The enormous value of patents is clear from the recent spate of lawsuits that have arisen worldwide from ICT patent infringements.
Patents are a highly important intangible asset for leading technology companies, an asset that is bought, licensed and traded as if we were talking about sticker swapping; however, these are tremendously valuable stickers that can even stop cutting-edge products that have involved costly investments from reaching national markets.
Patents are of such importance that these days they can be considered “intangible gold”.
Since the end of 2009 the number of patent lawsuits in the ICT sector has risen considerably all over the world.
What we have heard most about is the phenomenon globally known as “smartphone patent wars”, a patent war in which the battle is played out mainly in the field of tablets and smartphones, primarily in the USA and Germany, although it is also a rising phenomenon in the United Kingdom, Holland, Japan, China, Korea and Australia.
For example, Apple and Samsung are involved in disputes under at least ten different jurisdictions.
Lately it has become so important for the sectors big multinationals to have a huge portfolio of patents that their efforts to expand this portfolio have focused not only on R&D.
Nowadays it is normal to buy large patent packages from other companies for astronomical prices. For instance, in August 2011 Google bought out Motorola Mobility –the mobile division of Motorola, based on the platform Android- for 12,500 million dollars in order to acquire more than 17,000 patents.
As far as patent portfolios are concerned in this race to achieve the best market position, some considerable strategic patent sales have taken place in recent times.
Apart from the previous examples, some of the most famous ones are:
- The purchase of 6000 of Nortels patents by a consortium formed by Apple, RIM (the manufacturer of Blackberry), EMC, Microsoft and Sony in 2011. The price of the transaction: 4500 million dollars.
- The purchase of 1030 of IBMs patents by Google in July 2011.
The reason behind this excessive desire to boost their patent portfolio is twofold, the duality of patents themselves: attack and defence.
Patents are mainly used as a weapon of attack. A weapon that can have considerable benefits. If the patented technology is essential to a standard process ( 4G telephony), under fair, reasonable and non-discriminatory terms (FRAND) the owner has to offer users of the patented invention –i.e. other companies- a licence, and the profits resulting from these licences will almost certainly be very attractive due to the large number of potential users.
If, on the other hand, the patented technology is not standard, the owner has more possibilities for attacking. For example, the company may set more restrictive licensing terms. It may even decide not to license the technology, thus making it the only one that can use it.
It may also file for compensation for damages, like the astronomical 290 million dollar fine imposed on Microsoft by the US Supreme Court in June 2011 for infringing a software patent belonging to the small Canadian company i4i. The owner of a vitally important patented technology can basically knock out rival companies.
The main purpose of the patent in todays smartphone wars lies in this offensive tactic: preventing competitors from entering a country in order to monopolise the market for the invention in that country.
This strategy is being used increasingly by Apple, filing lawsuits for infringements in different countries and requesting a court order as an immediate precautionary measure to stop the allegedly offending product from being marketed.
For example, by doing this it managed to cause Samsung a great deal of problems by stopping the sale of its Galaxy Tab 10.1 tablet last year in Australia and Germany for infringing the design of Apples iPad 2.
Samsung reacted quickly by presenting a new model, the 10.1N -incorporating a new frame into it to avoid the similarity with the iPad 2 and therefore the infringement-, and its distribution has now been given the green light, but Apple managed to keep one of its major competitors out of the market for about four months, as well as damaging its image as a result of this lawsuit.
All of this is of incalculable value when it comes to this type of technology, which develops so quickly.
But patents also serve as a shield and are a useful bargaining tool. If someone accuses you of infringing their patents, what better way to respond than by launching a counter attack of the same kind, in turn accusing them of infringing several patents?
By negotiating in this way the parties can reach an agreement.
This tends to be the strategy taken by Google, which, in its relatively recent foray into the world of mobile telephony with the Android operating system, hopes to improve its positioning in terms of intellectual property in order to counteract the storm of impending litigations by Apple to stop the “Android phenomenon” -which was started by Google, although Samsung, HTC, Motorola, LG and other manufacturers are also involved-, and even more so since Steve Jobs supposedly stated at the beginning of 2010 that he would spend every penny Apple has on destroying Android, which at the time he considered “a stolen product”.
Apple is clearly responsible for most of the continuous attacks against Android. But it is not the only one.
Microsoft and Oracle, both of which have a huge patent portfolio -about 20,000 patents each-, are now playing the game too, having filed numerous lawsuits for infringements by manufacturers of hardware for Android.
In fact, Microsoft has eventually focused its strategy on licence agreements through which it charges companies such as HTC, LG, Motorola and Samsung a commission of 5 to 15 dollars for each Android device, thus earning patent licence fees on more than 70% of the Android devices sold in the USA.
To defend Android Google fights back by supplying patents to the manufacturers of this operating system, such as HTC, which use them to file lawsuits against Apple for patent infringement.
Motorola has sued Apple for an alleged patent infringement by its iPhone 4S devices and iCloud storage system. Samsung is also immersed in a fierce conflict with Apple, with numerous disputes in Germany, the USA and Australia, where it is trying to stop the sale of the iPhone 4S.
Apart from the “Android battle”, other agents also come into play: Kodak sued Apple, Samsung and HTC at the beginning of the year for infringing several patents in the USA related to the digital image technology used by the digital cameras that are incorporated into their smartphones and tablets.
There is no doubt that the smartphone battle has begun. The main adversaries, Apple vs Android. The weapons, patents.
The questions, many (“how long will it go on for?”, “who will eventually win?”). This is where smartphones have shown us that a patent is worth more than gold as an intangible asset.