“It’s a precedent because of the scale of these things,” said Jim Bessen, a fellow at the Berkman Center for Internet and Society at Harvard University. “A billion dollars for 800 patents? That’s just astounding.”
The fixation on acquiring intellectual property is troubling to many observers, who see a broken system, spawned by Washington regulators who have for decades rubber-stamped too many patents that are vague or have questionable value.
For years, most of the companies suing tech giants over patents were minor players in Silicon Valley known as “trolls” because they did not invent anything themselves. But more recently, as tech giants have expanded their reach and crossed into one another’s lines of business, the battle to protect intellectual ideas has intensified.
Now, nearly every major tech company is embroiled in a legal fight over patents. This month, Yahoo sued Facebook over 10 patents relating to advertising, privacy settings and messages. Facebook has countersued. Apple is suing Google’s Android partners, such as Samsung, accusing them of infringing on technology for the iPhone and iPad, such as the “slide to unlock” feature.
Yahoo’s lawsuit, in particular, triggered widespread condemnation from other tech executives, who accuse the company of resorting to desperate tactics as it tries to find a successful business model.
“They’re all acting as opportunists,” Bessen said. “They’re taking advantage of weaknesses in the patent system that shouldn’t be there.”
Microsoft and Apple argue that their lawsuits are simply efforts to protect their legitimate innovations and investments in technology.
Steve Jobs called the Android phone a “stolen product” and vowed to go to “thermonuclear war” over it, according to Jobs biographer Walter Isaacson.
Patents are so lucrative that firms such as AOL and Yahoo — which dominated the Web in the 1990s but are trying to reinvent themselves — can cash in on old patents related to the most basic functions of online communication.
The treasure trove of patents from AOL being sold to Microsoft relates mostly to technology such as instant messaging and e-mail, according to an analysis by research group Envision IP.
Companies that hold the most powerful patents can impose licensing fees on competitors or take them to court to allege infringement.
“Microsoft has one of the most sophisticated engines for monetizing IP in the world. People don’t really know that,” said Erin-Michael Gill, managing director and chief intellectual-property officer at MDB Capital Group, an investment bank.