Xockets Board Member: Our Case Against Nvidia and Microsoft Is About the Future of American Innovation
Capital and labor are the lifeblood of the U.S. economy, and their value relies heavily on constant innovation. Since the 1950s, economists have measured the impact of innovation and other factors on U.S. growth and productivity. ONE recent analysis found that one to two-thirds of those profits can be properly attributed to innovation, a much larger proportion than increases in capital and improvements in people’s skills and education. labor.
However, today the country’s economic progress is in danger. The giant corporations that dominate their respective markets have found ways to appropriate the valuable innovations created by startups and small companies. The new process of capturing other people’s innovations erodes the incentives for creative, entrepreneurial people to find ways to turn their new ideas into new products and technologies – and undermines reduce the economic and ecosystem conditions that support and promote innovation.
Innovation doesn’t happen by accident. It requires sustained investment in research and development as well as an economic and political environment that supports startups and new investments. It also requires strict legal protection and enforcement of property rights over innovation.
That protection is vital to the long-term progress of the country as outlined in the Constitution: Article 1, Section 8, grants Congress the specific power to “promote the progress of science and benefit, by securing for a limited time to authors and inventors exclusive rights to their respective writings and discoveries.”
Accordingly, Congress enacted patent laws to protect an innovator’s exclusive rights from infringement and, if she so wished, to sell or license those rights to others in exchange for a share of the economic benefits. economy arises from innovation.
For the past generation, innovative information technology and telecommunications have transformed virtually every American industry. At the same time, the process of developing new technology and other products has changed as the technology industry has become highly concentrated.
Nvidia, Apple, MicrosoftAnd Alphabet are the four largest companies in the economy, by total value combined market capitalization more than 12 trillion USD – equivalent to 44% of last year’s GDP. Managing their huge operations and markets requires most of their resources and attention. However, to maintain and increase their enormous value, giant companies must continue to innovate. In response, their recent innovations have largely been conceived and developed initially by startups and young companies that patent new ideas, then seek to sell them or themselves. as well as their exclusive rights to major companies.
This process of creating and developing innovation can be very effective. Innovators focus on the risky process of developing something new on a small scale in the hope of reaping the huge rewards of selling their ideas to large companies that can bear the costs of doing so. Complete the development and production of new technology on a large scale. This system ultimately relies on protecting the small innovator’s intellectual property rights, because without those rights there are no rewards.
What happens when a large company depends on innovation but has little regard for the rights of the true innovator? The innovator can sue, but that requires a very lengthy and expensive legal process, pitting a small startup or young company against a giant corporation that often dominates the market. It was David versus Goliath and Goliath had the weapons to overwhelm David.
Legal and economic observers of this serious imbalance have identified the growing use of so-called “effective violation.” That’s what happens when giant S&P 500 companies knowingly infringe on the patents of small innovators by appropriating their innovative ideas without notice or payment. It is called “efficient” infringement because the major infringer has calculated that it is necessary to wear out an innovator by exhausting its resources and patience in a protracted legal fight. will be less expensive than licensing or purchasing a patent.
Effective violators also know that the law and many of the courts adjudicating these disputes have changed in Goliath’s favor. A small innovator’s strongest means of protecting its patent rights is an injunction prohibiting the alleged infringers from using the patents while the dispute is adjudicated. However, in recent years, such bans have become rare. Without the existential threat of a ban protecting the small innovator’s proprietary rights, Goliath companies are effectively incentivized to ignore them.
And even when a major violator loses a dispute, other changes in the rules used to govern these cases have resulted in much smaller damages than economic damages. the actual reality that the innovator must bear, let alone its fair share of the actual economic benefits achieved. by the violator.
A prominent case recently filed involving one of the foundational technologies of artificial intelligence may illustrate these corrosive dynamics for everyone to consider. It involves a startup of which I am a board member, called Xockets, which over a decade ago developed and patented the basic DPU chip that enables big data AI operations. . Xockets is currently suing Nvidia, the world’s largest DPU chipmaker, and its customer Microsoft for infringing on our patents on the very technology that fueled Nvidia’s meteoric rise to power. largest in the world, worth more than 3.4 trillion USD.
Xockets’ case is that Nvidia and Microsoft are effectively infringing by appropriating the small innovator’s patent-protected DPU chip and then jointly boycotting Xockets’ efforts to sell or license its monopoly at a reasonable price. Most notably here, David has gathered resources to deal with this Goliath and the court is considering banning Nvidia from using the DPU chip in question. The case could become a lesson for giant companies considering taking advantage of small companies to create brilliant breakthroughs. (Nvidia and Microsoft did not respond to a request for a statement on the points raised in this article. Microsoft has argued in court that our statement does not meet the threshold for an injunction.)
The outcome of our case can be a serious lesson for young technologists. In the future, the ownership of their breakthrough innovations may depend on whether the world’s biggest and richest companies, intent on becoming bigger and richer, accept their rights. owned by innovators and paid to use their breakthroughs. If that turns out to be the case, economic logic teaches that there will be fewer breakthroughs in the future and fewer investors willing to invest in innovation – and productivity gains and income growth for most people. America will continue to be affected.
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