Ops Should Be Wary of Tech Patent Issues

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The capacity to achieve clear and effective technology standards is critical to the success of any new-media innovation. The growing availability of standardized hardware platforms has led applications providers to supply new and more innovative applications.

Today, many are looking for "killer applications" to establish technical standards. But it is typically more cost-effective and faster for patents to play a central role in setting the standards for new technologies.

Creators and owners of copyrights understand the importance of patent rights. Magazine publishers know how copyrights come into existence and what they cover. Music companies are expert at valuing and deploying song rights. Movie studios know all the subtleties associated with acquiring the rights needed to produce movies. And cable operators understand another kind of right — municipal cable franchises.

Technologies are protected by means of patents, which convey significant rights that control how they are used. An assemblage of the rights needed for digital-communications technology has far more potential than would apply in the case of movie rights, for instance, because the commercial promise of the technology is so much greater.

Traditionally, cable operators relied on hardware vendors to handle patent issues. They theorized that they didn't need to worry about patents, because they could obtain indemnifications from vendors.

Today, there are two reasons for cable operators to reconsider this philosophy: One involves considerations of risk, the other has to do with opportunities.

The risks relate to the value of indemnification. Patents can cover hardware, software and services. United States patents grant their owners the exclusive right to make, sell and use the patented technology for 20 years. These rights can be licensed separately.

Cable operators have acquired hardware in order to offer subscribers a host of valuable new services. While the hardware investment may seem costly at present, any reasonable projection shows that the value of the services the cable operator plans to provide will far exceed the cost of the hardware.

Because the profitability of digital hardware has diminished very rapidly, any company that buys hardware to provide services should recognize there is genuine risk that it will derive little comfort from an indemnification given by companies that sell hardware.

For cable operators, the second reason for focusing on rights associated with patents — the opportunities — is much more important.

Patents provide substantial benefits. These include:

Organized and focused growth of markets
: Licensors of patents can authorize licensees to develop and execute a coordinated program for growing the markets for patented products and services.

Making markets secure:
Exclusive licensing — whether of entire markets, specific geographic areas and/or fields of use — can provide highly secure markets for licensees.

"Platform" compatibility
: The capacity to set standards means that all participants — especially application developers — have assurance that they are developing products and services for the dominant hardware/software configuration.

Planned platform evolution:
Providing the authority to develop a coordinated program for growth and to set standards enables planned evolution in the dominant hardware/software configuration well in advance, thereby enabling applications developers to prepare their own development and distribution plans most effectively.

Reduced risk:
The capacity to establish secure plans for systems growth in advance — including "front-end" systems for marketing to customers as well as "back-end" systems for internal company management — can significantly reduce business and capital-investment risks.

Reduced investment costs:
Licensees can secure benefits from intellectual property coverage without the need to undertake significant development costs and the delays associated with intellectual property assemblage.

Rapid growth of markets:
By organizing market development and reducing competition, the program can provide for rapid market growth.

Capacity to establish copyrights: As digital communications technology evolves, patents are starting to cover the right to commercialize new software and programming properties. If the programming associated with new digital television applications has powerful commercial impact, the significance of patents that cover the right to commercialize programming, for all practical purposes, constitutes the right to control the distribution of copyrighted material.

Patents can provide the legal backbone required for the successful evolution of new media applications. The future success of digital applications is dependent upon cable operators and network suppliers taking a primary role in participating and determining patent issues.

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