For some companies it seems like they can never have enough patents. For over a generation now IBM has received more U.S. patents each year than any other company. Oddly, however, the same seems to be true of Google (NASDAQ:GOOG). The Mountain View-based technology corporation earned the 8th-most patents from the U.S. Patent and Trademark Office last year with 2,566 U.S. patents granted. But to be polite, the Google view of patents seems hyper-nuanced. In one breadth they condemn patents, the patent system and patent owners, and in another breadth they can’t acquire patents fast enough. It is fair to say that there is more than meets the eye when it comes to Google’s patent strategy.
Through third-party acquisitions and Google’s own home grown innovation the company is spending a kings ransom to acquire more patents, and paying steep fees to fast track their portfolio to acquire those patents quicker. At the same time Google is collecting patents the company is spending tens of millions to weaken patent rights, which doesn’t make any sense. As Google advocates positions that weaken patent rights for innovators the result will be many billions of dollars lost due to devaluation of their own patent portfolio. Shareholders, Members of the Google Board of Directors, and Members of Congress need to ask Google whether they are misusing company funds to acquire patents that are continually devalued by Google’s own lobbying efforts.
Google’s latest patent acquisition strategy
For example, over a two-week period in May, Google is hoping to “remove friction from the patent market and improve the landscape” through a Patent Purchase Promotion program. For a limited time, between May 8th and May 22nd to be exact, Google will be accepting offers to sell patents. During this defined time, Google says they will have a streamlined portal for patent holders to divulge details about the patents they hold and wish to sell to Google. Potential sellers will set a price for their patent and Google says they will either accept or decline without negotiating. Google promises to pay patent owners by the end of the summer if they decide to purchase.
It’s great to see that the company, which popularized the corporate catchphrase “Don’t Be Evil,” is taking action to broaden their patent portfolio, but how this purchase plan will lead to a better patent system, as the company explains, is not obvious. Of course, some are suspicious of Google’s motives, particularly given the timing and with patent reform heating up in Washington, DC. But if the company still intends to not be evil there is no reason for questioning motivations. Still, it is hard to forget that Google also promised not to be evil with the patents acquired from Motorola and then subsequently was adjudicated to be a patent troll with respect to those patents. Indeed, Google’s patent history has been checkered, at times seemly schizophrenic.
Google understands the value of patents
Google absolutely understands the value of patents. Indeed, the lasting value of patents is something that executives at Google have understood from the earliest days of the company’s existence. Those who’ve come to see the company as synonymous with an Internet search engine and a domain name may be surprised to learn that Google put its name on a patent eight months before it ever registered Google.com as a website.
U.S. Patent No. 6,285,999, entitled Method for Node Ranking in a Linked Database, claims priority from a U.S. provisional patent application filed January 10, 1997. The patent protected a computer-implemented method of analyzing linked databases to score a plurality of linked documents. To quote directly from the patent’s abstract: “The method is particularly useful in enhancing the performance of search engine results for hypermedia databases, such as the world wide web, whose documents have a large variation in quality.” According to domain name registration data available at Whois.net, google.com wasn’t created as a domain name until September 15, 1997. Thus, it seems for Google it was more important to file the patent application for their search engine ranking technology than it was to register the website that would go on to process an average of 3.5 billion search queries every day. So despite what Google lobbyists may say in as they lobby patent issues on Capitol Hill, the company has always supported a strong patent system, at least for themselves.
Google has built a tremendous portfolio of intellectual properties through patent filing activities that began to pick up steam in the early 2000s and have been pretty colossal in the past few years. It is interesting to note that while Google has been pushing for patent reforms and making the case that software patents are unnecessary and the root of all evil, Google’s own patent activities have literally launched forward.
Trendline data graph obtained from Innography (see below) show that the number of patent applications filed by Google throughout the late 1990s was very low but experienced a significant uptick in 2001. From then on until 2010, the number of patent applications filed by Google would trend upwards approaching 2,000 per year, but it would blow past the 2,000 patent application number by 2011 and in 2012, found its trajectory much closer to hitting 4,000 patent applications within a year, maybe two. 2014 was a veritable patent payday for Google; bringing the company more patents than the number of patent applications it filed the previous year. The only reason these graphs show a decrease in patent applications for 2014 and none for 2015 is because patent applications are not published until 18 months after they’re filed. We’re about one-third of the way through 2015 and already Google has more patents than it earned during all of 2011.
Google is also incredibly savvy when it comes to using the U.S. patent system. In previous articles on IPWatchdog.com we’ve noted how Google has been utilizing the fast-track patent examination system put in place by the America Invents Act at an incredible rate. For example, as of October 26, 2014, Google had obtained 875 U.S. patents from the USPTO fast-track system, far outpacing 2nd-place Huawei Technologies total of only 147 patents via fast-track. Given Google’s willingness to pay an additional $4,000 per application to obtain a patent within 12 months questions can and should be raised about whether the U.S. has a patent system that currently supports Google innovation better than it supports American innovation generally.
Hungry, hungry hippo
While there has been much renewed talk about patent trolls thanks to HBO’s John Oliver popularizing the issue recently, it is worth noting that the patent troll problem has never been as problematic as advertised. Patent owners actually do prevail in patent litigation, which means there is infringement of a valid patent. Litigation also substantially decreased during 2014 even though changes in law made by the America Invents Act (AIA) actually require patent owners to file more lawsuits because they are prevented fro suing large numbers of infringers in a single action. But the fact that the patent troll problem is not as severe as advertised does not mean there are no bad actors. There are some bad actors, but the Federal Trade Commission and State Attorneys General are going after those who send fraudulent demand letters, and Congress is already considering granting more weapons in the fight against those who prey on the unsophisticated with deceptive tactics.
It is also worth noting that aggressive, potentially abusive behaviors happen from both plaintiffs and defendants in patent litigation – no one is every truly innocent in patent litigation. Furthermore, there is a troubling new force in the patent system: the patent hippo, munching up whatever it can find. As patents have become devalued there are buyers in the marketplace, and Google has been a hungry, hungry hippo in recent years.
How convenient that the policies and positions advocated by Google have lead to patents being devalued, particularly the software patents that relate to Google’s core business. Could it be that Google has been advocating for policies that weaken the patent system, both at the Capitol and in courtrooms across America, so that they can swoop in as a buyer? Can you imagine the buying power Google has now compared to what they would have had even several years ago? In addition to sitting on over $62 billion in cash, Google led the charge to devalue patents across the board, including their own.
Of course, all of this begs an essential question. If patents are so bad and Google has to spend so much money lobbying to weaken the patent system, why is the company simultaneously buying patents and racing to quickly patent their own original innovation? There seems to be a disconnect between what Google says and what they do. Could it be possible that Google has taken such strong anti-patent positions in an attempt to drive down the market for software patents so they can continue to collect patents at steep discount? That would be quite troubling, but there is no question that as Google rhetoric against the patent system has increased so to has their taste for patents, just look at the trendline chart.
It is well past the time for both Google shareholders and Members of the Board of Directors to start asking difficult questions. They should be asking why Google is spending so much money to patent innovations when they claim that patents are unnecessary and do nothing more than get in the way of innovation. They should be asking why the company is spending tens of millions of dollars lobbying to weaken the patent system, which necessarily will devalue Google’s own massive investments in their own patented technologies, not to mention the patents they acquire, including those they acquired from Motorola for the staggering price of $12 billion.
Article updated May 4, 2015, at 7:08 pm ET.
Join the Discussion
22 comments so far.
BrentJune 5, 2015 03:02 pm
Google is in the precarious position where it does not want to have to pay for the innovations of others that it incorporates into its products (including operating system innovations, GPS/location based innovations, search and add placement process innovations, you name it), but does not want to chop its hands off to prevent it from defending itself from the Chinese technology companies who will eventually come to play in their arena in the U.S.
Its not that Google doesn’t like patents. It’s just that Google doesn’t like patents right now. They were important to young Google, and will be important to them when Google gets old, but right now they are a pain.
Patents last for 20 years, so continuing to ignore them doesn’t work so well, as you can’t just pull up useful patents quickly. Better off to use their political leverage to change the regulatory environment. The regulatory environment will eventually swing back, and Google will have a boatload of patents to protect them from new competition as they age.
Ron HiltonMay 21, 2015 02:51 pm
IANAL, but I think the clause cited in comment 19 means that one cannot use the submission as evidence in an infringement case, particularly as evidence of willful infringement, but one could certainly bring suit on the basis of other evidence.
B StoneMay 21, 2015 02:16 pm
Can anyone comment on above post by RRens? Does this mean that any submission basically provides Google with a free pass to use the submitted patents?
RRensMay 9, 2015 08:30 am
Regarding blog about Google Patent Purchase Promotion, why would Google buy any patents, when according to their terms, they can legally infringe any submittals!
Per submittal terms, See Par 5: “Upon Termination, the provisions of Paragraph No. 4 above shall survive this agreement through the expiration of any Submitted Patents”.
And Par 4 states: You agree that You will not use, and waive the right to use, the Submission-related Materials as evidence … of willful infringement, of indirect infringement, or for damages in connection with any claim of patent infringement.
Gene QuinnMay 5, 2015 01:58 pm
No problem. You can remain anonymous, but you can remain anonymous elsewhere. I’m done dealing with you, your condescending attitude, your complete lack of knowledge with respect to the law, and your persecution complex. Goodbye.
angry dudeMay 5, 2015 01:16 pm
I apologize for asinine comments, but with all due respect you won’t be able to understand my patent.
It’s technical in purpose but with some high math abstraction involved in description
Sorry, but I must remain anonymous
angry dudeMay 5, 2015 01:08 pm
It wasn’t exact plan, in reality things were a lot more complicated, and lawsuit was filed, but against C not B – but you get the the right idea.
Patent “trolls” (and I talked to a few of them) want(ed) some generic bs patent which doesn’t require a lot of technical discovery, something they can prove based on public info. Nowadays such patents go to PTAB to be killed, but I am talking before AIA days.
They would still offer between 50 and 100K but I’m not interested in that kind of money
Gene QuinnMay 5, 2015 01:03 pm
If the lottery looks better to you then you should play the lottery and leave the rest of us alone. Your comments continue to border on the utterly asinine. Your lack of confidence in yourself, the lack of confidence in your innovation, the lack of confidence in your patent is a YOU problem.
We are at the point now where you are going to either have to come out of the darkness and give us a patent number so we can evaluate your extremely naive bias or you need to go elsewhere. Your choice.
Ron HiltonMay 5, 2015 12:52 pm
So the plan was to use the licensing proceeds from A to fund the legal action against B? It sounds like A decided that it was more cost effective to settle with B than to fund a lawsuit, either directly or indirectly through you. If no one wants to fund an infringement suit, or to fund the commercialization of the invention, then it is true that there is little recourse. I think it comes back to having a high-value patent that justifies the necessary investment.
angry dudeMay 5, 2015 11:20 am
$$$ of course: even pre-filing due diligence would likely cost me 100K out of pocket, before contingency lawyers (which are pussies too) are willing to file complaint and proceed … for the next 5 years (appeal is a must in those cases) …before I see any money… that is if I’m lucky
thanks but no thanks – lottery looks better to me
Ron HiltonMay 5, 2015 10:54 am
Angry dude, It sounds like A took your proposal seriously, but was able to use it to threaten B into changing their behavior and/or settling out of court. Presumably both of them decided that was the safest and least expensive path. But what stopped you from going ahead and taking legal action against B anyway at that point?
angry dudeMay 5, 2015 10:16 am
I already did a good experiment on this one, a few years back (today such a legal “experiment” would be too dangerous for a small patent holder to undertake)
I wrote a letter to company A (huge SV multinational) which was under constant patent harassment from company B (that I was pretty sure was using my patent either directly or through one of their component suppliers, or both) and proposed exclusive licence or outright patent sale. I even proposed to stand the ground and sue B myself.
Result: no reply from A, but B dropped one of their key suppliers (in-housed that technology) and settled similar patent lawsuits with couple other companis in a matter of weeks.
Those big SV CEOs sue each other and still talk to each other and make little deals on the phone or at coctail parties.
They are dishonest pussies
BennyMay 5, 2015 02:02 am
Angry dude @ 8,
You say, “They will never buy a patent from a small inventor to enforce it against their corporate arch-rival”.
Why not? It strikes me as a rather effective business strategy, to force the rivals’ product off the market.
Ron HiltonMay 4, 2015 10:33 pm
The big tech corps will always have the upper hand. A high-value patent gives the little guy leverage but the playing field is not level. By “high-value” I mean both high quality (strong validity) and high commercial potential (strong market demand). A narrow patent may have strong validity, but limited market potential. Both aspects are needed in order to have leverage. The stakes are only high if the value is high.
angry dudeMay 4, 2015 09:48 pm
“The value of a patent is based on its quality (making it less likely to be challenged) and its commercial potential (making it worth defending if it is challenged)”
This is very naive patent valuation perspective.
I was thinking the same way until I was told otherwise.
Patent can be of highest quality but too technical (and consequently “narrow” in “patent troll’s” definition )and hard to prove infringement without spending a small fortune on expensive reverse engineering and third-party PhD experts plus attorney’s fees for claim mapping etc. satisfying pre-filing due diligence requirements (to avoid Rule 11 sanctions).
I knew all of this but I was thinking: well, those tech corps reverse-engineer each other products anyway, so they know how their stuff works.
Maybe if one corporation wants to financially punish another corporation they can purchase my patent and voila..
In reality those big tech corps sue each other all the time but still pat each others backs.
They will never buy a patent from a small inventor to enforce it against their corporate arch-rival.
The are dishonest pussies.
This is not how patent system and real capitalism are supposed to work.
CuriousMay 4, 2015 09:31 pm
If patents are so bad and Google has to spend so much money lobbying to weaken the patent system, why is the company simultaneously buying patents and racing to quickly patent their own original innovation?
It is called hedging your bets.
And it seems a bit ‘coincidental’ that now that they’ve created uncertainty in the patent acquisition/licensing market, they’re trying to buy up the very same patents that have been devalued as a result of their lobbying efforts
Interesting (and very valid) point that I haven’t thought of before. I can say, from being in the “market,” that the actions of the anti-patent faction the last few years has unquestionably decreased the value of most people’s patent assets. I suspect that this may be an unintended (and beneficial for Google) consequence of Google’s hedging its bets.
The real problem is expensive litigation
Litigation wouldn’t be so expensive if the stakes weren’t so high. However, because the stakes are so high, lawyers will be paid to leave no stone unturned (twice or three times).
Ron HiltonMay 4, 2015 07:56 pm
The value of patents has always been adversely impacted by the cost of enforcing them. The real problem is expensive litigation. The value of a patent is based on its quality (making it less likely to be challenged) and its commercial potential (making it worth defending if it is challenged). Improving patent quality is the real solution to the problem of trolls and infringement alike.
AnonMay 4, 2015 01:16 pm
@rohit I think the issue here is that Google is “gaming the game”. It’s no secret they’re leading lobbying efforts in Congress that are devaluing patents. And it seems a bit ‘coincidental’ that now that they’ve created uncertainty in the patent acquisition/licensing market, they’re trying to buy up the very same patents that have been devalued as a result of their lobbying efforts. There is a pattern here with Google as it’s not only patents that they seem to be targeting – they’re also actively lobbying the Supreme Court to dilute copyright they’re involved with as well (i.e. Java Oracle case)
momoMay 4, 2015 01:12 pm
A lot of this is driven by the fact that Google likes to rate employees by metrics.
One of the metrics (which I assume is tied to their bonuses) is how many patents Google gets. A lot of the Track 1 and other patents are very thinly sliced CONs used to pump up the numbers (“juke the stats” to use a phrase from The Wire).
I assume this reverse fire sale is a similar attempt to pump up the numbers.
rohit chhabraMay 4, 2015 11:37 am
Thanks for the informative post, however I don’t see the contradiction. It’s a perfect business strategy. One can hate the patent system and still acquire patents for:
1) working with the current system in place, hoping they won’t need to “play the game” once the patent system is changed;
2) using its patent power as a defensive strategy only when they’re bullied; and
3) keeping the trolls away – if the patents are for sale, you don’t want trolls to buy them and then sue you. Litigation is way more expensive then simply buying patents for sale.
In other words Google is simply saying, “hate the game, not the player.” And a smart entreprenuer will play the game until it exists in its current form.
AnonMay 4, 2015 11:27 am
While I will agree that the actions you present are viable options, I think that you miss the real danger afoot in the current patent climate, and thus make a critical error as to what is “as important.”
I think more attention – not less is the better path.
Voices such as yours, then, that seek to move the focus away from the problem ARE part of the problem.
Ron HiltonMay 4, 2015 09:14 am
Companies and the market in general don’t like uncertainty. The absolute value of patents is not as important as the ability to maintain freedom to operate. Bulking up the portfolio, making it harder for infringement suits to be brought, and buying out potential competitors before they get too big are all ways to accomplish that.