Companies, Patents, and Lawsuits; Oh My!
Bobbie is a member of The Motley Fool Blog Network -- entries represent the personal opinion of the blogger and are not formally edited.
The headlines have been rife regarding companies, their patents, and their lawsuits lately. So much so, that even an uninterested reader knows what is going on should the topic come up in conversation.
Just last month Yahoo announced its lawsuit against Facebook for patent infringement for which the defendant was “puzzled” by. Not too long ago, Facebook returned the favor.
Is it finally to a point where the tech company with the most patents wins? There has always been a quiet little industry that traded on patent licensing fees, especially in the field of technology. Is the acquisition of more patents the latest in self defense? Or is it more of an effort to beat the other guy to the punch? At this point it is getting hard to tell but major players seem to be establishing their perimeters.
The latest patent war is in the hands of Microsoft.
Microsoft (NASDAQ: MSFT) was kind enough to help AOL (NYSE: AOL) out by purchasing over 800 patents from them for almost $1.1 billion. In all fairness, AOL has hit some bumps in the road lately and can use the cash. The patent package covers a range of businesses and internet technologies including search, multimedia, and advertising. Although the patent package is a healthy one, AOL will be retaining approximately 300 core patents and patent applications. AOL and Microsoft will also play the licensing swap; AOL will lease their remaining patents to Microsoft for use and Microsoft will lease their freshly acquired patents back to AOL.
Facebook may actually benefit from the deal between AOL and Microsoft. Out of all the potential buyers for that group of patents, some of which are not on the friendliest terms with Facebook, Microsoft is at least an ally; it helps that Microsoft owns a small stake in Facebook. Other possible buyers may have included Google (NASDAQ: GOOG) and Yahoo (NASDAQ: YHOO) or worse, a patent-monetization company who would have hit Facebook for exorbitant licensing fees.
Microsoft was actually a logical buyer for AOL’s patents. Microsoft has millions of online users through its Windows Live and other programs. The company may have implemented several of the patents and be designing new innovations with different ones.
Microsoft has traditionally used patents as a revenue stream. Companies like Apple (NASDAQ: AAPL) have used several of Microsoft’s patents in order to keep other companies from infringing upon them. Analysts believe that there is a greater purpose behind this particular purchase citing a need to stockpile them as a potential legal defense. Think in terms of the Cold War; everyone was stashing weapons “just in case.” Microsoft and other companies are doing the same thing now in regards to technology. Lawsuits are expensive and time consuming; covering the corporate technological backside is becoming common practice.
There are several high profile patent infringement lawsuits winding their way through the court systems across the country and across the planet. The cases include suits regarding technologies underpinning smartphones and social networks. Some of the biggest lawsuits are Apple vs. Samsung, Oracle vs. Google, and the well known Yahoo vs. Facebook.
Microsoft, together with Apple, Oracle, and EMC purchased 882 patents from Novell in November 2012 for $450 million. Then in July 2011 Microsoft was part of an alliance comprised of Apple, EMC, Sony, Research In Motion, and Ericsson that bought over 6,000 patents from the now defunct Canadian telecom gear maker Nortel for $4.5 billion.
The pending deal between Motorola Mobility and Google was designed so that Google could lay its hands on the mobile phone makers 25,000 wireless patents; a purchase that could protect Google’s Android operating system from legal challenges.
The reality is that when companies find themselves in financial difficulties the first response is to sell off assets. One of the biggest assets for a tech company is their patents. Sometimes the sales can save the company; sometimes the sale comes too late.
Motley Fool newsletter services recommend Apple, Google, Microsoft and Yahoo!. The Motley Fool owns shares of Apple, Google, Microsoft and Yahoo!. BobbieJohnson has no positions in the stocks mentioned above. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.