[ossig] Tech Giants Join Together To Head Off Patent Suits - WSJ.com

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http://online.wsj.com/article/SB121478271751614435.html


  Tech Giants Join Together
  To Head Off Patent Suits

By *AMOL SHARMA*
June 30, 2008; Page B1

Several tech-industry heavyweights are banding together to defend 
themselves against patent-infringement lawsuits. Their plan: to buy up 
key intellectual property before it falls into the hands of parties that 
could use it against them, say people familiar with the matter.

Verizon Communications 
<http://online.wsj.com/quotes/main.html?type=djn&symbol=VZ> Inc., Google 
<http://online.wsj.com/quotes/main.html?type=djn&symbol=goog> Inc., 
Cisco Systems 
<http://online.wsj.com/quotes/main.html?type=djn&symbol=csco> Inc., 
Telefon AB L.M. Ericsson and Hewlett-Packard 
<http://online.wsj.com/quotes/main.html?type=djn&symbol=hpq> Co. are 
among the companies that have joined a group calling itself the Allied 
Security Trust, these people say.

One high-profile patent case that sent shivers through the tech industry 
was BlackBerry maker Research in Motion 
<http://online.wsj.com/quotes/main.html?type=djn&symbol=RIMM> Ltd.'s 
$612.5 million settlement in 2006 with NTP Inc., a small Virginia firm 
that held patents related to wireless email delivery but had never 
produced a mobile-email device. The four-year legal battle at one point 
threatened to shut down BlackBerry service nationwide.

Also troubling for tech firms, a number of companies have emerged in 
recent years with a business model based on acquiring intellectual 
property and using it as leverage to extract royalties from companies 
whose products or services rely on that technology. These companies, 
which critics call "patent trolls," look for patents that come on the 
market from companies going out of business, universities and individual 
inventors.

The Coalition for Patent Fairness, a group of technology and 
financial-services companies that has lobbied for patent legislation in 
Washington, says the number of patent-related lawsuits rose to nearly 
2,500 through October of last year from 921 in 1990. The so-called 
trolls aren't the only ones suing. Many companies, including Qualcomm 
<http://online.wsj.com/quotes/main.html?type=djn&symbol=QCOM> Inc. and 
Rambus <http://online.wsj.com/quotes/main.html?type=djn&symbol=rmbs> 
Inc., have been aggressive about enforcing their patents on their rivals.

The new Allied Security Trust aims to buy patents that others might use 
to bring infringement claims against its members. Companies will pay 
roughly $250,000 to join the group and will each put about $5 million 
into escrow with the organization, to go toward future patent purchases, 
the people familiar with the initiative said.

Tech companies have tried various ways to protect themselves, including 
investing in Intellectual Ventures LLC, a patent-holding firm founded by 
former Microsoft 
<http://online.wsj.com/quotes/main.html?type=djn&symbol=msft> Corp. 
executive Nathan Myhrvold. The companies provide money to help Mr. 
Myhrvold buy patents, and he in turn grants them a license to his 
portfolio. But some in the tech industry fear Mr. Myhrvold's venture, 
which has collected thousands of patents in areas such as networking and 
software, may itself become an aggressive patent enforcer down the road. 
Mr. Myhrvold has said litigation isn't part of IV's strategy, but hasn't 
ruled it out.

To head off such concerns, companies in the new group will sell the 
patents they acquire after they have granted themselves a nonexclusive 
license to the underlying technology. "It will never be an enforcement 
vehicle," said the group's chief executive, Brian Hinman, a former vice 
president of intellectual property and licensing at International 
Business Machines 
<http://online.wsj.com/quotes/main.html?type=djn&symbol=IBM> Corp. "It 
isn't the intent of the companies to make money on the transactions." He 
declined to confirm who the group's member companies are.

Mr. Hinman said the group doesn't face any antitrust issues because it 
isn't a profit-making venture and its members don't actually own patents 
-- they just grant themselves a license to them.

Ron Epstein, CEO of patent brokerage IPotential LLC, says companies that 
collect intellectual property are a boon to individual inventors who 
otherwise struggle to make money from their work. Mr. Epstein, formerly 
director of licensing at Intel 
<http://online.wsj.com/quotes/main.html?type=djn&symbol=INTC> Corp., 
said any company should be free to enforce its patent rights, regardless 
of whether it produces any products or services. "That seems to me a 
distinction without a difference," he said.

--Don Clark contributed to this article.

*Write to *Amol Sharma at amol.sharma at wsj.com <mailto:amol.sharma at wsj.com>


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