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Tuesday, 05 November 2013 13:34

Smaller companies vulnerable to trolls

Written by Nick Farrell



IBM shows the way

Big Blue’s case against Twitter reveals what could become how the bigger companies shut down the next generation of start-ups. The big outfits have been buying up caches of patents mostly to be used defensively against any other company who sues them for patent infringement.

The problem is that the next generation of start-ups don’t have that sort of insurance policy, and are dependent on the goodwill of the big companies to leave them alone. IBM claims Twitter has infringed three IBM patents, one of which relates to online advertising. Twitter said it has "meritorious defences" to those claims, and IBM has not filed a lawsuit, yet. But for Twitter to walk away from the case, it would have to win an expensive court case and it might be better for it to pay up. The case could also mean that it will have to build up a patent collection of its own.

But the logic that companies have to buy up patents as an insurance policy, or they will be sued by the big names in the industry is an alarming 21st century trend. Smaller companies, like Twitter are vulnerable to being shut down by it. In September, Twitter was sued twice for patent infringement the same week it announced its plans to go public. It seems that as the company goes public bigger outfits want a slice of the pie, for doing what really amounts to nothing. 

Last year Yahoo sued Facebook for patent infringement two months before Facebook's IPO. Yahoo eventually withdrew the lawsuit after a new Yahoo chief executive took over.Facebook learnt from the experience and went on a patent-buying spree shortly after the lawsuit was filed. Facebook bought 750 patents from IBM for an undisclosed sum, and then paid Microsoft $550 million for hundreds of patents that originated with AOL.

Twitter announced that it would not use patents for offensive purposes without permission from the employee who invented the technology. The company would only use patents defensively, it said, which means the patents could be used to countersue anyone who had struck first.

Nick Farrell

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