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Tech companies place big bets on patents

By Hiawatha Bray
Globe Staff / August 17, 2011

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Google Inc. and its Android software for smartphones are under legal assault from some of the biggest, richest companies on earth: Microsoft Corp., Oracle Corp., and Apple Inc., all suing over ownership of the patents that control their tech products.

And then there’s Boston entrepreneur Ted Morgan. His tiny company, Skyhook Inc., pioneered the concept of mapping cities by using the radio signals from millions of Wi-Fi Internet routers.

Skyhook tried to license the technology to Google, but the two companies failed to strike a bargain. Then Google added its own Wi-Fi-based mapping service to Android. Morgan claims it violates Skyhook’s patents, and his company filed a federal suit against Google last year. “We believe we own all the patents in this area,’’ Morgan said.

Such lawsuits are disputes over who can claim authorship to different technologies, so companies gird themselves for battle by assembling portfolios of patents they can use to argue they own the rights to their products. On Monday, Google announced a deal to buy cellphone company Motorola Mobility Holdings Inc. for $12.5 billion. Although Motorola could turn Google into a leading phone maker, Google said its main interest was Motorola’s vast library of 17,000 patents, which can help shield Android against lawsuits from competing companies.

The massive Google-Motorola deal illustrates the scale of global patent wars. Giant companies are paying billions of dollars to control key technical innovations, while rivals file high-profile lawsuits to cash in on their patent holdings and snuff out competitors.

In late June, a consortium that included Apple, Microsoft, and EMC Corp. of Hopkinton spent $4.5 billion for 6,000 patents belonging to the bankrupt Canadian telecom company Nortel Networks, covering everything from microchips to wireless networking technology. (Before it made the Motorola deal, Google had placed its own bid for the Nortel patents, but dropped out as the price rose.) Last November, the same companies joined forces to buy nearly 900 patents from Waltham software maker Novell Corp. for $450 million.

In a posting on Google’s official blog earlier this month, David Drummond, the company’s chief legal officer, denounced the consortium deals as “a hostile, organized campaign against Android . . . waged through bogus patents.’’

On Monday, Google chief executive Larry Page posted on the same blog, saying the deal with Motorola would “better protect Android from anti-competitive threats from Microsoft, Apple and other companies.’’

Not all patent attacks come from direct competitors. Some companies create pools of patents, buying them up by the thousands, then make a profit by charging businesses a royalty to use them. Those that refuse are targeted by lawsuits.

Perhaps the best-known of these patent-pooling companies is Intellectual Ventures of Bellevue, Wash., founded by former Microsoft chief technology officer Nathan Myhrvold. Intellectual Ventures has recently filed patent suits against Wal-Mart Stores Inc., Hewlett-Packard Co., Best Buy Co., and Dell Inc., among others, charging violations of several patents related to memory chip design.

“In my 35 years of practice, I have not seen so much litigiousness over pools of patents,’’ said Robert Tendler, a Boston patent attorney formerly employed by Motorola.

As they build their stockpiles, companies like Google will often purchase patents unrelated to the company’s own inventions, but which can be used to threaten countersuits against rivals. Wendy Seltzer, a senior researcher at the Berkman Center for Internet & Society at Harvard, compared it to “mutually assured destruction,’’ the threat of complete annihilation that prevented the United States and Soviet Union from using nuclear weapons.

“I’ve got 17,000 patents here, you’ve got a lot of patents over there,’’ said Seltzer. “You wouldn’t want to see what happens if I lob some of them. Let’s come to an agreement.’’

Still, Seltzer said, the patent wars reveal major flaws in America’s intellectual property laws. It’s too easy for software developers to patent trivial innovations, she said, resulting in thousands of patents that almost any company may inadvertently violate. A major patent overhaul bill now making its way through Congress will not solve the problem, according to Seltzer. Instead, patents should be issued only for software that substantially improves on existing products, she said.

Florian Mueller, a German software consultant who tracks the US software industry, said that buying the Motorola patents may give Google less protection against lawsuits than many believe. Mueller noted that Motorola itself has been sued by Apple and Microsoft for its use of Android software, despite its thousands of patents. “There’s no way that they can really serve as a protective shield for Android,’’ Mueller said.

Tendler raised another concern: the possibility of an antitrust action to block Google from buying the Motorola patents. Tendler doubted that the Justice Department would file such a lawsuit, but he said that Apple or some other Google rival could make such a move.

Meanwhile, Skyhook’s Morgan said his patent suit will continue no matter how many patents Google buys, adding that Skyhook is immune to the threat of retaliation from Google. “We don’t do anything else,’’ he said, “so there’s nothing to countersue us on.’’

Hiawatha Bray can be reached at bray@globe.com.

Android under the gun

Companies have filed at least three dozen patent lawsuits against Google or against companies that use Google’s Android software. Here are some of the most noteworthy.
Sources: Federal court records and news reports.

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