Former Intel CEO sees dark side to Silicon Valley patents

— 12:55 PM on May 4, 2009

You wouldn't expect the co-founder and former CEO of a company like Intel to give a speech about the dangers of the patent system. Yet that's just what Andrew Grove did at the 37th Annual National Inventors Hall of Fame ceremony—where, incidentally, he received a Lifetime Achievement Award.

As CNet News reports, Grove shared his take quite plainly with the audience, which included industry stars like Intel co-founder Gordon Moore, microprocessor co-inventor Ted Hoff, and Apple co-founder Steve Wozniak. Here's how he made his case:

"The true value of an invention is its usefulness to the public," he said, quoting Thomas Jefferson. The system in place in the Valley today is moving further and further away from this principle, he added. "Patents themselves have become products. They're instruments of investment traded on a separate market, often by speculators motivated by the highest financial return on their investment."

Grove called this a break from past practice. "The most important invention of our industry, the invention of the transistor, was licensed by AT&T for $25,000," he said. "This allowed the transistor industry to develop and become a flourishing manufacturing industry in the United States."

More interesting still, Grove drew parallels between the current patent system and the conditions that led to last year's financial crisis. He explained, "The patent product brings financial derivatives to mind . . . Derivatives have a complex relationship with an underlying asset. While there's nothing wrong with them in principle, their unfettered use has damaged the financial services industry and possibly the entire economy."

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