Patents are primarily meant to protect intellectual property. But they can also be weapons—as the actions of big technology companies over the past couple of years have shown. And even though there have been signs that the patent wars are finally winding down this year, a new front has just opened up.
Rockstar, an Ottawa-based patent-licensing and -enforcement company, launched a blitz of litigation on Oct. 31 against Google and handset manufacturers using its Android operating system, including Samsung Electronics and HTC. Rockstar is jointly owned by Apple, BlackBerry, Microsoft, Sony and Ericsson. It was formed in 2011 when the consortium spent US$4.5 billion to buy the patents of the defunct Nortel Networks.
Companies involved in wireless communications have spent billions to amass patent portfolios to protect themselves from litigation over the technology they employ. When Google was shut out of buying Nortel’s patents, for example, it snapped up Motorola Mobility for US$12.5 billion a year later. Facebook paid US$550 million to acquire patents from Microsoft, which had earlier bought them from AOL.
After those high-profile purchases, however, the frenzy appeared to die down. InterDigital, a U.S. company that earns money by suing and securing licensing agreements for its patents, was unable to find a buyer last year. Patents from bankrupt Eastman Kodak that were expected to fetch at least $2 billion went to Apple and Google last January for just $527 million. Indeed, most companies in the wireless space are now flush with patents. “If all the main players have huge portfolios, then anybody who can be sued can also counter-sue,” says Neil Wilkof, head of intellectual property at law firm Herzog Fox & Neeman. Patent stockpiles amount to a legal deterrent based on mutually assured destruction.
But as far as Rockstar is concerned, there is more ground to be gained. The company has moved slowly since 2011, and its recent lawsuits—which involve just about every major player in mobile—represent its biggest gambit yet. How the litigation will pan out is unclear. Pierre Ferragu, an analyst at Bernstein Research, has long speculated that a “gentlemen’s club” is emerging, where the big wireless players sign licensing agreements rather than go to court. In the long run, that’s good for the industry, freeing up resources to spend on research and development rather than existing patents and legal fees.
Still, that day may not arrive for a while. Rockstar’s CEO, former Nortel chief IP officer John Veschi, recently told trade publication Intellectual Asset Management that many companies are using Nortel IP without a licence, and Rockstar is only getting started. With 6,000 patents in its arsenal, the firm will ensure the war rages on.
