In our introductory blog on Intellectual Property (IP) we explained the many benefits of proper management and protection of innovations. Nowhere is this more evident than in the technology industry, particularly in the area of mobile devices such as smartphones.
Smartphone revenue is expected to reach over $250bn in 2013 and the big players such as Apple, Samsung, Google, Microsoft and others have been jostling for position by buying up patent portfolios to strengthen their hand.
The following is a brief summary of some major acquisitions and a landmark litigation case which illustrates that when it comes to IP - there’s a lot to gain, but also a lot to lose.
Google Acquire Motorola Mobility - $12.5bn
The completion of the acquisition of Motorola Mobility for $12.5bn was announced on Google’s official blog on 22 May 2012. The main purpose of the acquisition was to obtain the rights to the portfolio of patents held by Motorola which Google could use to protect its own range of mobile android devices against competitors such as Apple.
John Lagerling, Google director of Android Business Development, told the New York Times, “It’s mostly about the patents, the way you can sort of disarm this huge attack against Android”.
Nortel Patents - $4.5bn
A hotly contested auction in 2011 concluded when a consortium including Apple, Microsoft, Sony and RIM (Blackberry) purchased patents held by bankrupt technology company Nortel Networks for $4.5bn. Google, which started the bidding at $900m, lost out to the consortium in the end, as did other technology giant Intel.
Kodak - $525m
In December 2012, another consortium of 12 companies, including Apple, Google and Facebook, joined together to purchase the digital imaging and processing patents from the now bankrupt Kodak company.
The portfolio of patents was initially valued at $2.5bn but the bankrupt Kodak was forced to settle for $525m.
IP Protection – “Smartphone Patent Wars”
Acquiring IP rights not only facilitates lucrative licensing agreements with licensees but also reduces the risk of a company infringing patent rights held by others.
There have been several major patent litigation cases across many industries in recent years, including the mobile device industry. The litigation battles in the mobile device market have been referred to by some as “Smartphone Patent Wars”.
Landmark Case: Apple v Samsung - $1.05bn
In August 2012, Samsung were ordered by a U.S. Court to pay damages of $1.05bn to Apple after a jury found that Samsung had infringed Apple patents, including those patents covering the shape of the iPhone and on-screen icons.
More recently in August 2013, Apple won a case against Samsung relating to two of Apple’s many patents. The decision now prevents Samsung from importing devices to the U.S. that infringe the two patents held by Apple.
Although the latest decision awarded to Apple is a small victory in an ongoing global war for the Smartphone market, the above cases emphasise the importance of respecting and not infringing the IP rights of others.
Opportunity For Innovators
Large companies such as Microsoft have recognised the importance of securing the rights to the products and innovations that they provide to their customers. Microsoft has spent approximately $4bn over the last decade to secure intellectual property rights over the products that it provides to its customers.
Rather than seek out litigious remedies against those who infringe their IP rights, the large companies are now adopting a more co-operative approach where smaller innovation companies are encouraged to enter patent licensing agreements which can be highly lucrative for both parties. This should ultimately help avoid costly litigation.
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