Patent Armageddon

By Jason Weber *

Nuclear bomb explosionThe Cold War may have ended decades ago, but the arms race has just begun.  However, this is not a race between the United States and Russia to amass the largest stockpile of nuclear weapons.  It is a race between major tech companies to amass the largest stockpile of patents in the world.  In the past year, major tech companies including Apple, Yahoo, Samsung, and Facebook have been involved in patent infringement actions.  During this same time period, these companies and others have been buying up patents like candy.

On April 9, 2012, Microsoft bought over 800 patents from AOL for almost $1.1 billion.  Back in August, Google bought Motorola Mobility and its slew of over 17,000 patents for $12.5 billion.  Before that, a group of companies, including Apple and Microsoft, beat out Google’s competing bid and bought 6,000 patents from the bankrupt Nortel Networks for $4.5 billion.  Facebook recently joined in the race when it bought about 700 patents from IBM.

ICBMs phoneAs NPR’s Planet Money pointed out in a July story, these companies are not stockpiling troves of patents in order to produce anything, but for protection.  In a sense, it is like the Cold War concept of mutually assured destruction, except instead of using the threat of nuclear annihilation to deter attacks, these companies are saying “if you try to sue me with your patents, I’ll sue you with mine.”  Google essentially admitted as much when it explained its purchase of Motorola as a way to protect itself against “anti-competitive threats from Apple, Microsoft, and other companies.

The patent arms race is not likely to end any time soon.  Kodak plans to sell its 1,100 digital imaging patents as part of its bankruptcy plan.  The patents are worth an estimated $2.6 billion.  Research in Motion (RIM), the makers of Blackberry devices, may also sell all or part of its patent portfolio valued up to $2.5 billion.  While this may not lead to Armageddon, all the litigation could drive up the price of your favorite tech toys.  Further, as NPR explains, the big players like Microsoft, Google, and Apple all have plenty of resources to survive any potential nuclear winter.  The casualties of this arms race will be the start-up companies that “get sued out of existence before they can become the next Google or Apple.”

*  Jason Weber is a second-year law student at Wake Forest University School of Law and a staff member on the Journal of Business and Intellectual Property Law.  He holds a Bachelor of Arts in Political Science from Hope College and served with Teach for America prior to entering law school. After graduating in 2013, Mr. Weber intends to practice in the areas of education or community and economic development law.