Feudalism is defined thusly: “the dominant social system in medieval Europe, in which the nobility held lands from the Crown in exchange for military service, and vassals were in turn tenants of the nobles, while the peasants (villeins or serfs) were obliged to live on their lord’s land and give him homage, labor, and a share of the produce, notionally in exchange for military protection.”

If you reason through it, such a system requires certain things to be true. One is there is a finite amount of land and it has all been claimed by someone. The other is the land must be useful to the provision of food and shelter for humans. Feudalism in a desert would be pointless. The other is the feudal society must have enough complexity to support something greater than swidden farming. The peasants must produce more than they can consume in order to support the administrative apparatus overseeing them.

It’s not hard to see the vulnerabilities of such a system. A plague, for example, could wipe out a wide swath of peasants, thus dropping their productivity below what can sustain the feudal elite. A bad harvest could do the same. Alternatively, conflict between rival lords could escalate the cost of maintaining the system to the point of collapse. The Thirty Years War, for example, can be viewed as the collapse of a complex system of governance due to decreasing marginal returns.

Reading this story in the Financial Times, got me thinking that the patent system has evolved into a weird form of techno-feudalism, a system headed for a collapse of sorts.

A US appeals court is set to hear a landmark patent case on Wednesday that could change the way royalty rates are set for commonly used intellectual property in the tech industry.

The case, pitting Microsoft against Google, has already involved a lower court in setting patent rates for the first time, in a move that critics warn will upend the balance of power between leading tech companies.

Microsoft brought the case in 2010 against Motorola Mobility, the handset maker later acquired by Google. The search company sold Motorola’s operating business to Lenovo last year but kept its patents and has now taken the case to the court of appeals.

The dispute centres on so-called standard-essential patents, which cover technology that is included in industry-wide technology standards. Since others have to use the technology if they want their own products to meet an industry standard, the companies that submit their patents for approval by standards bodies are required to license them out on “reasonable and non-discriminatory”, or RAND, terms.

Microsoft sued Motorola after the handset maker asked for 2.25 per cent of the final product price for use of several of its patents that are included in standards for WiFi and video compression technology. Microsoft said the demand would have cost it $4bn a year. Judge James Robart, in a federal court in Seattle, laid out a different method for calculating the royalties that would instead cost Microsoft less than $2m a year.

If upheld, Judge Robart’s approach could tilt the balance of power in negotiations away from companies that own large portfolios of commonly used patents and instead favour those — like Microsoft or Apple — whose businesses are based more on implementing technology standards in their products.

“It’s going to be very significant indeed. Nobody quite understands what the term [RAND] means,” said Alexander Poltorak, chief executive of General Patent Corp, a US intellectual property firm.

In its appeal brought in Motorola’s name, Google has argued that the judge was wrong to take up Microsoft’s complaint in the first place, since the Motorola royalty demand was only the opening shot in a negotiation that should have been left to run its course. The court could have ruled on Microsoft’s breach of contract complaint without getting involved in the thorny issue of rate-setting, it claims.“The litigation set bad policy by encouraging parties to run to court rather than negotiate,” said David Balto, a former chief of competition policy at the Federal Trade Commission.

Some in the tech industry also argue that, if the ruling stands, companies will not be as willing to allow their technology to be included in industry standards, since it would rob them of much of their negotiating leverage.

The calculation method that Judge Robarts came up with “would conceivably apply to lower the reasonable royalty available to every single [standard-essential patent]”, the American Intellectual Property Law Association wrote in an amicus brief to the court.

Companies who have joined the opposition to the ruling include Qualcomm, many of whose patents cover mobile communications technologies that have been adopted in industry standards. The calculation method is a “one-sided directive that advances only implementers’ interests in obtaining licences at the lowest possible cost,” it said in a court filing supporting Motorola’s position.

We have technology companies racing to patent even the dumbest of ideas in the same way settlers claimed land in the West after the Homestead Act. Even crappy lands were claimed by someone in the hope of finding some value in them. We have companies making claims on DNA and mathematical calculations, things that exist independent of human intervention.

As most of the useful patents have been claimed, the patent wars have ensued in the court room. The cost of owning a patent is the cost of defending it. Presumably, the cost is less than the revenue from it, but escalating court battles drives up the cost of patent ownership. Thus, there is an incentive for small patent holders to sell to corporate giants with armies of lawyers.

Just as being a small lord became impossible, being a small patent holder may become impossible. The result will be a flood of nonsense patents by big companies intended to drive out smaller competitors. What follows that is a lack of innovation as the cost of invention becomes a barrier surmountable only by big firms. We already see this in medicine.