The Big Idea!

Although the hot companies, the high-profile entrepreneurs, and the wealthy venture capitalists tend to get all of the attention, there is a another, hidden, story of Silicon Valley that is just as important—and just as critical to the Valley’s success: intellectual property.

Says Donald J. Polden, dean of the Santa Clara University School of Law, “Intellectual property law is at the heart of innovation. If you can’t protect your new ideas and inventions, you are less motivated to even make the attempt. That legal protection made Silicon Valley possible—and it is why Santa Clara Law has long made intellectual property law a centerpiece of its curriculum.”

If a company cannot protect its ideas and inventions—even if only in part, and only temporarily—it may not see the revenues and profits it needs to survive and grow. Like it or not, the days when high tech companies really could be founded in garages (HP and Apple) or with just a few thousand dollars (the semiconductor industry) are long gone. The modern microprocessor or genetically engineered pharmaceutical or Android phone can cost a billion dollars in development expenses before it is ready for market … and if that idea or design can be stolen, copied, or cloned for a fraction of that amount, the incentive is gone for the company doing the hard work to ever be so creative again, and everyone loses.

Students with unmatched expertise not only add to the educational experience of their peers, but also their professors.

The same is true for what is in people’s heads. The employee who spends a decade working at, say, Oracle or Google, then jumps to a startup to build a competing product may be taking—for free—plans and processes that took thousands of person-years and millions of dollars to devise, test, and execute.

This isn’t fair. But now take the reverse perspective: Is it right for a big company to crush the dreams of one of its former employees who chose to follow the career path of the big company’s own entrepreneur founders? And just because one company came up with a good idea, does it have the right to try to monopolize the market by suing any erstwhile competitor who comes even close to its claimed turf? And where do the rights and benefits of the customer—and society—fit into all of this?

These are not easy questions. Many famous and not-so-famous Silicon Valley companies (and leaders) have found themselves at different times in their histories on opposite sides of the same argument. Occasionally these disputes resolve themselves. But more often than not, the solution can only be found in adjudicating the disagreement under intellectual property law. And with SCU’s law school being among the oldest, not to mention the most geographically centered, law program in Silicon Valley, it shouldn’t be surprising that the school has been at the center of high tech intellectual property law, especially as it relates to high technology, since its beginning—or that it continues to be at the forefront of the field.

“Because we accept part-time students working in the Valley, and because we draw from a multimillion population metropolitan area, Santa Clara Law School attracts some enormously talented people. The result is students with unmatched expertise who not only add to the educational experience of their peers, but also their professors,” says Eric Goldman, associate professor at the law school and director of its High Tech Law Institute.

Among Goldman’s recent students is one who works in Google’s AdWords department, another with 15 years of radio ad sales experience, and one who has served as in-house counsel at Amazon UK. “Where else can you find that level of expertise among students?” Goldman says.

The spirit of ’75

It was in 1975 when SCU Law first offered a course on intellectual property: a course in patent law, taught by adjunct professor Tom Schatzel. It was followed a year later by a course on trademarks.

It was the perfect time to start teaching intellectual property law. Four years before, Intel had introduced the model 4004, the world’s first microprocessor, or computer on a chip. In 1972, Nolan Bushnell at Atari had introduced the first video game. And a year after Schatzel taught his first patent course, Steve Jobs and Steve Wozniak would announce the Apple I computer. These three events, each of which would create global industries worth hundreds of billions of dollars, took place within 10 miles of the SCU campus.

Historically, Silicon Valley had been pretty casual about patents and patent law. Bill Hewlett and David Packard preferred to compete rather than sue. And when a maverick group spun out of Shockley Transistor, taking the semiconductor “cookbook” with them, they weren’t pursued. Even the founding event of modern Silicon Valley—the explosion of Fairchild Semiconductor and the subsequent creation of scores of competing chip companies—drew nary a cease and desist demand, much less a major lawsuit.

But the great feuds that would come to characterize Silicon Valley—Intel versus Zilog, Intel versus AMD, Apple versus Microsoft, the chip industry versus Rambus, et cetera—were waiting in the wings, ready to burst onto the scene.

The first of these, Intel versus Zilog, set the pattern for what was to come. In this case, a former Intel executive who had jumped to fellow chip-maker Zilog, ran into one of his old Intel compatriots at the airport and made a joke (or so he claimed) about taking his notes with him. Intel, despite itself being founded by two Fairchild execs, Robert Noyce and Gordon Moore, who had jumped to start their own company, sued … and the game was on.

The most famous intellectual property feud in valley history—indeed, the story of the case itself is as famous as many of the area’s biggest companies—was only settled in November 2009 after 22 years. This case, between Intel and AMD, began with a dispute over a technology license and morphed into a legal feud that cost billions of dollars and consumed the careers of uncounted attorneys at both firms. The winner? It’s hard to tell. Intel agreed to pay AMD $1.25 billion and renew some old cross-licenses. But by then, AMD was just a shadow of a company, having sold off its manufacturing operations.

Speed and balance

It is this Pyrrhic victory aspect of intellectual property litigation in high tech—that is, companies still suing over products and technologies made long obsolete in the fast-moving tech world—that makes it important to find compromise “by bringing diverse, and sometimes opposing, communities together,” Goldman says.

This search for alternative solutions, Goldman adds, has increasingly become key to the success of the valley, where its delicate entrepreneurial environment might become irreparably harmed if the balance were to be tipped toward big companies with big legal funds. “It’s truer in the Internet age than ever, that a quick resolution is almost always better than a long legal battle.”

Where most law schools are best characterized as followers of the latest legal trends, when it comes to intellectual property law, SCU Law has always been obliged to lead them—to identify early emerging legal obstacles in the valley, and then race to solve them before they become chronic. As the electronics revolution that began in Silicon Valley reaches out to cover the planet, the work being done at the law school is having a similar global reach. And the school’s reputation in high tech law precedes it: Nearly half of the applicants to the SCU Law each year now announce that they are interested in intellectual property law.