by Mike Masnick
Mon, Oct 3rd 2011 11:28am
from the a-well-thought-out-shakedown dept
There are various interesting things in the article worth commenting on. First is the smaller settlements/making it up in volume technique. While its initial lawsuits against coffee shops and restaurants did focus on the central corporations, with the hotels, Innovatio appears to be focusing on individual franchisees. Yes, the small businesses who own individual hotels and probably have no idea how to deal with a patent infringement lawsuit -- all because they dared to offer WiFi somewhere in their hotels. To make it "easy" of course, Innovatio's lawyers will let them settle for between $2,300 and $5,000. In almost every case, that's going to be cheaper than hiring a lawyer to just get started dealing with this -- which I'm sure is exactly what Innovatio intends.
The company is represented by the infamous law firm of Niro, Haller & Niro, which is the firm that originally inspired the term "patent troll." The lawyer representing the company, Matthew McAndrews, seems to imply that the company believes the patents cover everyone who has a home WiFi setup, but they don't plan to go after such folks right now, for "strategic" reasons:
"Innovatio has made a strategic and business judgment at this stage that it doesn’t intend to pursue [lawsuits on the basis of] residential use of WiFi," McAndrews said during a phone conversation last week.And while that certainly could change, you may be relieved (or probably not) to learn that McAndrews does not "perceive" such a "strategic" decision will change. However, later in the article, he seems to indicate otherwise:
Ultimately, he said, Innovatio’s "plan is to license this portfolio to the fullest extent possible. That would include anyone who's wireless networking."And then there's this:
"We want you to continue to use this technology, we just want our client to get his due share,” McAndrews said. “This is not a seat-of-the-pants, fly-by-night shakedown."I guess he means this is a well-planned, well-financed shakedown that's going to stick around for a while. Lovely.
At least there is some firepower arguing against Innovatio. After its first round of lawsuits, Motorola and Cisco went to court, asking for a declaratory judgment that its WiFi products do not infringe... and that Innovatio's patents are invalid. Hopefully that comes to pass or WiFi may get a hell of a lot more expensive.
by Glyn Moody
Fri, Sep 30th 2011 7:39pm
from the trust-us-we're-not-bluffing dept
On the other hand, many software patents have been issued for basic programming techniques that are obvious to most competent coders, which makes it almost impossible not to infringe on them. Their obviousness means that it might be possible to find prior art to have them invalidated, but that takes time – and lots of money.
Put these two facts together, and you have the perfect situation for patent bullying. Holders of software patents will claim that some of your code infringes on their ideas, and that they could, if they wished, sue you and/or get your product withdrawn from the market. But generous types that they are, they will instead offer a licensing deal that solves all your problems.
The great thing about these licensing deals is that no details need be given afterwards – indeed that's usually a condition of them. So the patent holder can use them to insinuate to the rest of the world that fabulous sums are involved for multiple patent infringements, and that other people had better sign up quick before they get sued for even more.
Back in 2007, Microsoft tried to deploy this approach against companies – and users - using free software, which represented an increasing threat to Microsoft's dominance:
"We live in a world where we honor, and support the honoring of, intellectual property," says Ballmer in an interview. FOSS patrons are going to have to "play by the same rules as the rest of the business," he insists. "What's fair is fair."Significantly, though, Microsoft would never reveal what exactly those 235 patents were, despite repeated calls for them to be detailed so that people could examine the validity of Microsoft's claims. Because of this, the free software world called Microsoft's bluff, refusing to enter into licensing deals; no one was sued.
Microsoft General Counsel Brad Smith and licensing chief Horacio Gutierrez sat down with Fortune recently to map out their strategy for getting FOSS users to pay royalties. Revealing the precise figure for the first time, they state that FOSS infringes on no fewer than 235 Microsoft patents.
More recently, Microsoft has tried again, this time approaching manufacturers with products based on Android, which has free software such as Linux at its heart. Once more, claims that Android infringed on Microsoft's software patents were never specific, but this time it's been more successful in lining up licensing deals with major players, including one with HTC in April 2010, one with Casio, a few weeks ago and one with Samsung this week.
Most news outlets have been proclaiming the latter in particular as a huge blow against Android. But let's just look at what the press release actually says:
Microsoft announced today that it has signed a definitive agreement with Samsung Electronics Co. Ltd., to cross-license the patent portfolios of both companies, providing broad coverage for each company’s products. Under the terms of the agreement, Microsoft will receive royalties for Samsung’s mobile phones and tablets running the Android mobile platform. In addition, the companies agreed to cooperate in the development and marketing of Windows Phone.
Everyone has focused on the part about Microsoft receiving royalties for Samsung's Android products, which would imply that Android does, indeed, infringe on Microsoft's patents. But the press release made no mention of the figures involved, or what precisely they were for. Samsung might have agreed to pay $5 per unit, or 5 cents. And for all we know, that “development and marketing of Windows Phone” might even involve Microsoft paying, say, $5 or 5 cents per Android unit back to Samsung.
In other words, this might well be much ado about nothing, the main purpose of which is to provide Microsoft with more “evidence” that it can wave at other companies when it goes calling for more licensing deals. A separate post by Microsoft's Brad Smith and Horacio Gutierrez spells that out for us:
In the context of all the attention intellectual property matters have received in recent months, it’s worth taking a moment to reflect on the meaning and impact of these agreements. The Samsung license agreement marks the seventh agreement Microsoft has signed in the past three months with hardware manufacturers that use Android as an operating system for their smartphones and tablets. The previous six were with Acer, General Dynamics Itronix, Onkyo, Velocity Micro, ViewSonic and Wistron.In other words: “Look, all these companies can't possibly be wrong. There's clearly a big patent problem with Android, and anyone basing products around it had better sign up too.”
These agreements prove that licensing works. They show what can be achieved when companies sit down and address intellectual property issues in a responsible manner. The rapid growth of the technology industry, and its continued fast pace of innovation are founded on mutual respect for IP. Intellectual property continues to provide the engine that incentivizes research and development, leading to inventions that put new products and services in the hands of millions of consumers and businesses.
Why might Samsung go along with this kind of thing? Well, because we don't know the details of that licensing deal, it might be receiving more than it pays out – unlikely, but possible. More likely is the situation where Microsoft agreed to help it in various ways with the Windows Phone products that it also produces – after all, Samsung just wants to sell hardware, and doesn't really care which software it runs. There are plenty of legitimate ways in which Microsoft could make Samsung's acquiescence in this licensing game attractive.
And let's not forget that Samsung is currently embroiled in a much more serious dispute around the world with Apple over its Android products. It's a basic rule that you don't fight wars on two fronts if you can help it, so settling with Microsoft – especially if the terms were favourable – makes good sense from a business point of view.
To summarise, then, this high-profile deal tells us nothing about the real terms of the agreement; all we have is a reinforced appearance that Android infringes somehow on Microsoft's (unspecified) software patents – pure FUD (Fear, Uncertainty and Doubt).
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by Mike Masnick
Wed, Aug 31st 2011 11:07pm
from the does-it-even-matter? dept
Still, the folks at M-CAM decided to put the Motorola Mobility patent portfolio to the test by using a variety of scoring techniques, and believes that the portfolio isn't all that valuable, both in the aggregate and at the specific level. It basically found that about 48% of the patents are probably worthless. At the specific level, the company looked at the 18 patents that Motorola Mobility had asserted against Apple, suggesting that these particular patents may be the "stars" of the bunch -- but, again, found that nine of those patents were "impaired," and were unlikely to be very strong or valuable.
The report notes that buying and maintaining dubious patents probably isn't a particularly good value by itself:
Google is paying $12.5 billion for alleged assets that include a 17,000 patent portfolio, of which close to half appear to serve as deterrent value alone. The cost of maintaining patents of dubious quality will be an ongoing and potentially unnecessary liability to Google and its shareholders. Regrettably, close to half of the portfolio deemed "best" based on previous assertions have substantial weaknesses. Google’s patent stockpiling initiative appears to be focused entirely on deterrent value rather than on acquiring quality assets. Google shareholders may take some small solace in the adoption of a multi pronged defensive strategy, but may want to demand higher quality standards for the assets and liabilities acquired in future transactions.Of course, if Google's goal is longer term, it's possible that this isn't such a crazy deal. Already, we've seen that this acquisition alone has been a key driving force in getting lots of people (and especially the press) to admit that the patent system is clearly broken. Spending that much to get that kind of widespread awareness may be worth it... if it leads to real reform (which is still a big question mark). On top of that, if the quantity of patents has a deterrent value, no matter the quality of the overall bunch, it's likely that Google will still find it "worth it." However, the fact that it now needs to maintain these 17,000 patents, where approximately half may have no direct commercial value, really demonstrates (yet again) the massive "tax" of bad patents on companies.
by Mike Masnick
Tue, Aug 23rd 2011 10:24pm
from the the-perverted-economics-of-patents dept
Of course, the big question that many raised when Google did this deal was whether it would actually push some handset makers away from Android, out of a fear of competing with their own supplier. While big Android players like HTC quickly downplayed that risk, insisting that they were committed to Android, at least some are speaking out about being less willing to bet on Android, and how it might even drive them to look more closely at Microsoft's Windows Phone operating system.
Let's unpack this for a second, because it begins to show just how ridiculous this overall situation is:
- Microsoft, thanks to patents, makes more money from Android phones.
- In order to fend off patent threats, Google buys Motorola to get its patents.
- In doing so, handset makers scared of competing with Google, start looking at Microsoft as a partner.
- The end result: Microsoft may get more handset partners, but less money, since Android is a pure licensing profit center.
by Derek Kerton
Tue, Aug 16th 2011 7:06pm
from the yet-another-IP-market-distortion dept
Some suggest that Google bought Motorola Mobility Inc (MMI) so that it can vertically integrate and produce flagship phone models that have the polish and seamlessness of the iPhone. But the real reason is a common theme here at Techdirt: Google needs to build its defenses against patent lawsuits in the smartphone industry.
On the very face of it, Google doesn't need a handset subsidiary to make a custom Google phone. They can easily commission a handset exactly how they want it from OEM brands like HTC and Samsung, and have already done just that with the Nexus models. They could easily design their own brand of phones and have it built by contract manufacturers like Foxconn (as Apple does). I've read elsewhere that Google now gets the benefit of better understanding of the challenges of integrating Android into handsets. That's also incorrect. Google has a history of sending teams of engineers to most of their handset and tablet partners to work side by side overcoming those challenges.
Perhaps Google just saw a good deal on Motorola. Its stock price has been dropping through the decade, and also the past year. The market value prior to today was just $7.3 Billion, compared to $20B for Nokia or $13B for RIM. Perhaps, like Nortel before it, the value of Motorola's Intellectual Property (IP) is being hidden by a poor operational record. A buyer like Gordon Gekko (of the 1987 film Wall Street) could have bought up MMI, divested the operational arm from the IP portfolio, and realized a gain by separating the parts (as Gekko famously did to an airline). Of course, that's a 'private equity' view on the purchase, but Google has indicated it will retain MMI for now. Still the sum of the parts might be worth more than the whole. Although not a startup, this seems similar to Masnick's post yesterday that the value of a startup's patents might exceed the value of the operation.
There is also the less-mentioned factor that Google now also owns MMI's set-top-box division, which might give a shot in the arm to the fledgling Google TV business. Bundling Google TV into every STB would be great for Google, but I would expect that, since these boxes are all bought by cable operators, the cable companies would ultimately decide if Google TV actually remained in the box once it was installed on the customer premises. Since Google TV competes with their on demand services, it may end up as popular as the built-in laptop tethering feature is on Verizon's Android smartphones - i.e. Verizon takes it out.
My understanding is that Google intends to run Motorola as independently as possible. That is, no doubt, to head off what is known as 'channel conflict'. Channel conflict occurs when one member of a supply chain, say the Android OS supplier to many handset vendors, expands into another part of the chain, in this case the handset industry. Now they are both a supplier AND a competitor to companies like HTC, Samsung, LG, etc. Historically, the other vendors start to mistrust their OS supplier, and become more reluctant to use the OS as they search for other options.
We've seen this before with Nokia's handling of Symbian. Since 2001, Symbian was, ostensibly, an openly available smartphone OS that any handset manufacturer could use. Nokia got behind this idea full force, not wanting to cede the market to OS companies like Microsoft. They pushed the idea of other handset vendors joining them, in competition against Redmond. Some did adopt Symbian, including Ericsson, Motorola, Siemens, NTT DoCoMo. But Nokia struggled with the notion that Symbian was "too controlled by Nokia" since around 2003, so they spun it off into an open consortium in 2009. Too little too late. The other OEMs didn't ever really believe that Symbian was truly independent. The end result is that very few other handset vendors ever got fully behind Symbian, even during the time when it was the best smartphone OS in the world. So Nokia just ended up buying it back again in 2010, and finally killing it off recently.
With Android linked too closely to Motorola, companies like Samsung might be driven more to their own OS, called BADA, while others like LG could seek new alternatives (Windows, QNX...) Thus, Google now must re-interpret the same dance that Nokia did years ago: "No, don't worry, Android is still open. You will have as equal access as Motorola." This may succeed, but is a precarious position. The dance partners may have changed, but the music is still the same. Let's see if they come up with some new moves.
OEM confidence that Google will keep equal access to Android to all handset vendors is made even more precarious since the recent moves by Google to prefer some vendors of its formerly "open" Android OS. Google only released the latest tablet version of the OS (Honeycomb 3.0) to select partners, shutting out the open source community and other hardware vendors from the OS for now. The first to get exclusive access? Motorola, for the Xoom tablet. This is not the best way to ease OEM concerns around equal access, given that some may be 'more equal than others'.
It becomes clear that what Google truly needs from the acquisition is the patent portfolio of Motorola Mobility. The smartphone patent wars have been raging lately. It seems every handset vendor is getting sued by big competitors and by patent trolls alike on a daily basis. Android vendors, for example, pay nothing to Google for use of the OS... but they must pay about $5 per phone to Microsoft because MSFT had the smartphone patent leverage against Google. In another dire example of the risk of patent assault on Android device makers, the Samsung Galaxy 10.1 Tablet has been shut out of European and Asian markets by injunctions based on patent claims from Apple.
To fend off patent assaults, companies seek to build their own patent arsenals. That, for example, is why so many vultures hovered around the carcass of Nortel, and bid up its patent portfolio to 4x what the market expected. Google bid, but did not win at the Nortel auction. But with Motorola's 14,000+ patent portfolio in the mobile phone industry, Google can not only defend Android much better from the patent assault (by threatening counter-assault), but Google can thus reduce risk and uncertainty for its handset partners, thereby making Android more attractive.
Think about it. One of the biggest features of the Android OS for device makers was the license fee: free. Free, as Techdirt readers know, offers some very powerful mathematical and business implications. Suddenly, building an in-house OS for your car stereo or TV remote control may look less attractive than a more powerful, free, Android OS. Same goes for tablets, fridges, netbooks, or phones. But if MSFT and Apple (and countless others) can layer up license fees, the attractiveness of Android starts to diminish. The power of 'free' disappears, and instead, uncertainty and risk of lawsuit reign supreme.
So, the deal results in two opposing forces for the future of Google: IP cost and risk mitigation, and potential channel conflict. If Google can succeed at making the IP risk mitigation more important than the channel conflict for the OEM vendors of the world, thereby winning more handset and device partners, the Motorola purchase can be a success. If channel conflict is the more important part of the equation, Google loses big. I wonder if Google might someday sell off the handset maker, but keep the IP. Big news, either way. It'll be interesting to see how it plays out.
by Mike Masnick
Mon, Aug 15th 2011 3:03pm
from the keep-an-eye-on-the-patents dept
by Mike Masnick
Tue, Aug 9th 2011 3:43pm
from the best-advertising-ever dept
It's really sad that Apple simply doesn't want to compete in the marketplace. The thing is, I've used both the iPad and the Galaxy Tab, and the iPad is nicer. The Galaxy Tab is definitely the best Android tablet I've seen so far, but Apple has the ability to compete and win in the marketplace. So why is it going ballistic all over the world about the Galaxy? While it may be causing some pain for Samsung now, all it's really doing is screaming out to the world: "hey, if you want a more open tablet that we think is as good, if not better than, the iPad, check out what Samsung is working on!" In the past, Apple mostly let its own products stand on their own, and they clearly dominated in the marketplace. The fact that Apple is switching from that stance to aggressive litigation should be a warning sign for Apple's future.
by Mike Masnick
Thu, Aug 4th 2011 4:15am
from the the-evil-of-patents dept
A smartphone might involve as many as 250,000 (largely questionable) patent claims, and our competitors want to impose a “tax” for these dubious patents that makes Android devices more expensive for consumers. They want to make it harder for manufacturers to sell Android devices. Instead of competing by building new features or devices, they are fighting through litigation.A few years back, there were some stories about how Google's legal department was willing to take on big important issues, not just because they would help Google, but because it would strengthen the overall internet and innovation. That obviously would help Google too, but there was a sense that the company would fight for issues beyond just those that impacted Google. In recent years the company seemed to shy away from some of those fights, so it would be interesting to see if fighting against bad patents brings Google back around.
This anti-competitive strategy is also escalating the cost of patents way beyond what they’re really worth. Microsoft and Apple’s winning $4.5 billion for Nortel’s patent portfolio was nearly five times larger than the pre-auction estimate of $1 billion. Fortunately, the law frowns on the accumulation of dubious patents for anti-competitive means — which means these deals are likely to draw regulatory scrutiny, and this patent bubble will pop.
Of course, as some are noting, even as Google is getting vocal, it appears to be pulling some punches -- focusing on the specific patent problems it faces, rather than speaking out against the fundamental problems of the patent system itself. In fact, nearly a month ago, Glyn Moody wrote an excellent piece explaining how Google's best line of attack here would be to go after the very concept of software patents, something the company hasn't shown a willingness to do just yet.
My guess is that the company would certainly be behind an effort to do away with software patents, but that it recognizes that it's a massive uphill battle at this point. Tim Lee, in the Forbes link above, argues that it actually makes a lot of sense for Google to "stick its neck out" on software patents being a problem. Not only would an awful lot of developers (both inside and outside the company) support Google if it came out against software patents, it would also help to establish Google's overall position in its legal battles. Many patent lawsuits are about just getting companies like Google to pay up. If Google takes a public stand that it doesn't believe any software patents are valid, then it also sends a signal that it will fight such shakedown attempts in court as far as it can go. That can help scare off the trolls, who are just hoping for a quick payout.
In the end, I don't think Google will take such a step, but I think it would be a welcome addition to the discussion. In the last few weeks, with the This American Life patent episode and the Economist's recent worries about patents, it seems this issue is finally getting some mainstream recognition. A push from Google might help it go even further, and finally breakthrough the clutter.
by Mike Masnick
Wed, Aug 3rd 2011 1:02am
Apple Continues To Scream To The World How Competitive Samsung's Tablet Is By Getting It Banned In Australia
from the what-are-they-missing dept
The latest in the worldwide legal fight is that Apple has convinced Australia to block the sale of the device in that country, while it reviews some of Apple's more ridiculous patent claims -- such as for "slide to unlock," "pinch-to-zoom," and... for the "edge bounce" feature that happens when you hit the "bottom" or "top" of a document. Seriously, Apple? Get over it. People copy design elements all the time. Apple has done it as well. And the end result is everyone works hard to make a great new product. Going after Samsung for making a quality competitor just looks petty. Go compete in the marketplace.