Patents are a huge business. NTP made a cool $650 million from Research In Motion’s (RIM) Blackberry earlier this year, and today sued Palm for alleged Patent infringements. IBM reportedly makes more than $1 billion per year in licensing its patents. Intergraph is still well-known for having scored a $225 million settlement from Intel in 2004, as well as $25 million from AMD, plus some other licensing deals that resulted from its initial litigation.

InformationWeek recently produced a good article discussing the use of patents as a business tool and whether the way they are being used is suppressing innovation.

In the CAD and engineering software industry, there are lots of patents, although the industry itself tends to a little more stable than the general Tech and IT industry is. But patent litigation still happens: For example, this April, Autodesk and Microsoft were sued by Z4 for patent infringement of ‘product activation’. By August 2006, Autodesk and Microsoft were found guilty of stealing IP from Z4 and charged a total of $133 million (a little less than the $1 billion Colvin at Z4 had initially asked for).

“But the number of patent lawsuits continues to rise and so does the size of settlements and judgments, says the Coalition for Patent Fairness…” reports Information Week. They say that “Before 1990, only one patent damage award larger than $100 million had been awarded, In the past 5 years there have been at least 10 judgments and settlements of that size and 4 of those topped $500 million, the group says.”

And this has not gone unnoticed. EWeek published a call for Patent Reform back in January. “Enough already! Do we want to hamstring our economy by indiscriminately handing out idea land grants, to the point where companies can't traverse the technology landscape without paying countless tolls? Litigation wastes resources that we would like to see spent on R&D or merely conserved by vendors to enable them to lower product prices. 

 According to InformationWeek, IBM and Microsoft are already offering up agendas for change in patent law. The US Patent and Trademark Office has been consulting with General Electric, HP, IBM and Microsoft in a “community review.” Congress is also getting involved by sponsoring legislation that would grant stronger protection to patent holders who file first and make challenging more difficult.

All these players seem to understand that things are just getting silly. That patent applications and awards have been sloppy and that this sloppiness is leading to a whole new level of lawsuits that no one could have imagined. And more importantly, that with a ‘sword of damocles’ hanging over innovators heads, they are simply ceasing to innovate.

Do add comments, anecdotes, thought. We would love to hear more on this subject from people who have experienced actual patent issues.