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IP, Patent

Patent Deal Potentially Has “Apocalyptic” Consequences

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.

UPDATE

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.

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Discussion

7 thoughts on “Patent Deal Potentially Has “Apocalyptic” Consequences

  1. I think the only one who need quiver from this turn of events is those who seek to exit from RPX in its upcoming IPO. This should demonstrate that the consortium model isn’t needed as was contended at the inception of this business model. Moreover, if RPX is free of antitrust liability, this group should be ok, too. But, I don’t think that the antitrust issue has been cleared in my mind, though. I would file this under “throw everything against the wall to see if it sticks” when it comes to dealing with technology patents.

    Posted by Jackie Hutter | December 22, 2010, 8:16 am
    • Jackie,
      Thanks for the comment. I haven’t blogged about the antitrust angle, but it is something that’s been rolling around the back of my head for awhile.

      My point above (in a very long-winded way) is that money is the likely motivator for bringing these 4 egos to the table. That said, without knowing what patents are involved, we have no way of saying whether this was a good or bad move (financially speaking).

      Either way, claims of “cheap defensive insurance” ring hollow for me since $450 M is a really high price absent a specific threat. Once again, however, if you’ve been on the wrong end of 4 of the top 10 damages verdicts, as Microsoft has, then you may have a different opinion of what “cheap” means.

      Posted by Patrick | December 22, 2010, 8:45 am
  2. I just read a lot of weblogs lately as well as yours is one of the greatest. I enjoy reading your posts – obvious and well crafted. Your own web page will go straight to my personal bookmarks. I acquired some nice inspiring ideas after reading this.

    Posted by John Dale | December 28, 2010, 3:44 am
  3. Since Intellectual Ventures started suing, I now completely disbelieve the claims of any business entity that it is buying up patents for “defensive purposes only.” Assuming that IV prevails in its lawsuits (as I’m guessing it will), look for more patent clearinghouses (supposedly established to “protect” their clients from the dreaded patent trolls) to start using patent litigation to assertively attempt to monetize their newly-acquired IP assets. Clever move, too, for IV to engage in *some* R&D, so that it can take advantage of judicial preference for “practicing” entities over NPEs.

    Posted by patent litigation | January 12, 2011, 12:33 pm
    • When people say they need guns for “protection,” the anti-gun crowd doesn’t believe them either. Whatever your stance, the simple facts are indisputable. Kevlar is for protection. Guns are for launching projectiles (or making someone think that you will).

      Patents share no traits in common with Kevlar.

      Posted by Patrick | January 13, 2011, 12:35 am

Trackbacks/Pingbacks

  1. Pingback: Tweets that mention Patent Deal Potentially Has “Apocalyptic” Consequences « Gametime IP -- Topsy.com - December 22, 2010

  2. Pingback: New Year’s Patent Resolutions: Bulk Up Or Trim The Fat? A Humble Suggestion Is To Try Both « Patent Connections - February 24, 2011

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