Last week I talked about the contract dispute Hewlett-Packard and Oracle had in Santa Clara County. That was old news about old tech companies in the area. I could also be writing about the newer and hipper companies like Twitter and Facebook and their intellectual property troubles in the Silicon Valley. As Twitter recently announced a settlement related to patents, I will go over why Twitter and IBM decided to avoid an intellectual property related legal battle.
Twitter entered a cross-licensing deal with IBM because IBM is a large enough company that litigation against them is too much of a financial drain. Around when Twitter went public a few months ago, IBM identified some of their patents that they could use to sue Twitter for infringement. The action on IBM’s part contrasts with how Apple has filed suit against their competition to protect their intellectual property and prove that they made the biggest and riskiest investment into current mobile computing device trends. IBM seems to patent for the sake of showing off their research, and IBM does a lot of research. The company boasts on its own site that IBM was granted around sixty seven thousand patents over a twenty-year period and is the undisputed market leader when it comes to patents granted. It doesn’t necessarily mean that IBM is the leader in innovative technology, but it does mean that IBM is large enough that it can continue its research and patent prosecution efforts for decades on end.
The deal reached between the two companies is just intellectual property business as usual. Part of the reason the Apple Google battle has received so much attention is that normally businesses license each other’s patents rather than fight about patent infringement. IBM has licensed its patents to other tech companies like Facebook, Yahoo, and Google. Twitter just seems to be joining the club that do not want protracted legal battles when they could be investing more in their own technology. At least IBM develops its technology around the globe instead of relying significantly on licensing revenue gained from companies paying them after using patent references to accuse them of infringement. Actually, I should verify that distinction with some evidence. While I cannot be sure of how many patent threats IBM has made over the years, I can check which threats resulted in actual lawsuits. The last time IBM sued someone over patents was for declaratory judgment for non-infringement back in 2011. The defendant in that case was a technology licensing company, and the case was dismissed a few months later. Therefore, it is my opinion that IBM has threatened its competition with its patent portfolio to gain technological relationships with potentially more innovative businesses. It might be an underhanded tactic, but if it results in more technological advancement than litigation, I consider it a net public good.
Twitter’s fight with IBM is more of a rite of passage for going public than it is commentary on the state of intellectual property law. Since Twitter licensed patents rather than litigate IBM IP, we cannot figure out if the patents IBM cited would hold up to closer scrutiny in court. Threatening a company going public happened with the Yahoo v. Facebook case, and that case was resolved in a similar way. IBM may have won this battle, but there are more changes being proposed to patent law that IBM opposes, probably because it would make it harder for IBM to license out its patents. At this point IBM is expected to earn more patents, but we will see if that actually translates into business success or, for that matter, another patent litigation threat from a large established company to a smaller newer one.