Hypo Venture Capital Headlines: Patent wars plague Internet Age


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SAN FRANCISCO—The Internet Age is becoming as known for patent litigation as it is for online innovation.

From the makers of computer chips to creators of smartphones and designers of videogames, rivalries have spread from marketplaces to courtrooms with combatants warring over rights to use technology.

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Hypo Venture Capital Headlines: Patent wars plague Internet Age

  1. 1. Hypo Venture Capital
  2. 2. SAN FRANCISCO—The Internet Age isbecoming as known for patent litigation as it isfor online innovation.From the makers of computer chips to creatorsof smartphones and designers of videogames,rivalries have spread from marketplaces tocourtrooms with combatants warring overrights to use technology.“For many years, there was basically astalemate in the patents arms race with anunderstanding that companies wouldn’t sueeach other,” said Colleen Chien, a law professorat Santa Clara University in Silicon Valley.
  3. 3. “That was disrupted by a new business model of patentassertion,” she continued. “It has become acceptable to violatethe gentlemen’s agreement of not suing and now it is the newnorm.”The break in the unofficial truce was inspired in part by “patenttrolls,” entities that buy or file patents with the sole intent ofsomeday suing entrepreneurs who use the ideas.Ranks of patent trolls are growing, as is the number of largecompanies turning to patent litigation not just to cash-in but togain or protect market terrain, according to Chien.“What do you call an AOL or a dying company that turns topatent lawsuits?” she asked rhetorically. “Do they becomecorporate trolls?”Struggling Internet pioneer Yahoo! last month filed a lawsuitagainst Facebook accusing the social networking star ofinfringing on 10 of its patents.
  4. 4. The suit claimed that “Facebook’sentire social network model, whichallows users to create profiles andconnect with, among other things,persons and businesses, is based onYahoo!’s patented social networkingtechnology.”Facebook returned fire with acountersuit accusing Sunnyvale,California-based Yahoo! of being theone infringing on patents, and notthe other way around.Even business software giant Oraclehas weighed in. A trial will getunderway on Monday in a patentcase Oracle filed against Googlebased on software used in Androidoperating systems.
  5. 5. As patent suits proliferate, Internetfirms with ample war chests arespending small fortunes to armthemselves with portfoliospurchased from technologycompanies selling off intellectualassets.AOL this week announced plans tosell more than 800 patents toMicrosoft in a $1.056-billion dealgiving the faded Internet star aneeded cash injection.Microsoft general counsel BradSmith said that the software giant isgetting “a valuable portfolio that wehave been following for years.”
  6. 6. Facebook in March confirmed that it bought 750 software andnetworking patents from IBM to beef up its arsenal on anincreasingly lawsuit-strewn technology battlefield.Early this year, Google bought 188 patents and 29 patentapplications related to mobile phones from IBM but did notdisclose how much it paid.Last year, IBM sold Google 2,000 or so patents ranging frommobile software to computer hardware and processors.Google has been strengthening its patent portfolio as thefight for dominance in the booming smartphone and tabletcomputer markets increasingly involves patent lawsuits –with Apple a prime litigator.
  7. 7. The Mountain View, California,technology titan behind Android mobiledevice software last year transferredpatents to smartphone giant HTC Corp.to help the Taiwan-based company in anintellectual property clash with iPhonemaker Apple.Apple has accused HTC and othersmartphone makers using Google’sAndroid mobile operating system ofinfringing on Apple-held patents.Some of the patents that HTC got fromGoogle had belonged to MotorolaMobility, which Google is buying for$12.5 billion in cash in a quest forprecious patents.
  8. 8. “Our acquisition of Motorola will increasecompetition by strengthening Google’spatent portfolio, which will enable us tobetter protect Android from anti-competitive threats from Microsoft, Appleand other companies,” Google chiefexecutive Larry Page said when theMotorola Mobility buy was announced.Motorola Mobility chief executive SanjayJha told financial analysts the US maker ofsmartphones and touchscreen tabletcomputers has over 17,000 issued patentsand another 7,500 pending.Meanwhile, Apple and Microsoft allied in aconsortium that outbid Google to buythousands of patents from bankrupt NortelCorp. in what was branded the largesttransfer of intellectual property of theInternet Age.
  9. 9. “The reality is, there is more and more liability in making aproduct,” Chien said. “Companies like Google and Facebookwith few patents but big roles in the marketplace have themost to lose.”Patent suits in hot Internet markets are not necessarily badnews for consumers, provided that companies cashing in usewindfalls to develop even more innovative products, accordingto Chien.Managing patents could also become a potential source ofcompetitive advantage for startups.“The Facebook example shows that you can go out and buypatent protection,” Chien said. “It is only when you are makingmoney that you become interesting as a target, and when youare making money you can afford to buy patents.”