The latest major acquisition of patents by a big computer software corporation has been agreed to between AOL and Microsoft. The sticker price this time: $1.06 billion. The purchase includes more than 800 patents, putting the per-patent price north of $1 million. On the heels of purchases by Google, buying Motorola Mobility and its attending intellectual property, and the Nortel portfolio sale, major corporations continue building their IP war chests. More than this, they are doing so largely by raiding the portfolios of other large companies that are either distressed or worse. If it has its way, Kodak will be the next big seller. The question becomes: to what end?
In the battle between tech giants, the power afforded by a patent potentially allows the owner to prevent the manufacture, import, or sale of products that infringe the invention described in the patent. Scale this power by the thousands of patents owned by companies like Google and Apple, and the opportunity to hobble a competitor is manifest. Hence, tech companies are tripping over themselves to amass greater and greater numbers of patents in the areas of electronics, software, and, as in the case between AOL and Microsoft, advertising. Given the numbers of patents owned by the major players, and the complexity of a given product, it’s a safe working assumption to say that every major product released by the likes of Apple, Goole, Microsoft and others of that ilk infringe on at least one patent owned by a competitor.
So what is keeping patent owners at bay, permitting infringing products to enter the market? Essentially, mutually-assured destruction. Given an increasing number of patents owned by a given competitor, the probability of that competitor owning a product that one or more of your products infringes approaches 1. If one tries to assert patent rights, that will in turn spur a counter-assertion. This gives rise to a stand-off; although there is potentially much to be gained by excluding a competitor’s product from the marketplace, the consequences of that action could substantially outweigh the benefits.
Continuing the Cold War allusion, patent acquisitions like those mentioned above are tantamount to an arms race between nations. Nobody wants to be left behind, so everyone commits more and more resources to protection. Consortiums are even arising, akin to treaty organizations, to the chagrin of those that are excluded. In sum, barring major changes in the philosophy in the business practices driving the tech industry, the one with the biggest patent portfolio looks to be king of the hill.