From 24/7 Wall Street:
The borrow-a-patent, rent-a-patent, buy-a-patent industry is growing
by the day. Google (NASDAQ: GOOG) just bought 1,023 patents from IBM
(NYSE: IBM). The big hardware company will hardly miss them. It files more than 5,000 patents in most years.
Google will need these patents as it fights off Apple’s (NASDAQ:
AAPL) intellectual property claims and positions itself for the growth
of court battles over who had such properties first and what they are
worth. Most observers believe that Google’s buyout of Motorola Mobility
(NASDAQ: MMI) was primarily for access to the handset company’s patent
pool....MORE
And from Knowledge@Wharton:
In July, a consortium led by Microsoft, Apple and wireless industry
players such as Research in Motion paid $4.5 billion for 6,000 patents
from the now liquidated networking company Nortel. Last month, Google
purchased Motorola Mobility for $12.5 billion, in part to gain access to
the company's 17,000 patents. And Eastman Kodak, a company struggling
to navigate the digital era, has multiple parties bidding to buy its
patent portfolio.
Welcome to the patent bull market. "There is clearly a
patent-hoarding mentality in technology -- and in mobile communications,
specifically," says Andrea Matwyshyn, a professor of legal studies and business ethics at Wharton. "The game is to amass as many patents as you can."
Part of the reason for the run on patents is the surge in lawsuits
among key industry players. Oracle is suing Google for Android
royalties, alleging that the search giant's mobile operating system
infringes on the patents for its Java programming language. Microsoft is
suing Motorola, claiming that the cell phone manufacturer has violated
its software patents. Meanwhile, Apple and mobile phone manufacturer HTC
have also filed suits against each other. Pick any company in the
wireless industry, and you are likely to find a patent lawsuit
associated with it, say experts at Wharton.
The most recent high-profile court battle is between Apple and
Samsung. Apple alleges that Samsung's tablet device and smartphones have
copied the iPad and iPhone, respectively. Samsung asserts that the
concept behind the iPad and similar technologies originated in science
fiction film and television productions which featured computing tablets
decades ago -- including 2001: A Space Odyssey and "Star
Trek." The company also claims that Apple's iPhone infringes on its
wireless networking patents. Last month, Apple sought -- and won -- an
injunction on sales of Samsung's Galaxy Tab tablet device in Europe.
What makes the Apple-Samsung patent lawsuit particularly notable is that
Apple is Samsung's largest customer for memory, screens and other
tablet components.
"There's a state of open warfare around patents," notes Wharton legal studies and business ethics professor Kevin Werbach.
"If you want to play in this space, you need to bring some assets to
the table." According to Werbach, patent accumulation is largely a
defensive strategy. Given the prevalence of lawsuits, companies are
gobbling up intellectual property so they have an arsenal to use in
countersuits. Two companies with large patent portfolios will often
settle a lawsuit with a cross-licensing pact.
"In valuable segments, companies are using the legal system to threaten rivals and extract concessions," says David Hsu, a management professor at Wharton.
"A patent is really just a right to sue another party for infringement," notes Karl Ulrich,
a professor of operations and information management at Wharton.
"Often, an infringement suit legitimizes what is essentially bullying of
a poor company by a rich company. In these cases, the party with the
deeper pockets can intimidate the other into licensing a patent, or into
ceasing sales of the allegedly infringing product."
From Trolls to Combatants
Several years ago, the rise of so-called "patent trolls" -- entities
that acquire intellectual property solely to launch lawsuits -- was seen
by many as a sign that reform of the patent system was needed.
Today, patent litigation is frequently more about mutually assured
destruction between combatants in competitive industries, says Werbach.
According to this line of thinking, the company with the most patents
can win. A common strategy is to acquire multiple patents that feature
"foundational" technologies -- basic innovations that all subsequent
similar devices would have to rely on, such as digital imaging, wireless
networking and corporate email interfaces -- to secure market
position, he notes. "For the last 10 to 15 years, major technology
vendors have had the most patents awarded. For those companies, patents
have always been defensive."...MORE
