UPDATED 12/22/10 (see below)
Among the consequences/signs of apocalyptic events, we’re told, includes: “Human sacrifice, dogs and cats living together… mass hysteria!” Not to accuse anyone of hysterics, but we have seen the business equivalent of “dogs and cats living together” in the form of a four company partnership including Microsoft and Apple to purchase 882 patents from bankrupt Novell. That’s right, consortium CPTN Holdings, LLC, which previously refused to identify the patents that were acquired, is actually a foursome including Microsoft and Apple, rounded out by Oracle and EMC Corporation. An insider reportedly commented that the move is purely defensive, but that may depend on your definition of defense. But first, some background.
Stripping away the company names, the individuals most often associated are themselves, generally a well-known bunch, though not always for being friends. Larry Ellison (“one of America’s flashiest billionaires“), Steve Jobs (Ellison’s personal photographer and himself “one of Silicon Valley’s leading egomaniacs“), and Bill (“That’s the stupidest thing I’ve ever heard“) Gates each have their own reputations in the business and tech communities … I admit I don’t know much about Roger Marino (surviving co-founder of EMC), but it’s a safe bet that he’s the proverbial straight man in this “odd foursome.” (Unlike Ellison, no one’s written a book about Marino using the words “the difference between God and Roger Marino”).
However, one thing Marino does have in common (somewhat) with his colorful counterparts is wealth, with a reported net worth of about $1.2 Billion. Thus, despite the fact that insider’s claim the purchase is “cheap defensive insurance,” the safer bet is that this “leak” is meant to distract us from the man behind the curtain, and ignore the financial incentive motivating this move. We don’t know what patents are included in the 882 from Novell, but they do … and Joe Brockmeier is likely dead-on with his guess as to the first target of the inevitable patent assault:
Yes, I have a guess — it’s Google. Rather, Apple, EMC, Microsoft, and Oracle have teamed up to chip in on patents they can use against Google. Each of the companies has a stake, or several stakes, in trying to keep Google out of markets they want to own. EMC, Oracle, and Microsoft all have threats from Google in cloud services for the enterprise. Google’s made no secret of trying to expand Google Apps into an enterprise player and as an development platform. Microsoft and Apple are fending off threats from Google on the desktop and mobile market. Microsoft is trying to compete with Google in search and ads. Apple is trying to compete with Google for the mobile ad market. Microsoft, Oracle, and Apple (to a lesser extent) all compete with Google in the office suite market.
In this respect, it doesn’t really matter whether the patents have anything at all to do with cloud computing,desktop computing, mobile computing, or search and mobile advertising … The conventional wisdom has often been to use patents as a defensive fortress, meaning protecting your products from imitation by competitors. But in modern warfare, a fortress, or any structure for that matter, is more of a target than a weapon. The four horsemen, meanwhile, have defied convention, recognizing the benefit of patents have in leveling (or un-leveling to your advantage, as the case may be) the playing field. Consider a company known primarily for proprietary desktop and mobile computing devices facing potential competition as Google expands its software and hardware offerings. Should it matter to you whether you can command royalties for similar products, or would you be just has happy winning royalties on search advertising? Money is money, after all …
In the modern IP age, these bohemoths have learned that, sometimes, the best defense is a good offense, and they’ve used this patent acquisition opportunity, possibly to acquire a sword rather than a shield. Considering the current bidding war over the Nortel portfolio, this strategy isn’t lost on Google either. According to one attorney, the global IP marketplace is over $100 Billion. While I really have no idea whether this figure is accurate, if the number is anywhere in the ballpark it confirms something I do believe to be true: that opportunities abound for patent acquisition. After all, despite the fact that most observers considered the last one an unmitigated disaster, Ocean Tomo is plowing forward with yet another IP auction. Whether companies take advantage of these opportunities to fortify their business models with offensive-minded patents remains to be seen.
The Patent Purchase Agreement has been filed with the SEC, but the Exhibit A (which should actually list the patents being acquired) does not appear to be included. If anyone has a copy they can send to me, please do.
An article by Erik Sherman (Microsoft Forms a Patent Bloc With Apple, EMC, and Oracle) seems to suggest that he or someone he’s in contact with knows what patents are being sold:
Although I have yet to see a detailed analysis of the patent portfolio’s value, it covers a number of areas, including mobile data networks, electronic licensing of software (likely including apps), and the distribution of multimedia content over the Internet. There could be significant legal defensive and offensive value buried in there.
Finally, there’s been a suggestion that Google is not a likely target because of Novell’s participation in Open Innovation Network. While I’m not an expert on OIN, my understanding is that the licensed patents only deal with “the Linux System.“ Unless that applies to all 882 patents, I’m not convinced that Google is in the clear by virtue of OIN alone.