Here is a guest blog By John-Paul Rooney, a partner and patent attorney who specialises in the field of consumer electronics and software at Withers & Rogers LLP.
Rooney looks at how important it is for businesses that are considering floating on the stock market to understand the intellectual property they own. This follows Twitter’s flotation and alleged IBM patent infringements.
Patent allegations are unsettling for Twitter
By John-Paul Rooney
“Just prior to its float on the New York Stock Exchange, Twitter received a letter from International Business Machines Corporation (IBM) alleging that it had infringed three of the latter’s US patents. The timing of the legal challenge, just ahead of the social media company’s planned flotation, may have unsettled some investors and both parties are expected to settle before too long.
As a top global patent filer, IBM currently has more US patents granted per year than any other company (6,478 in 2012) and is estimated to hold approximately 87,000 granted or pending US patents which are progressively more focussed on software and services. By comparison, social media company, Twitter, has just nine US granted patents and 95 pending.
IBM has brought three patents to the attention of Twitter, relating to the provision of shortened website links in tweets, advertising and the sharing of common contacts. These patents date back to 2000, 1988 and 2001, respectively. It would appear that these patents, if valid, could potentially be enforced against others in the digital social space.
In May this year, in a somewhat unusual move, Twitter decided to cede some control of patent rights for inventions to the individuals responsible for their development in an attempt to reduce patent litigation. In doing so, they sent a message to the marketplace that they are committed to a laissez-faire approach to the enforcement of intellectual property rights. However, now it seems that this strategy may be back-firing and the social media company’s well-meaning, but potentially commercially-naïve approach to patent protection is coming back to haunt them.
IBM has an immense arsenal of patents, built up over decades, and they are used to enforce their commercial rights where there is opportunity to do so. In this case, Twitter is a sitting target, particularly as it is so close to a float and therefore not looking to pick patent arguments. The fact that the technologies developed by the social media company may be under-protected may also have encouraged IBM to look their way, as there is little possibility of a defensive countersue from Twitter.
Facebook faced similar patent infringement challenges ahead of its float last year, which were settled at the time. Since the company has acquired a considerable patent portfolio by buying up patents from IBM and Microsoft. It is possible that Twitter will take the same course of action.
All companies should know what intellectual property they own, what they could potentially own should they choose to protect, and, ideally, what others might own which could affect their business (freedom-to-operate). This is especially important when a company considers a flotation or other public sale, as can be seen in the cases of Twitter and Facebook. Intellectual property rights have never been so valuable.”