#patents

We’re going to touch this with our fingers. And we have invented a new technology called multi-touch, which is phenomenal. It works like magic. You don’t need a stylus. It’s far more accurate than any touch display that’s ever been shipped. It ignores unintended touches, it’s super-smart. You can do multi-finger gestures on it. And boy, have we patented it.

Steve Jobs, on January 9, 2007 unveiling the iPhone.

The other money quote.

(via @tconrad)

wired
wired:

Samsung owes Apple more than $1 billion in damages for violating Apple hardware and software patents, a California jury ruled on Friday.
The jury found that Samsung infringed upon Apple patents having to do with physical design and user interfaces, often willfully, and that several of the South Korean company’s products diluted Apple’s trade dress, especially as it related to various iPhone models.
More @ Gadget Lab.

$1,049,343,540, to be exact.

wired:

Samsung owes Apple more than $1 billion in damages for violating Apple hardware and software patents, a California jury ruled on Friday.

The jury found that Samsung infringed upon Apple patents having to do with physical design and user interfaces, often willfully, and that several of the South Korean company’s products diluted Apple’s trade dress, especially as it related to various iPhone models.

More @ Gadget Lab.

$1,049,343,540, to be exact.

Dan Levin and Edwin Chan:

Apple Inc licensed its prized design patents to Microsoft Corp but with an “anti-cloning agreement” to prevent copying of its iPhone and iPad, an Apple executive said on Monday.

That executive was Apple’s director of patent licensing Boris Teksler who is testifying in the Apple/Samsung lawsuit. And he went on to note that “he could count on ‘on one hand’ the instances Apple has licensed those patents.”

As expected, most of the money paid, $5.5 billion, was for patents and IP. What’s curious is the $2.6 billion paid for “goodwill”. In other words, that’s the amount Google paid above what they considered the fair market value to be because they think the combination will be fruitful down the road.

If you’ve heard the term “goodwill” recently, it’s because that’s how Microsoft categorized their $6.2 billion aQuantive write-down. Microsoft ended up eating shit on all those billions because expected synergies didn’t exactly work out as planned. Okay, they didn’t work out at all. And remember, aQuantive was a successful, money-making company at the time Microsoft acquired them. Motorola? Not so much.

So far, it looks like Google’s billions acquired an asset that is dragging down their bottom line. Maybe that changes, maybe it doesn’t — it’s obviously too early to tell. But the recent history of Motorola certainly doesn’t look good. Right now, that sure looks like a very pricey $2.6 billion.

Do The Right Thing

Twitter’s decision to implement the Innovator’s Patent Agreement could not have been an easy one. While it’s refreshingly straightforward and an obvious crowd-pleaser, it potentially puts the company in a bit of a vulnerable position. What if no one else adopts the policy? They’ll stand alone with their pants partially down.

While I haven’t yet talked to anyone at the company about the decision, my sense is that they made the call using a simple principle: do the right thing.

While obvious, it seems that companies are rarely guided by simply doing the right thing. Legal departments get in the way. Or investors get in the way. Someone gets in the way. What’s right isn’t often what’s “smart”. And that’s a problem on multiple fronts.

When I tweeted about the upsides of this decision earlier, many people were quick to point out some of the practical problems. What struck me is how all the problems mentioned were derivatives of fear. Fear of others. Fear of change. Fear of dying.

The number one reason not to implement the IPA seems to be the fear that one day things could turn south and then your patent portfolio becomes your main asset — either as a commodity for sale (see: Aol) or as a weapon (see: Yahoo). 

That is such a losing mentality. I’d bet any company not willing to implement something like the IPA due to those thoughts is more likely to fail. Failure is quite literally on their minds!

With the IPA, Twitter is taking the opposite stance. They’re betting that rather than having the fallback option to sell their patents at the highest possible price or suing others with them, they’re going to continue to win. And they’re going to continue to innovate.

And if things go wrong, they’ll go down with grace, not with the cowardice that Yahoo is currently showing. But again, things are less likely to go wrong because they’re not busy dwelling on things going wrong.

I think Twitter will find that doing the right thing will pay dividends. It’s hard to imagine a better tool for recruitment in this day and age. True innovators can do what they do best at Twitter without fear that their work will be misappropriated in the future. And in an age of growing concern about the power and intentions of Google, Facebook, and Apple, the broader startup space will look more favorably upon Twitter.

This, of course, isn’t the end of software patents. But it is a practical solution to a problem that was quickly spiraling out of control. 

After the initial high-fiving is done today, the cynics will come out and say this was purely a marketing maneuver. Or that it actually won’t change anything. But that talk is a disservice to what Twitter has actually done here. They’ve gone out on a ledge that others haven’t been willing to go out on — and that some never will.

They’re doing the right thing, which isn’t nearly as easy as it sounds.

Twitter has drafted up what they’re calling the Innovator’s Patent Agreement (IPA). With it, the company is promising to only use their patents as the actual inventor intended — read: defensively, not offensively.

More specifically:

The IPA is a new way to do patent assignment that keeps control in the hands of engineers and designers. It is a commitment from Twitter to our employees that patents can only be used for defensive purposes. We will not use the patents from employees’ inventions in offensive litigation without their permission. What’s more, this control flows with the patents, so if we sold them to others, they could only use them as the inventor intended.

Excellent news. Twitter is promising to implement the IPA later this year and says that it will apply to all their patents past and present. Yes, this means things like Loren Brichter’s pull-to-refresh (which he’s excited about).

Hopefully other startups large and small will follow Twitter’s lead here. It would be really excellent if larger companies (*cough* Yahoo *cough*) did as well, but it’s hard to see that happening given the current state of things. This is a movement that will have to start from the ground up.

Big time kudos to Twitter for this.

Dan Levine for Reuters:

For future damages, Google proposed paying Oracle 0.5 percent of Android revenue on one patent until it expires this December and 0.015 percent on a second patent until it expires in April 2018.

Oracle rejected the offer for being too low, but it’s interesting that Google (if found to be infringing on Oracle’s patents) was willing to pay a percentage of all the revenue they make from Android. This would have continued the trend of the mobile OS being a nice little business for everyone not named Google

For Google itself? It sure looks like a pretty poor little business given the resources they pour into it. 

lilly

lilly:

I’ve been thinking about the situation with Yahoo suing Facebook regarding some older patents, and observing the reactions online in blogs and on Twitter. I’ve been struck by how unanimous it’s been, and the emerging narrative that Yahoo has somehow crossed a line, that Internet companies don’t…

A smart take on the Yahoo/Facebook patent situation by John Lilly. I think he’s right, there’s more fueling the outpouring of hatred directed at Yahoo than just their patent maneuvers. BUT, I also think their maneuvers are particularly bullshit in this case. Look at what it is they’re suing Facebook over. It’s things that nearly all social services use. It’s obvious things. Things that existed before Yahoo patented them. 

Lilly is right that many other patent lawsuits are bullshit as well — particularly in software. But Yahoo is being unreasonably evil and stupid here. Why didn’t they sue, say, 5 years ago? Why aren’t they suing 200 other companies “infringing” their silly patents? 

It’s because, like Kodak, they’re dying. And these are the actions that a dying company resorts to. With Kodak, it’s obvious — they’re bankrupt. And people feel sort of sorry for them as a result. Yahoo is not bankrupt, so it’s not-so-obvious. But they are still very much dying. And they clearly know it, hence, the lawsuit.

Maybe we should feel bad for Yahoo here too. But we don’t yet. But we will someday in the not-too-distant future. The saddest thing now is that they probably really think this lawsuit will help save them. It won’t.

Fred Wilson:

I am not writing this in defense of Facebook. They can and will defend themselves. I am wrting this in outrage at Yahoo! I used to care about that company for some reason. No more. They are dead to me. Dead and gone. I hate them now.

I have yet to read anyone not in agreement that Yahoo’s move here is total bullshit. They’ve really, truly (and probably irreversibly) fucked their reputation in the tech community here. That will be fatal. 

Just remember this when they’re chopped up and sold for parts in a few years. Or — more poetically — when Facebook buys them just to turn out the lights.

This Motorola deal continues its downward spiral. It’s already a bad — some might say awful — deal from a pure business perspective. But now the seemingly lone bright spot of the deal for Google — the patents — are turning into a headache as well. 

Bloomberg only mildly touches on some of this, Daniel Eran Dilger of AppleInsider and Florian Mueller of FOSS Patents go deeper. Of note: if Google is committed to staying the course with Motorola’s patent licensing strategy (which they say they are), they’re going to find themselves enforcing patents related to H.264, the video codec that Google itself is trying to kill with WebM. 

They also may find themselves suing Apple over patents and demanding a royalty for each iPhone sold. 

The problem Google is likely to face is that if they aren’t agressive with the patents in the way that Motorola has been, how can they possibly hope to license them in the way they say they will? Who would license something when they don’t have to? This is a slippery slope. 

Bigger picture: after going on and on about the dubious patent tactics by rivals like Apple and Microsoft (and rightfully so in most cases), Google may find themselves in the same position thanks to this Motorola deal.

Charles Arthur of The Guardian makes the case for why Google will have to get aggressive with their patents, lest the Motorola deal look like one of the worst purchases in recent years — maybe ever.

Writes Arthur:

The really profitable bit of the business is the “Home” division, which makes set-top boxes, but has been bumping along at around $900m revenues for the past year. It actually makes money - only around $60m per quarter, but at least it’s profit, compared to the consistent losses in the mobile business, which has only made a profit in two of the past nine quarters. Even so, it would take 75 years for the Home business’s profit to make back the money Google paid for the business.

In other words, in purely financial terms, MMI is a dog.

On the face of it, the Motorola deal is such a bad one for Google that it makes absolutely no sense. But one level deeper, when you consider how badly Google was getting screwed in the patent bidding wars, it actually almost seems like they had to do this deal — and that Motorola chief Sanjay Jha knew it.

The problem Google faces is that this reality doesn’t translate easily to shareholders. They’ll see Motorola dragging down Google’s numbers and wonder what the hell they were thinking with the buy? 

Even if Google spins out Motorola, it will look bad. 

That’s why Arthur’s argument isn’t totally crazy here. I still doubt Google will become a patent pusher — though you could have said the same about Microsoft a couple decades ago — but I think that’s the most obvious way to show what they got out of the Motorola deal.