Pursuing Software Patents? Watch out for this…
In 2010 Google’s innovative Android mobile phone technology was the target of no fewer than 12 infringement suits from rivals Apple, Oracle, Microsoft and others.
Part of the problem is the culture clash between old style devotees to intellectual property rights and adherents to the newer, more collaborative environment of open source. But the bottom line is always money: Billions of dollars are at play in what can only be described as the brokerage of intellectual capital.
The focal point in the patent war is the data center, the methods by which companies collect, analyze and store the vast amounts of information they accumulate over millions of transactions.
Recognizing that information is the new currency, Google recently purchased more than 1,000 database patents from IBM for an undisclosed amount of money. In keeping with the company’s avowed commitment to open source, Google made some of that know-how public and Facebook promptly suborned it for use in their own data management technology.
The rules of engagement in the corporate food chain would dictate that Google must now come after Facebook for infringing on its patents.
Will that happen? Stay tuned.
Invention can put a company at the front of the line for the big bucks. Facebook, which launched in 2004 but became overwhelmingly popular in 2006, currently has a market valuation of $50 billion according to Goldman Sachs.
But Facebook like its fellow social media companies Twitter and LinkedIn, is vulnerable on the invention front: With only 12 patents in its portfolio, as compared to thousands in Microsoft’s portfolio, unless Facebook wants to reinvent the wheel every time it tweaks a change, any software innovation the company wants to make to its platform is likely to be challenged in court.
Fortunes Can Be Made From Software Patents
Huge fortunes are at play in the software game. Silicon Valley-based Electronic Arts (EA), the biggest developer and distributor of digital games in the United States and the Western world with 16 percent of the total market share, recently purchased Seattle-based PopCap Games for a whopping $750 million in cash and stock. Not a bad return for the three founders who as recently as a decade ago were working out of their own homes.
The three had founded the company initially to promote an online strip poker game they called Foxy Poker. Fortunately for Bejeweled fanatics, Foxy Poker was too risqué for the home gaming market and not quite sleazy enough for the porn market. A short time later they created the amazingly addictive game Diamond Mind which Microsoft, which licensed the game for a time, renamed Bejeweled.
Interestingly, PopCap co-founder and Chief Creative Officer Jason Kapalka admits that at least some of Bejeweled’s core mechanics were lifted from the Russian game Tetris Attacks. No lawsuits are pending on that account, however.
Fortunes Can Be Lost In the Software Game
Fortunes can also be lost in the software game. Or potential fortunes. One of the primary ways is through patent infringement lawsuits.
Sweden-based Spotify is an online music streaming service that uses a modified peer-to-peer technology to allow users to listen to literally millions of songs as well as to share these songs with friends. Its market valuation has been put at roughly one billion dollars. Since 2008, it’s attracted well over ten million avid European users, and when it recently announced plans to become available to American users, signed up 70,000 in the first week. Speculation about a possible Spotify/Facebook business development is a hotly debated topic in various financial circles.
But at the end of July 2011, Spotify was sued for intellectual property infringement by a software company called PacketVideo, the originators of a streaming music technology that was the Next Big Thing a decade ago.
Does the suit have merit?
Experts say the technology – U.S. patent 5,636,276 – is quite broad. Of course the broadness of its intellectual property claims have not mitigated Apple’s position in its war against the Android phone, the chief rival to its own proprietary iPhone.
If courts find for PacketVideo in this case, every music streaming company could find itself in their gun sights, and the fabulous riches that eluded the company’s founders a decade ago when they started the business could be theirs at last.