Patent lawsuits back in fashion

LITIGATION IS nothing new as a business tool – even the ancient Greeks had laws protecting trademarks.

But by any measurement, 2011 was an extraordinary year in terms of technology companies resorting to legal fisticuffs, particularly within one narrow sector: smartphones and tablet computers such as the iPad and Samsung Galaxy (which run on similar operating systems).

As in any brawl, usually just a few pugnacious characters start it. In this case, it has been Apple and Google aiming punches in disputes about patents involving Apple’s iPhone and iPad software, and Google’s open source Android operating system, which has found a home in an ever increasing range of mobile handsets and tablets in a market that Apple long dominated.

From early on in 2010, as Android’s star rose, Apple was quick to seek the courts to defend what it claims as unique, patented features in its device software. And Google, and a gaggle of Android handset manufacturers, have been ready to stand firm and defend Android.

“We can sit by and watch competitors steal our patented inventions, or we can do something about it,” the late Apple chief executive Steve Jobs said in an initial skirmish in March 2010, directed at rival HTC and its Android handsets – a comment of course robustly rejected by HTC. Many suits that started in 2010 gained momentum this past year, with some counter-suing, or other companies joining in.

The battles aren’t just limited to software and hardware manufacturers. A third type of company which exists primarily to buy up patent portfolios and litigate around them, known as a non-practising entity (NPE), has also jumped into the fray. For example an NPE called Interval Licensing launched a suit against Google in 2010 over Android, while another US firm, NTP, in July this year sued Apple, Google, HTC, LG, Microsoft, and Motorola in a scuffle over email patents.

Even some more traditional companies seemingly outside the central sue-happy sectors are involved. Oracle sued Google for billions this year over Java patents and Android, for example. And Kodak has been in the centre of a number of lawsuits – both suing and being sued – primarily because smartphones and tablets integrate cameras and image viewing software. Kodak’s disputes mostly have been about its image previewing technologies and have seen it go head to head with Samsung, RIM, HG, and Apple. More usage-specific tablet-like devices such as Amazon’s Kindle and Barnes Noble’s Nook ebook readers have also been targeted – Microsoft, which has a portfolio of over 60,000 patents and also has a new partnership with Nokia, sued both companies (and in Barnes Noble’s case, added on Nook manufacturers Foxconn and Inventec).

The complexities of licensing arrangements agreed across the sector, often as a result of patent litigation, results in some oddities such as the fact that, according to Microsoft’s legal blog in October this year, over half of Android manufacturers have patent-licensing agreements with Microsoft, including HTC. Microsoft general counsel Brad Smith and deputy general counsel Horacio Gutierrez said Microsoft now had 1,133 such patent–licensing agreements in place.

Commentators say that litigation and patent wars are typical of young, aggressive industries and shape the future of new sectors as competitors are added in or eliminated. For the companies involved, the end goal may be to force licensing agreements on rivals, or to slow or block the sale of a device into a new market, as happened with the Samsung Galaxy tablet briefly in Australia this year in a patent dispute with Apple. Samsung in return tried to block the sale of Apple’s new iPhone 4S into some Asian markets this year.

Such wars also start to reshape the corporate landscape and spark mergers and acquisitions, as happened this year. Many feel Google’s $12.5 billion (€9.5 billion) purchase of Motorola Mobility in August – Motorola’s mobile development and manufacturing arm – was done primarily to acquire the massive and varied patent portfolio of one of the mobile sector’s pioneers, all the better to play the litigation game.

Motorola Mobility was said to control some 17,000 patents relating specifically to the smartphone and mobile device sector (and before that, Motorola had been suing Blackberry maker RIM, amongst others, for patent infringement).

Does it have to continue this way into 2012? Not necessarily, say litigation experts. Companies could pool and share patents instead.

“In a patent pool, two or more companies in a technological field come together and agree to cross-license their intellectual property holdings in order to co-operate for the benefit of all involved,” wrote Timothy J Maier recently on US intellectual property law firm Maier Maier’s blog.

“Patent pools are useful because they are efficient. They give users and manufacturers of a technology a one-stop-shopping experience, and guarantee access to an entire technology space through the door of one relatively simple licensing arrangement.”

However, with the sector’s patent wars now so advanced, most legal and business commentators argue that 2012 is likely to be another bumper year for patent lawsuits across the sector, as industry elephants struggle to control as much ground as possible in the budding and lucrative smartphone and tablet industry.

The end goal may be to force licensing agreements on rivals, or block the sale of a device