Tech companies facing mounting IP challenges

The recent flurry of patent buying and selling activity in the global tech sector illustrates dramatic changes in the way some of the biggest technology companies are approaching their intellectual property (IP)

The recent flurry of patent buying and selling activity in the global tech sector illustrates dramatic changes in the way some of the biggest technology companies are approaching their intellectual property (IP).

We have seen companies, which have traditionally focused on building a strong patent portfolio, generating additional revenue from their past efforts by reportedly selling or licensing some of their IP rights. At the same time, companies with little or no internal IP have been rapidly buying in patent portfolios to fend off potential law suits.

Take Facebook, for example. In March, as Facebook readied itself for its well-publicised initial public offering (IPO), it was sued by Yahoo for patent infringement. While many saw Yahoo’s move as an attempt to pressure a favourable out-of-court settlement prior to the IPO, this didn't happen. In fact, the case escalated, with Facebook countersuing Yahoo and Yahoo adding additional patents to its lawsuit.

Prior to 2012, Facebook did not appear to have much interest in patents and, for such a large company, had internally generated only a small portfolio of between 50 and 60 patents. However, according to Facebook’s amended registration statement, it spent $83m acquiring patents in the first quarter of 2012, which may include 750 patents it is reported to have bought from IBM. Facebook has also agreed to pay $550m for approximately 650 patents that Microsoft had previously acquired from AOL, as well as a licence to hundreds of other AOL patents retained by Microsoft.

Increasing IP challenges

Such developments underline the increasingly complex global IP environment for tech companies. The rising threat of litigation, coupled with record numbers of patent filings around the world, means that it is more important than ever for IP departments to ensure that their companies’ products and technologies do not infringe third-party patents.

It is more important than ever for a company to ensure its products and technologies do not infringe third-party patents

Haydn Evans, vice-president, IP outsourcing, CPA Global

This concern was reinforced by a recent survey of 30 of Europe’s most innovative tech companies, undertaken by CPA Global. Nearly 70% of respondents identified such "freedom to operate" (FTO) issues as one of their key challenges in ensuring that they are freely able to develop, manufacture and sell their products globally.

Meanwhile, the threat of litigation is compounded by the activities of non-practising entities (NPEs), or “patent trolls”, who amass patent portfolios with no intention to actually manufacture and/or market the technology, but who are constantly on the lookout for potential infringements of the patents they have acquired. NPEs are particularly prevalent in the tech sector, as reflected in CPA Global’s survey. Almost 50% of respondents identified NPEs as one of their biggest concerns over the next 12-18 months.

All of these challenges add considerably to workloads – and at a time when many IP departments are under budgetary pressure, being required to do more work with the same or fewer resources.

Patent awareness strategy

To help companies cope with these new IP challenges, it is essential that they put in place an effective, well structured FTO search process. Many organisations may already have processes established, but they often don’t have adequate resourcing to conduct the extensive searches required. 

Increasingly, they are turning to specialist external providers to help with the FTO process. Such providers can serve as a cost-effective extension to the in-house teams, providing the necessary bandwidth to undertake comprehensive FTO activity.

Technology also has a major part to play, with a range of IP management software tools available to support the process and maintenance of FTO activity. A sophisticated IP management software platform will provide clarity about an organisation’s patent portfolio –for example, how the existing portfolio aligns with the product range of the organisation, and that of the competition, while ensuring the IP rights within the portfolio are appropriately protected and maintained.

Faced with ongoing budgetary pressures, the IP departments of many tech companies are finding that by utilising specialist third-party resources and the right IP management technology, they can optimise the value of their in-house teams, freeing them up to focus on the strategic IP challenges confronting their businesses.

Haydn Evans is vice-president, IP outsourcing at intellectual property management specialist CPA Global.

Photo:  iStockphoto/Thinkstock

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