We recently received a letter from International Business Machines Corporation, or IBM, alleging that we infringe on at least three U.S. patents held by IBM, and inviting us to negotiate a business resolution of the allegations. The three patents specifically identified by IBM in the letter were U.S. Patent No. 6,957,224: Efficient retrieval of uniform resource locators, U.S. Patent No. 7,072,849: Method for presenting advertising in an interactive service and U.S. Patent No. 7,099,862: Programmatic discovery of common contacts.
Although Twitter does not believe they are guilty, they are still resolving the issue peacefully through acquisition rather than lawsuit:
Based upon our preliminary review of these patents, we believe we have meritorious defenses to IBM’s allegations, although there can be no assurance that we will be successful in defending against these allegations or reaching a business resolution that is satisfactory to us.
Besides the purchase of 900 patents from IBM, Twitter and IBM have also agreed to a patent cross licensing agreement to avoid any future infringement disputes.
IBM has quite a large collection of patents and an extensive record of infringement disputes, most of which are resolved with litigious negotiations. IBM spends an average of $6 billion per year on research & development and is the leading patent purchaser in the United States. They currently hold more than 41,000 patents worldwide, 6,809 of which were purchased just last year. IBM also receives $1 billion in revenue in patent licensing revenue every year.
In 2011, IBM accused Google of violating patents through products such as Chromebook, Adsense, Google Book Search, geolocation, just to name a few. At that time, Google was also entangled in disputes with Android and Oracle, so it simply acquired 1,030 of IBM’s patents rather than face another lawsuit.
For the most part, IBM has been consistently successful in accusing others of infringement because of the way their patents are written. An excerpt:
Ad manager pre-fetches advertising objects by passing advertising object IDs from the advertising queue to object storage facility which then retrieves the object from the interactive system if the object is not available locally. While this invention has been described in its preferred form, it will be appreciated that changes may be made in the form, construction, procedure and arrangement of its various elements and steps without departing from its spirit or scope.
The last, very generally written sentence makes it easy for other companies to fall victim to IBM’s patent licensing disputes. According to VentureBeat, patent infringement disputes cost the U.S. economy $30 billion each year. Perhaps the government should require more specificity when filing a patent, so that companies such as IBM will no longer be able to squeeze money out of corporations based on vaguely written patents.
What do you think of IBM’s patent tactics? If you found this article interesting, check out this article about how Google was once almost acquired for less than $1 million. Also, be sure to check out Sprinklebit for some investment practice and tips!