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September 06, 2011

Google vs. Apple: Patent Infringement Wars & the Importance of an IP Risk Management Strategy

The patent wars have been heating up in a major way within the mobile phone sector, primarily between the Apple vs. Android operating systems.   Some key developments of note:

-Apple began suing makers of Android operating system phones for Patent Infringement.

-Apple and Microsoft partnered to buy 6,000 wireless patents from Nortel for $4.5 Billion.

-Google announced the $12.5 Billion acquisition of Motorola Mobility for its 17,000 patent portfolio.

If you ever wondered if “litigation as a business strategy” was real or not, look no further. David Drummond, the Chief legal counsel for Google was quoted in the Wall St. Journal as saying these lawsuits they were facing were “a hostile, organized campaign against Android by Microsoft, Oracle, Apple and others, waged through bogus patents.”

So how did they respond? By purchasing Motorola’s 17,000 patents for their own enhanced patent portfolio in what is clearly an arms race build up of their own IP arsenal to both defend against their current litigation and to use in countersuits of their own.

But what do emerging technology companies with their own patent portfolio and potentially disruptive technologies do if they want to continue growing without “having” to sell to a larger strategic buyer should they face an IP lawsuit of their own?

I suggest considering Patent insurance as a part of your overall strategy.

At a high level, there are two types of IP policies that firms can consider: Abatement (offensive) coverage and Infringement (defensive) coverage.

If you have a truly innovative idea, bigger firms may inevitably try to copy your idea. Given that a patent litigation lawsuit can cost an average of $2 - $3 million, the smaller your company is, the more vulnerable you are to being unable to properly enforce or defend your patents.

Remember, even if the best patent attorney in town did a great job prosecuting your patent(s) within the PTO process, you still have the same litigation risks since you can never control who files an IP suit against you.  

And don't be naive, larger firms engaged in a lawsuit will exploit their advantages if they sense you don't have the ability to easily pay the legal fees required to match them. Which is why I suggest considering patent insurance to mitigage some of that IP risk. 

Having patent insurance can help you gain negotiating leverage or at least be on more equal footing against a larger, deeper-pocketed firm.  Your goal then is to reach a satisfactory settlement, get injunctive relief or establish a more favorable licensing deal given that you don't have to cave against the threat of a suit.

While it’s not an inexpensive policy, it’s not astronomical either. It’s certainly a great deal less expensive than having to divert valuable working capital to adequately fund an IP lawsuit or worse having to negotiate totally from position of weakness.

Please contact me if you’d like to discuss the concept further.