. . TECHNOLOGY : PATENTS : BUSINESS: COSTS :LAW: LITIGATION AND LAWSUITS: When Silicon Valley Fights, Patents are the Deadliest Weapon
. .When Silicon Valley Fights, Patents are the Deadliest Weapon By David Goldman
@CNN Money Tech August 18, 2011: 5:23 AM ET CNN . .NEW YORK (CNNMoney) -- Patents have dominated the tech news headlines lately, with industry leaders such as Google, Apple and Microsoft spending billions to beef up their intellectual property portfolios.
.Google (GOOG, Fortune 500) said its surprise $12.5 billion bid to purchase Motorola Mobility (MMI) on Monday was made in part to protect its mobile business from rivals' patent-related lawsuits. Earlier this month, Apple (AAPL, Fortune 500), Microsoft (MSFT, Fortune 500) and others bought patents from the bankrupt Nortel for $4.5 billion. Google also purchased a bundle of more than 1,000 IBM (IBM, Fortune 500) patents last month, for an undisclosed price.
. snip .Patent buys are particularly popular in the telecom space, because the fast-growing mobile device market is fiercely contested. Massive players like Google, Apple, Microsoft, RIM, Nokia, Samsung, HTC, LG, Hewlett-Packard (HPQ, Fortune 500) and many others are all jockeying for position to take advantage.
.One way for those companies to gain ground is to sue rivals, claiming patent infringement. The battles are nasty, expensive and lengthy -- but the victory prize can be massive.
. snip .Companies don't even have to use modem patents to successfully claim infringement. Last month, Apple won a lawsuit against HTC, which was found to have violated two patents in its recent smartphones. Apple was issued those patents for its Macintosh computers in the mid-1990s.
.The mere threat of patent lawsuits can be an effective strategic ploy. Defending against litigation, even in relatively small cases, can cost millions of dollars in legal fees. An offer to settle, even for a large fraction of the cost of litigation, can be a better business decision than defending patents in court.
.That ever-looming threat explains why tech companies are spending billions to bulk up their patent portfolios of patents. Google would pocket more than 17,000 patents from its Motorola purchase. Apple, Microsoft and their partners snagged 6,000 Nortel patents in their recent deal.
. But with patents, there isn't necessarily safety in numbers. .Motorola's portfolio, despite its large size, is filled with patents that have already been licensed out to its rivals, Mueller said.
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