Well, Twitter, a well known company that feels like startup(!) had finished $36M patent deal
with IBM.
According to the article, I was able to find out that Twitter bought 1,000 patents from IBM.
This is the exact excerpt from article that states their claim.
"Companies in the Internet, technology and media industries own large numbers of patents, copyrights, trademarks and trade secrets, and frequently enter into litigation based on allegations of infringement, misappropriation or other violations of intellectual property or other rights."
So let's go into why they bought the patents in the first place. Last year when IPO was in the talks, IBM reached out to Twitter informing them that they had infringed IBM's three patents and basically informed them that either settle with us or let's fight at court. In all, IBM can be viewed as a smart company or bully. They knew that Twitter was going in the IPO-phase, so they decided to reach out to Twitter. IBM is a big company with large patent profile, so they probably had nothing to lose.
Twitter, on the other hand, is not. If news gets out that they are in litigation regarding patents, their stock could have significantly went down during the IPO phase. Not only that, they would have to deal with IBM in court. And the worse part is that they might lose. All in one, Twitter settled and bought the patents. Who won here?
Well, in my opinion, both companies won. As Twitter claimed, they avoided court fees and litigation in court. Also, they acquired 1,000 patents from IBM. They have avoided litigation talk during IPO. Also, they are now one of the biggest software companies, so they should be collecting patent profiles. We could say that Twitter did pretty well here. But, they did pay hefty price of $36 million. Though, I believe that that price was worth it.
IBM won too. They sold the patents, but they talked to Twitter and got $36 million in return. They didn't have to go into litigation. They also didn't need to do much work. They just approached Twitter and told them their intentions. In a way, IBM played the role of "patent troll". But, it turned out to be good price for both companies.
I am curious to know how software companies will deal with patent issues in the end. I know that Google has massive patent profiles, but they are not just a software company. Twitter and Facebook are centered a lot on social connection, so it will be interesting to see what happens next regarding patents.
Twitter, on the other hand, is not. If news gets out that they are in litigation regarding patents, their stock could have significantly went down during the IPO phase. Not only that, they would have to deal with IBM in court. And the worse part is that they might lose. All in one, Twitter settled and bought the patents. Who won here?
Well, in my opinion, both companies won. As Twitter claimed, they avoided court fees and litigation in court. Also, they acquired 1,000 patents from IBM. They have avoided litigation talk during IPO. Also, they are now one of the biggest software companies, so they should be collecting patent profiles. We could say that Twitter did pretty well here. But, they did pay hefty price of $36 million. Though, I believe that that price was worth it.
IBM won too. They sold the patents, but they talked to Twitter and got $36 million in return. They didn't have to go into litigation. They also didn't need to do much work. They just approached Twitter and told them their intentions. In a way, IBM played the role of "patent troll". But, it turned out to be good price for both companies.
I am curious to know how software companies will deal with patent issues in the end. I know that Google has massive patent profiles, but they are not just a software company. Twitter and Facebook are centered a lot on social connection, so it will be interesting to see what happens next regarding patents.
Source: http://www.theregister.co.uk/2014/03/08/twitter_ibm_patents_cost_36m_dollars/
Interesting that you commented on IBM here as a patent troll. I see what you're trying to say, but I'd have to say I disagree! I think this was the maturest method of this type of legal discourse. Try came to an agreement where both sides came out mutually benefiting. I think this was a business deal to favor both sides and not a potential patent troll. This is how all these conflicts should be resolved in my opinion
ReplyDeleteHello,
DeleteThanks for the comment.
I didn't say IBM was patent troll. I said one can view them as one since they targeted Twitter just before the IPO. Technically, Twitter didn't need to buy the patents. They were pretty much forced to because they didn't want to hurt their stock price when going into IPO. I am sure they have enough resources to go into court if it weren't for the IPO. That's just my opinion.
I guess, if those patents IBM sold were indeed good patents (primarily that they were new and non-obvious), it would have been inevitable that IBM uses them to sue Twitter had they not been sold. After all, a lot of money were spent on filing the patent, and lots of time on discussion to "perfect" them (since most applications are rejected on the first round of validation), and that also translates to a lot of man-hours and even more money. It is just a business dealing then.
DeleteOn the other hand, if the patents sold were bad patents then IBM would be really wicked and like a patent troll. But seeing they are such a huge organisation, the patents are likely to be truly legitimate, and probably stemmed from departments who did not materialise their inventions, which actually occurs quite frequently.
Regardless of whether they were good patents or not, I was stating that IBM acted like patent trolls as they used the exact timing of Twitter IPO. I understand what you mean though. They should get all the benefits of the patents as they took all the time and money to invest in them. But, why target Twitter at that instance at exact time? Twitter was around for more than 5 years. I am just skeptical of the exact timing of this lawsuit. It eventually led twitter to settle.
DeleteMaybe IBM wasn't looking to quarrel after all. This is just speculation, but it seems that IBM was certain that Twitter had infringed but just wanted to be fairly compensated. I see why you say that they act as the "patent troll" in this situation, using the IPO period to their advantage. Thankfully, IBM is a lot less malicious than a group like Rockstar.
DeleteHi Nidhi,
DeleteThanks for the insight. Yeah, IBM is a big company, currently doing not so well in the business today. But, I was just skeptical of the timing as I described above. To target Twitter at just IPO time was a bold move. Indeed, it was smart, but I am sure that they targeted Twitter at that time because they knew Twitter would settle. If not, they would have approached them way before.
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ReplyDeleteHi Dong, great post. I appreciated your holistic analysis of the situation between IBM and Twitter. Since IBM's been around for much longer than Twitter has, it only seems fitting that they'd better understand the rules of the game. Though targeting Twitter right before its IPO seems like a very opportunistic move, it thankfully resulting in a great win-win situation. IBM could have even waited until after Twitter went public, which may have given them a better name for themselves while also damaging Twitter's name more. It seems that they reason they didn't do this is that Twitter and IBM are not in direct competition over a certain service. When it comes to companies who are neck-and-neck, e.g. Apple and Samsung, things could get a lot uglier!
ReplyDeleteIndeed. It's win-win situation for both because Twitter acquired many patents that they technically would need in the future. In a way, Twitter had no option anyway. Also, after reading the article, I was a bit skeptical on whether software companies would be sued like this in the future. What do you think on that? There are many startup software companies, and if patents become a big deal, do you think startup companies would survive?
Delete