software and has to be examined in the light of guidelines issued by patent office prior to grant of a patent. With the development of IoT, there is need to find a suitable way for the issues pertaining to standardized technologies and computer related inventions so that the standards can be licensed on fair, reasonable and non-discriminatory terms to third parties. This will also help the third parties to access the equivalent patents at royalty rates.

Conclusion
Many of the patent laws that were prevalent in the internet age will be a major concern for the IoT technologies and need to be further improvised for development of the IoT system. However, IoT presents a tremendous potential for inventors, policy makers, thus giving them the opportunity to make changes in the patent system. This will help in promoting innovation and growth in IoT technologies. Regardless of whether IoT will represent the next industrial revolution or form its own technological area, it will bring new innovations, improvisation in patent system, and competition. The issues related to standard technology will become more widespread, thus leading to patent trolls. The big question is – will IoT lead to patent wars with companies launching patent suits at each other or will companies forge into licensing and cross-licensing agreements.

Authored by: Amit Aggarwal (Co-founder, Effectual Knowledge Services) and Karan Bhutani (Assistant Manager, Marketing, Effectual Knowledge Services)

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