The Patient Strategy of Patents | Madison Who's Who

As many things, patents seem to have an origin in Ancient Greece around 500 B.C. The city of Sybaris offered encouragement in the form of profits to the creators or discoverers of some new refinement in luxury. This source of revenue would be valid for a year. If only Sybaris put a patent on patents, that would be a very profitable enterprise in today?s world of technological enterprise.

In its inception the IT industry had its battles for territory, but lines were drawn and treaties were signed and then came a time of serenity conducive to the development of new technologies. Recently there seems to be some movement of troops and amassing of weapons ? in the form of legal teams and patents.

Paul Maritz is the chief executive officer of VMware and comes with 14 years at Microsoft, much of it during the 1990s when the company was quickly extending its dominance and threatening older technology powerhouses. Mr. Maritz states, ?When the continents shift and new players come into a space, it results in an unstable situation.? According to legal experts and technology executives, plenty more patent confrontations loom. Older technology companies such as Oracle, IBM, ?and Microsoft maintain rich patent portfolios covering essential technologies used by the Web set, especially database and file-management applications.

?The new-generation companies like Google, Facebook, and LinkedIn will eventually run afoul of the established companies,? says Timothy D. Casey, a former patent lawyer at Apple and co-founder of the SilverSky Group, an intellectual property and business strategy consultancy. ?It?s a familiar pattern in the technology industry.?

Part of the risk for the new generation of Web companies comes from their weak patent portfolios. Facebook has only 12 patents to its name, while the totals for Twitter, Zynga, LinkedIn, and Groupon range from zero to two each, according to filings with the U.S. Patent and Trademark Office. That puts them in a position similar to where Google was earlier this year, when it had far fewer mobile-related patents than its competitors. That relative weakness spurred Google to pay $12.5 billion for Motorola Mobility and its 17,000 patents on Aug. 15, its biggest acquisition ever. Newer Web companies may ultimately have to take similar steps to bolster their position. ?If you want to be a permanent fixture of the landscape, you better get some defense,? says Paul Maritz.

The more patents a company owns, the greater the odds of avoiding lawsuits. Those not financially able to fight or settle those suits are left helpless. David Martin, founder and chairman of patent consulting firm M-Cam, comments, ?In a patent case you have to pay millions and millions of dollars to read through a patent. If I have 10,000 patents, I?m not going to read through them. A big company with a lot of patents will go up to someone and say, ?We own the rights to that.? and they?ll send you 10 [of their patents] and if you don?t have a problem with those, they will send you another ten, and they?ll keep drip torturing this thing until they get someone to roll.?

Digging a defensive patent moat: companies like Google and Apple have a lot of cash on hand. There are three things they could do with that money ? besides letting it earn 0.12% at one-year Treasury bond rates:

1. Pay dividends ? sigh, if only.

2. Buy back shares.

3. Acquire other companies (for diversification and/or to acquire intellectual properties).

Given the immediacy of the patent threats these companies face, door No. 3 (for the intellectual properties) seems like the safest move.

Another new development on the patent horizon is that the Law may be about to change.

On August 30 members of the National Small Business Association are hosting a forum on patent reform. Now, these days patents go to the person who can prove they invented an idea. But, under legislation working its way through Congress, patents could go to the first person to file. If the patent bill becomes law, the new rule of thumb will be: File Fast. File Frequently.

Gene Quinn is a patent attorney, he advises, ?I think the small companies are going to need to start filing on innovations no matter how small they are. In order to make sure that if the one that they?re working on does pan out, they?ve got the basic coverage locked in.?

That can get very expensive. Quinn says legal fees are in the thousands to file each application. Some products can have hundreds of patents, and entrepreneurs may not know which to protect.

?A lot of times, it takes eight months or a year to actually figure out that the specific aspect of the invention is not worth protecting. So you don?t file it, you don?t go through the expense.? says Ron Katznelson. He runs a startup called Bi-Level Technologies.

But Gene Quinn says there is an upside: It could push companies to be more proactive about their inventions.

The above includes content from Ashlee Vance?s ?When Patents Attack: Could Facebook Be Next?? for Bloomburg Businessweek, a Dan Radovsky ?A Game of Patents Acquire or Die? for The Motley Fool, Matt Rosoff?s, ?Google is Buying ?Crap? Patents in Motorola Deal? for The San Francisco Chronicle, and ?Under new law, patents would go to first-filers? by Jennifer Collins for MarketPlace.

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Source: http://blog.madisonwhoswho.com/2011/09/the-patient-strategy-of-patents/

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