Archive for the ‘Legal/Tech News’ Category

The Broader Benefit of Benefit Corporations

leave a comment

Ello, an ad-free social network, recently closed another round of venture funding, raising $5.5M. Exciting right? Another social media start-up getting some Series A funding. While $5.5M is surely nothing to sneeze at, perhaps the more interesting feature of this next stage of Ello's life is that it's registered itself as a public benefit corporation, enshrining in its corporate charter as a "public benefit" that it will never show ads or sell user data. To date, 27 states have enacted legislation recognizing "Benefit corporations," entities that give directors legal protection to pursue social and environmental goals over maximizing investor returns. According to benefitcorp.net, a defining characteristic of benefit corporations is that "they are required to create a material positive impact on society and the environment." One of the largest early adopters of the benefit corporation form was outdoor clothing and gear company Patagonia. In doing so, Patagonia sought a structure that would prevent shareholders from suing it in the pursuit of costly environment initiatives, such as donations to environmental organizations and support of renewable energy sources, that allowed it to serve the welfare of the global community. Warby Parker, with its initiatives ranging from staying carbon neutral, to providing lost cost eyewear to those in need, and even sponsoring a local Little League team, similarly sought the insulation of its directors through the benefit corporation structure. In both examples, the benefit corporation produces a direct, measurable and concrete positive impact on their communities and the environment. Ello's election to benefit corporation status brings with it a tweak to what we've seen so far. Even though Ello has registered as a public benefit corporation, their mission is in many ways fundamentally different from more well-known predecessors. Whereas Patagonia and Warby Parker have employed the benefit corporation as a way to protect their support of immediate and material benefits to the public good outside of the scope of their direct relationship with their consumers, Ello seems to have stretched the breadth of the defining characteristic of benefit corporations to protect what it believes to be the intrinsic value of its product. Is protecting users from ads a public benefit in kind with what we've seen from Patagonia and Warby Parker? In allowing Ello to register as a benefit corporation, Delaware state law seems not to see a distinction. Whatever the limits of the definition of public benefits, one thing Ello has shown about benefit corporations is how useful they can be in insulating directors from investor interference. Whether or not Ello's mission can truly be said to be in pursuit of the public good, they have succeeded in securing the pursuit of their vision. In effect then, perhaps it makes more sense to refer to Ello as a "mission" corporation, protecting the discretionary judgment of it leadership beyond its fiduciary duties to investors, than a benefit corporation. To all of the entrepreneurs of the world, be aware of this broader benefit.

Written by

November 25th, 2014 at 10:37 pm

Technology Companies Fight Back Against Government Requests For User Data

leave a comment

In response to privacy concerns surrounding data transmission and disclosure of information, the federal government has enacted a couple of laws, most notably the Privacy Act of 1974 and the Health Insurance Portability and Accountability Act (“HIPAA”), in order to safeguard individuals’ private information. The Privacy Act of 1974 was enacted in reaction to the dawning age of information and was an attempt by the federal government to protect individuals’ privacy rights. The Act requires governmental agencies to do four things regarding the information they collect and store about private US citizens: 1) to, upon request, tell an individual what information they've collected about him or her, 2) to allow individuals to correct or amend that information, 3) to use certain principles when handling and using the information, and 4) to follow certain guidelines restricting how the individual’s information is shared with other agencies and people. HIPAA provides similar protections, specific to disclosures of personally identifiable information in the healthcare setting. However, despite the enactment of such federal laws, people like Steven Rambam, CEO of Pallorium, an international investigative agency, deliver lectures titled “Privacy is Dead – Get Over It”. The feeling that federal laws don’t protect individuals from unauthorized disclosures of private information is probably due in large part to the fact that neither the Privacy Act nor HIPAA, adequately protect consumers from US law enforcement agency requests for user information, such as requests from the National Security Agency.  Instead, providing safeguards from excessive government surveillance falls to the technology companies in possession of private individuals’ information. There has been a lot of push back from technology companies on both the concept that “privacy is dead” and the idea that the appropriate response to perceived breaches of privacy is to just “get over it”. Instead current and emerging technology companies are putting technological safeguards in place to protect their users against governmental breaches of privacy. For instance, as detailed in another post on this blog, technology companies like Apple and Google have recently updated their privacy policy and introduced passcode encryption technology that the companies themselves cannot bypass. This allows individual consumers to be protected against attempts by law enforcement to incriminate them based on the contents of their Apple or Google electronic devices. Additionally, Facebook is in the process of developing an app that allows anonymity. Users would be able to discuss topics using multiple pseudonyms.  These technological developments are arguably in response to public opinion reflected in a statement made by Jameel Jaffer, deputy director of the American Civil Liberties Union, that, “Technology companies have an obligation to protect their customers’ sensitive information against overbroad government surveillance….” Even before the creation of technological safeguards against unauthorized disclosure of information to US law enforcement, technology and internet companies have battled the US government openly and directly in court and in Congress. In fact, the battle between technology companies and the US government concerning governmental requests for user data continues, as on Tuesday, October 4, Twitter sued the FBI and the US Department of Justice on First Amendment grounds, in order to release a transparency report documenting the exact number of government requests for user information the company received. Twitter is not the first technology or internet company to sue the US government seeking to change the current rules surrounding data request disclosures. Companies, including Apple, Google and Microsoft, have fought for users’ privacy rights in court and in Congress. In fact, in December 2013, eight companies including Apple, Microsoft, Facebook and Google formed a coalition called “Reform Government Surveillance” to lobby Congress to place greater restrictions on governmental surveillance. The aforementioned coalition settled with the federal government and reached an agreement that would allow for companies to disclose how many government data requests they received in groups of one thousand. Twitter, however, did not participate in this agreement and instead pushes for further National Security Agency data request disclosure rights. For instance, Twitter not only wants to disclose the number of requests but also what types of data the government had requested. Surveillance law reform is slowly making headway, as companies with strong lobbying power like Apple, Microsoft, Twitter, and Facebook push for restrictions on the US government’s power to compel the disclosure of individuals’ information and engage in bulk, seemingly indiscriminate, data collection. In the meantime, according to the Electronic Frontier Foundation (“EFF”), there are a notable portion of technology companies that not only require a warrant before they disclose user information but also notify users about government requests, publish transparency reports and law enforcement guidelines, and fight for users’ privacy rights in court and in Congress. It might be useful for technology and internet platform users to note which technology companies have their backs when it comes to privacy rights and which technology companies do not.

Written by

November 4th, 2014 at 6:11 pm

Posted in Legal/Tech News

Apple’s Canary Fails to Chirp

leave a comment

Recently, Apple updated the privacy section on its website. While this was likely part of their response to privacy concerns due to the recent iCloud controversy, and fortuitously timed with the release of the newest batch of phones from the company, it also contains the latest edition of their transparency report. This report is a collection of the requests made by governments around the world for information about Apple device users and account holders. Curiously though, the most controversial aspect of the report may be what is not included. As the Electronic Frontier Foundation reported Apple was one of the first major companies to make use of the device known as a warrant canary. A warrant canary is one of the methods that a company may use to alert the public of otherwise secret demands made by US government. Following the passage of the USA Patriot Act in 2001, the availability of secret subpoenas has been dramatically expanded, and may be used against anyone who may have information which the authorities consider relevant to their intelligence or terrorism investigations. Because of the nature of these subpoenas, criminal penalties may be assessed against individuals who reveal even the existence of the requests for information. To get around this, a company may publish a public statement that they have not received such a request. If that is no longer true, removing the statement, or refusing to make it again, signals the public that the government has asked for data. In the transparency report covering early 2013 Apple stated that it “has never received an order under Section 215 of the USA Patriot Act. We would expect to challenge such an order if served on us.” This language is missing from the more recent reports, instead stating “To date, Apple has not received any orders for bulk data.” This shift in language may be Apple’s signal that it has been forced to comply with an order under the Patriot Act. An alternative view is that Apple is just complying with the latest addition to the government’s scheme of actually reporting on these kinds of requests. Detailed in a January 2014 letter to the general counsel of major tech companies, there are essentially two options available. A company may publish the amount of requests for specific kinds of information in bands of 1000, or may publish total aggregate numbers in bands of 250. Apple’s latest report indicates that it currently sits in the 0-250 band. The major flaw in both of these reporting capabilities is that the starting number is in fact zero, which is where the warrant canary can do its work. The letter indicates that there is to be a significant time delay between the issuing of a request and when a company may report on it, ranging from six months to two years for a new government security product. A timely published warrant canary may also circumvent this requirement. The risk of the canary from the government's standpoint is that it undermines the nature of the secret orders and reduces the effectiveness of a major national security tool. Whether the absence of the canary language indicates Apple’s compliance with the new government reporting scheme or is an admission that Apple has actually received a secret order, the takeaway is clear: The government has an arsenal of methods to acquire information about users of Internet services without their knowledge. The validity of these secret orders is an issue of supreme importance in our increasingly interconnected world. Among the variety of ways for companies to advocate for their users, publishing transparency reports similar to Apple’s is probably one of the simplest, and subtlest, ways to bring the discussion into headline news once again. The warrant canary is a device with perhaps questionable legal heritage, but it promotes a vigilant and informed public discussing a question at the crossroads of national security and personal privacy.

Written by

October 1st, 2014 at 5:58 pm

Posted in Legal/Tech News

Appellate Review of Markman Hearings

leave a comment

In Markman, the Supreme Court declared that determining the meaning of patent claims, i.e. “claim construction,” is a question to be decided by the court; the Seventh Amendment right to a jury trial does not apply. Markman v. Westview Instruments, Inc., 517 U.S. 370, 372 (1996). Shortly thereafter, in Cybor, the Court of Appeals for the Federal Circuit held that de novo review applied when results from these newly-created ‘Markman hearings’ are appealed. Cybor Corp. v. FAS Technologies, Inc., 138 F.3d 1448, 1451 (Fed. Cir. 1998) (en banc).   Earlier this year, the Federal Circuit granted a rehearing en banc to determine if Cybor should be overruled, and what, if any, deference should be given to a District Court’s claim construction. Lighting Ballast Control LLC v. Philips Electronics N. Am. Corp., ___F.3d___, WL 667499 (Fed. Cir. Feb. 21, 2014) (en banc). The court considered three options: (1) reaffirm Cybor and maintain de novo review, (2) overrule Cybor and declare claim construction a question of fact, or (3) adopt a “hybrid” standard of review that affords deference to the District Court’s factual determinations but preserves de novo review of the “ultimate” conclusion. Amici from industrial and technological companies advocated reaffirming Cybor. Academics and practitioners generally favored either the hybrid approach or the overruling of Cybor. Relying on stare decisis, a 6-4 majority reaffirmed Cybor.   The majority pointed out that since Cybor was decided, Congress has not acted to overturn it while enacting other patent legislation during that time. They further explained that predictability and consistency favor maintaining the status quo. Consistency is a concern particularly relevant in patent law – a concern which led to the creation of the Federal Circuit over thirty years ago. The majority feared a return of “forum shopping” because the same patent could be subject to conflicting interpretations in different District Courts. Parties would be incentivized to choose a forum with judges likely to interpret patent claims in their favor knowing that reversal on appeal is unlikely.   The dissent, appearing to favor the hybrid approach, pointed out that the parties in the present case, almost all amici, and the Supreme Court recognize that claim construction involves some questions of fact. Thus, they vehemently argued that under Rule 52(a)(6), courts of appeal can set aside only those findings of fact that are “clearly erroneous.” Rejecting stare decisis, the dissent argued that “informal deference” is already given to District Courts because they spend “hundreds of hours” learning the relevant technology, so overruling Cybor would “not upset settled expectations.” The dissent also stated that de novo review incentivizes the losing party to appeal, decreases the likelihood of settlement, and increases litigation costs.   But Lighting Ballast may not stand for long. In April, the Supreme Court granted certiorari in Teva Pharmaceuticals USA, Inc. v. Sandoz, Inc., which presents a nearly identical question as that in Lighting Ballast. In Teva, the District Court held a Markman hearing and construed the claims in Teva’s favor, avoiding invalidity for indefiniteness. The trial judge relied heavily on Teva’s expert witness to determine the level of ordinary skill in the art at the time of invention. Teva Pharm. USA, Inc. v. Sandoz Inc., 810 F. Supp. 2d 578, 596 (S.D.N.Y. 2011). On appeal, the Federal Circuit explicitly applied de novo review, compared the testimony of the competing expert witnesses, reversed the District Court, and held the claims indefinite. Teva Pharm. USA, Inc. v. Sandoz, Inc., 723 F.3d 1363, 1369 (Fed. Cir. 2013), reh’g en banc denied. Similar to the dissent in Lighting Ballast, Teva claims that Rule 52(a)(6) should have governed the Federal Circuit’s standard of review because determining the level of ordinary skill in the art is a question of fact. Unfortunately, Teva will not be heard until the Supreme Court’s October 2014 term. Until then, Lighting Ballast remains good law; de novo review of claim construction still applies.   Guest Post Written by Brian Apel

Written by

July 13th, 2014 at 1:05 pm

Akamai and the Question on Joint Infringement on Method Claims in the Supreme Court

leave a comment

On April 30, 2014, the Supreme Court of the United States will hear opening arguments [1] for a landmark case found in patent law casebooks, Akamai Technologies, Inc. v. Limelight Networks, Inc., whereby the Federal Circuit, sitting en banc, held in a 6-5 ruling that a defendant may be held liable for inducing patent infringement under 35 U.S.C. § 271(b) when no direct infringement occurred under 35 U.S.C. § 271(a). [2] 35 U.S.C. § 271 states:
  • “(a) … whoever without authority makes, uses, offers to sell, or sells any patented invention, within the United States or imports into the United States any patented invention during the term of the patent therefor, infringes the patent.
  • (b) Whoever actively induces infringement of a patent shall be liable as an infringer…”
The Federal Circuit overruled its own precedence set in BMC Resources, Inc. v. Paymentech, L.P., which had previously held that induced infringement requires a single party to commit all steps of a method constituting direct infringement under § 271(a).  In Akamai, neither Limelight nor its customers performed all of the steps, but nevertheless Limelight was found liable because Akamai and its customers jointly performed all steps.  The court reasoned that a party who actually participates in performing the infringing method should be “more culpable than another one who does not perform any steps” but instead induces another to do so. [3] Arguments supporting Judge Newman’s 35-page dissent include imposing an unfair obligation on businesses to speculate on potential future uses by a third-party buyer or user, the increased discovery costs to an already expensive procedure, and the potential for erroneously imposing liability on supplying non-infringing products and services. [4]  This case is of interest for inventions involving multiple steps, in particular the internet software and hardware industry, as demonstrated by the amicus briefs submitted by technological giants, such as Apple, the Google, Oracle, Red Hat, SAP, CISCO, Xilinx, Altera, HTC, SmugMug, weatherford, the CTIA, Facebook, Inc. and LinkedIn Corporation, The Wireless Association, the Consumer Electronics Association, MetroPCS Wireless, and many others.[5] Many people will be listening next Wednesday on how the Supreme Court will interpret the word “whoever” in the statute and balance these important policy goals.

Written by

May 2nd, 2014 at 3:53 pm

IRS Ruling Declares Bitcoin Will Be Taxed As Property

leave a comment

On March 25, 2014, the Internal Revenue Service issued a ruling declaring that it will tax virtual currencies, such as Bitcoin, as property. This ruling could have significant effects on the way that consumers use Bitcoin. The implication of the ruling is that Bitcoin can no longer operate as an alternative form of currency because any transaction using Bitcoin as consideration will lead to a capital gain or loss for the person paying with Bitcoin. Bitcoin fluctuates drastically in value, which means that almost every transaction using Bitcoin will result in some sort of gain or loss which will now be taxable at capital gains rates. So, for example, if a person buys a Bitcoin for $10 and uses it to purchase an item for $15, he or she will be required to pay capital gains tax on the $5 increase in value. The extreme value fluctuation, however, also explains why the IRS’s ruling may not be as extreme as some commentators suggest. It is, in fact, this value fluctuation which has led consumers to use Bitcoin primarily as an investment medium, like gold, silver, and other commodities, rather than as actual currency. The rapidly changing value of Bitcoin provides plenty of room for investors to try to maximize value by betting on the increase or decrease of the technological commodity. There are also significant administrative restrictions which will make the IRS’s ruling difficult, if not impossible, to enforce, at least with respect to the average individual. In order to determine the amount of capital gains tax an individual owes to the U.S. government, he or she will have to carefully track all of the purchases made with Bitcoin over the course of the year. If individuals are making multiple purchases with Bitcoin, this will prove to be a very tedious and complicated requirement and is likely to discourage individuals from using Bitcoin as currency in the first place. In addition to being difficult for individuals to monitor their capital gains, it will be just as complicated for the IRS to figure out how much it should be receiving in taxes from these individuals. Bitcoin’s original purpose was to provide a type of currency that was completely anonymous, which is why it has often been used in funding illegal transactions. The virtual wallets which house Bitcoins are not tied to individuals; this will make it very difficult for the IRS to monitor how much capital gains tax individuals owe on their Bitcoin transactions. This administrative monitoring gap may provide a new venue for entrepreneurs to develop a platform which provides tracking of an individual’s basis in and purchases using Bitcoin in order to properly determine how much capital gains tax they owe in connection with Bitcoin transactions. But without this type of platform, it is unclear how the IRS will effectively enforce its new ruling. Sources:
  • http://money.cnn.com/2014/03/31/technology/irs-bitcoin/
  • http://techcitynews.com/2014/03/28/bitcoin-is-property-not-currency-rules-irs/
  • http://techcrunch.com/2014/03/30/bitcoin-slips-in-the-wake-of-the-irss-tax-decision/
  • http://www.coindesk.com/irs-bitcoin-ruling-may-bright-side/
  • http://www.inman.com/2014/03/31/irss-bitcoin-guidance-turns-every-transaction-into-a-reportable-capital-gain-or-loss-at-tax-time/
  • http://www.irs.gov/uac/Newsroom/IRS-Virtual-Currency-Guidance
  • http://www.theatlantic.com/technology/archive/2014/03/why-bitcoin-can-no-longer-work-as-a-virtual-currency-in-1-paragraph/359648/
  • http://www.theguardian.com/technology/2014/mar/31/bitcoin-legally-property-irs-currency

Written by

April 8th, 2014 at 10:27 am

Keurig Walls Off the Garden by Shutting Out Third Party K-cups

leave a comment

Keurig, the single serve coffee machine produced by Green Mountain, is nearly ubiquitous in offices, homes, and schools around the country. The device rose to popularity on the back of the K-cup, the single serve pods produced by Green Mountain that allowed a single cup of hundreds of different coffee, tea, and chocolate drinks to be brewed in a matter of seconds. Green Mountain made $3.9 billion in sales in 2012, with 2.7 billion coming from K-cup sales. Keurig was able to maintain strong sales of its K-cups because of several patents on the design and features of the K-cup. However, in September 2012, U.S. Patent Nos. 5,353,765 and 5,840,189 expired. These two patents covered the original K-cup design. Their expiry has opened the door for generic knockoff K-cups to flood the market. Green Mountain claims that the design covered by these patents is outdated and has been superseded by new and improved designs covered under patents that are still in force, including, U.S. Patent Nos. 6,645,537 and the still pending Application No. 20050051478. However, many generic K-cups are already on the market and work in Keurig’s brewing machines. While Keurig claims that generic K-cups will continue to make up less than 15% of the total K-cup market and stress that their current design is superior to any competing product, Green Mountain is clearly worried about the generic threat. In early March of this year Green Mountain announced “Keurig 2.0,” an improved brewing device that would be launching as early as the fall of 2014. Among other changes over previous models, the new Keurig brewer will contain technology that prevents generic K-cups from being used. Green Mountain is the latest to introduce protections for their propriety technology, following in the footsteps of Hewlett-Packard and other printer manufacturers who have added technology to their printers preventing generic printer cartridges from being used, or software companies that have added Digital Rights Management (DRM) to their software to prevent piracy. It is unclear exactly what sort of form this proprietary protection will take, but past forms used in printers include RFID tags. In any case, Green Mountain has made clear that they will still allow third parties to produce K-cups so long as they obtain a license from Green Mountain. Already, a legal fight is brewing over Green Mountain’s proposed move. TreeHouse Foods and Rogers Family are already suing Green Mountain on antitrust grounds. Besides the antitrust concerns, Green Mountain may have difficulty stopping third parties that circumvent their protections. In 2012, Lexmark installed technology to prohibit generic printer ink refills in their printers and lost an appeal in the 6th Circuit for a copyright and DMCA claim against a company that developed a work around for the protection technology for their generic ink refills. In the near future, the legal precedents set by these cases could have far-reaching effects on DRM and physical proprietary protections across the market.

Written by

April 2nd, 2014 at 4:22 pm

Patent protection is essential yet insufficient for the success of a startup

leave a comment

Pebble has successfully run the largest Kickstarter campaign, raising more than $ 10.2 million in 2012 [1] [2]. However, Pebble’s future might not be so bright. First, the USPTO recently issued a final rejection to Pebble Technology’s only US patent application (US Patent Application Number 13/511,531 titled System and Method for Alerting a User on an External Device of Notifications or Alerts Originating from a Network-Connected Device) on March 10, 2014 [3]. In contrast, Apple has filed at least 79 patents related to smart watches [4]. Second, large companies have the resources to defend themselves against non-practicing entities while a startup such as Pebble Technology does not. Fortunately for Pebble Technology, this concern is somewhat alleviated by the 2013 Obama Executive Order on Patent Trolls. But Pebble is also facing strong competition from established consumer electronics giants such as Sony. In addition, other companies such as Google and HTC are eager to enter the market. Furthermore, cheaper alternatives such as Fitbit may be more attractive to some consumers. Clearly, the wearable technology space is not short of impressive design and technologies [5] [6]. Navigating a crowded technology space is definitely not easy for a startup. To be successful, a startup needs to be innovative, to have a strong business plan and strategy, and to have intellectual property protection. And Pebble Technology might need help in all these areas.

Written by

March 30th, 2014 at 11:39 am

Patents for Humanity

leave a comment

The Obama administration recently announced a renewal of Patents for Humanity, a USPTO program promoting the use of patented technologies to address worldwide humanitarian needs.  Patents for Humanity is part of the President’s program to strengthen the patent system and to promote innovation by recognizing patent owners and licensees who using their patented technology to improve global health and living standards for the less fortunate.  In addition to public recognition for their contribution to humanitarian needs, the winners will receive an acceleration certificate that gives expedited processing of select matters (e.g. moving patent re-examination proceedings to the front of the queue) before the USPTO. The first Patents for Humanity was implemented in February 2012 as part of an initiative to solve long-standing development challenges.  Participants described in their applications how they've used their patented technology or product to address humanitarian issues (defined as issues “significantly affecting the public health or quality of life of an impoverished population”) in one of the four categories: medical technology, food and nutrition, clean technology and information technology.  The first 1,000 applications that met the competition requirements were considered, and the applications were independently reviewed by three judges selected from academia for their expertise in medicine, law, science, engineering, public policy, or a related field.  The judging process applied three neutrality principles – technology-neutral, geographically-neutral, and financially-neutral.  The program considered inventions from any field of technology that met the competition criteria. The targeted impoverished population may be located anywhere in the world.  And any means of getting technology to those in need may qualify without regard to financial consideration.  Lastly, the program considered the diversity of contributions in order to highlight global humanitarian contributions across all types of technology, organizations, and practices. The 2012-2013 program recognized 10 winners and 6 honorable mentions.  The medical technology category was divided into a category for medicine & vaccines and a category for diagnostics & devices.  The winners of the pilot program include research institutions like University of California, Berkeley and industry leaders, such as Microsoft and Proctor & Gamble.  USPTO expects to open applications for the 2014 Patents for Humanity program in April.  The latest USPTO announcement states that the 2014 program will be structured similarly to the pilot program that was introduced in 2012, with a few changes based on the feedback from the pilot program.

Written by

March 11th, 2014 at 9:33 am

As Patent Litigation Reaches “DEFCON 1,” Tech Companies Look for Alternatives

leave a comment

Non-practicing entities (NPEs) are nothing new in the world of patent litigation, but this past October, NPE litigation reached a new level when the Rockstar Consortium filed an infringement suit in the Eastern District of TexasRockstar Consortium (not to be confused with Rockstar Games, a videogame developer) is not a well-known name to the public: the company doesn’t actually make anything. Instead, Rockstar makes money by licensing its large (approximately 4,000 strong) portfolio of patents and enforcing its intellectual property through legal action. Rockstar employs a small cadre of engineers and technicians to reverse-engineer consumer electronics products to determine whether they might infringe one of its patents. When an engineer identifies a potentially infringing product, Rockstar’s attorneys approach the alleged infringer, likely threatening legal action if a settlement isn’t reached. However, what distinguishes Rockstar from a run-of-the-mill NPE is the support that it has received from traditional technology giants. Rockstar was formed shortly after the bankruptcy of the former Canadian telecommunications giant Nortel Networks. Nortel auctioned off its stash of patents, and “Rockstar Bidco,” backed by the unliely alliance of Apple and Microsoft (among others), won the auction with a bid of $4.5 billion, beating Google after many rounds of bidding. After distributing approximately 2,000 patents directly to its sponsors, a newly minted “Rockstar Consortium” remained with a cache of 4,000 patents to enforce. Two years of anticipated litigation was finally realized when Rockstar asserted patent infringement contentions against Google, Samsung, and a number of other companies who manufacture Android smartphones. Technology industry commentators called the act “DEFCON 1” in the patent wars. Google now faces a well-funded opponent, supported by Google’s direct competitors, with a large cache of high-quality patents. While the exact implications of this litigation have yet to be determined, Google is certainly facing potential disruptions to the distribution of its Android mobile operating system, possible licensing deals that could seriously damage its future profitability, and the near-certainty of spending many millions of dollars in legal costs. Google’s recent cross-licensing agreement with Samsung suggests that it may be looking for alternatives to litigation, and it would probably make good business sense for Google to explore options for resolving this dispute out of court.
 

Written by

February 18th, 2014 at 11:24 am

Search the Blog