TECH PATENT ARMS RACE ESCALATES JURISDICTION REPORT: US—PATENTS
Paul J. Sutton Sutton Magidoff LLP
Recent events in the world of high technology titans demonstrate that a patent arms race is reaching fever pitch, with companies amassing patent portfolios for offensive and defensive purposes. And the prices being paid for patents and intellectual property technology have reached staggering figures. Patents are increasingly viewed as strategic financial weapons and resources, not merely legal assets.
Tech companies, with war chests overflowing with cash, have turned their backs on traditional acquisition formulas which focus upon rules such as multiples of sales and profitability. Here is an examination of recent acquisitions and developments which follow Google’s $12.5 billion acquisition of Motorola Mobility Holdings and its huge, 17,000-strong, patent portfolio in 2011.
Microsoft/AOL/Facebook On April 9, 2012, Microsoſt agreed to pay nearly $1.1 billion to purchase and license some 1,100 AOL patents relating to Internet functions. Two weeks later, Microsoſt sold many of these patents to Facebook for $550 million, thereby keeping them out of the hands of rivals such as Google.
As reported in the April 10, 2012, edition of Te Wall Street Journal (WSJ), the patents acquired and licensed by Microsoſt cover online advertising functions as well as email, web-searching rankings, web browsers, instant messaging and video conferencing. A number of these AOL patents include formerly acquired assets of Netscape. Te use of these and other acquired patents to generate significant licensing revenue will add to Microsoſt’s coffers.
Based upon statements by Microsoſt general counsel Brad Smith, it is not expected that Microsoſt will immediately use the AOL patent portfolio to commence new rounds of litigation. Te WSJ observes that Microsoſt will bring patent litigation against those who refuse to accept soſtware licence arrangements, as it did against Barnes & Noble’s sales of its Android-powered Nook electronic reader. Te company has teamed with Nokia in releasing an AT&T Windows-based version of the Nokia Lumia 900. Tis places it in direct competition with Apple, HTC, LG and Samsung.
Facebook/Instagram/IBM On April 9, 2012, Facebook signed a $1 billion cash/stock deal to acquire Instagram, the company marketing the popular photo-sharing app of the same name. Te target of patent litigation by Yahoo, Facebook only recently acquired patents from IBM, which it has used to bring counterclaims against Yahoo. No longer facing Instagram as a competitor, Facebook will now build Instagram IP-protected features into its products.
6,000 patent Nortel sale Te WSJ reports that Nortel Networks has sold a portfolio of 6,000 patents for $4.5 billion to a consortium of companies including Apple, RIM, EMC, Ericsson,
74 World Intellectual Property Review July/August 2012
Sony and Microsoſt, reflecting an average purchase price of $750,000 per patent. Intel and Google both unsuccessfully competed with the consortium to purchase this Nortel patent collection.
Google Android patent win In a win for open source soſtware, Oracle lost its patent infringement claims against Google on May 31 when a unanimous San Francisco jury found that Android does not infringe two Oracle patents. Judge Alsup has since also ruled that Android does not infringe Oracle’s Java copyrights.
Microsoft ITC win against Motorola Te US International Trade Commission (ITC) on May 18 ruled that Motorola’s Android-based mobile devices infringe a Microsoſt smartphone US patent No. 6,370,566, and called for an import ban on the infringing devices.
Nvidia/Intellectual Ventures/IPWireless Nvidia has teamed with Intellectual Ventures (IV) to purchase and divide 500 wireless patents from IPWireless. Tese patents cover LTE, LTE-Advanced, 3G and 4G wireless technologies. IV brought patent suits against Motorola Mobility in October 2011, and against AT&T, Sprint and T-Mobile in February 2012.
Kodak ITC patent loss On May 21 an ITC judge ruled that Kodak’s patent covering previewing images on digital cameras was invalid, giving a victory to Apple and Research In Motion. Kodak, in Chapter 11 bankruptcy, will appeal.
Microsoft wins Walker Digital appeal Te Federal Circuit on May 24 upheld Microsoſt’s win in an Internet search patent case brought by Walker Digital LLC.
FTC standard-essential patent position Te US Federal Trade Commission (FTC) in a June 6 filing told the ITC that an import ban on Apple iPhones over standard-essential patents could be damaging to competition.
Te soaring value of patents is a boon to patent practitioners, who must refocus their attention on the use of patents for generating significant ongoing revenues as well as for defensive purposes. Te patent attorney who fails to counsel his/her client regarding licence opportunities deprives the client of significant potential returns on investment.
Paul J. Sutton is a founding partner of Sutton Magidoff LLP. He can be contacted at:
paul@suttonmagidoff.com
www.worldipreview.com
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