The borrow-a-patent, rent-a-patent, buy-a-patent industry is growing by the day. Google (NASDAQ: GOOG) just bought 1,023 patents from IBM (NYSE: IBM). The big hardware company will hardly miss them. It files more than 5,000 patents in most years.
Google will need these patents as it fights off Apple’s (NASDAQ: AAPL) intellectual property claims and positions itself for the growth of court battles over who had such properties first and what they are worth. Most observers believe that Google’s buyout of Motorola Mobility (NASDAQ: MMI) was primarily for access to the handset company’s patent pool.
TG Daily reports that Google “bought 1,023 patents from IBM, covering everything from cleaning methods to file system management. They include patents relating to server architecture and databases, as well as a number of Java patents and some covering web search.”
Patent hording almost ensures that claims will clog the courts as companies use the legal system, along with innovation, to stake claims for product distribution and market share. Apple has sued companies that use Google’s Android system. Microsoft (NASDAQ: MSFT) collects royalties from some handset companies that use Android. Samsung cannot distribute its tablet PC in most of Europe because Apple has used the courts to effectively block it.
The war over IP has become so violent that some of the weaker tech companies are under pressure to monetize their portfolios. Eastman Kodak (NYSE: EK), a firm so troubled that it may not survive the next decade, has retained bankers to auction off much of its IP. Some shareholders have asked embattled handset maker Research In Motion (NASDAQ: RIMM) to add to its cash balance though a sale or license of much of its patent portfolio.
Questions that the courts have not yet answered may be the key to future litigation: How portable are patents? Can a company buy intellectual property just before it enters the legal system with complaints against rival, even if it has had no part in creating the underlying technology? Perhaps not, and that would throw the patent legal world into another frenzied spin.
Douglas A. McIntyre
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