Eleven technology giants come together to launch patent trust
02 Jul 2008
The largest technology companies have come together in a unique initiative called the ''Allied Security Trust'' to safeguard their interests regarding patent infringement lawsuits. Members include Cisco, Google, Hewlett-Packard, Motorola, Sun Microsystems, Ericsson, and Verizon Communications. Four other companies are also reported to be part of the organisation.
The group is hoping to work together to reduce their exposure to lawsuits filed by non-technology companies that buy patents in order to extract licensing fees from others, as well as suits filed by technology companies that buy and enforce patents.
The recent years have brought a number of lawsuits that got big companies (which are the most targeted) wondering how they to prevent them. This is especially important for them, as acquiring intellectual property to extract royalties from others is a thriving business at the moment.
A large number of companies, called ''patent trolls,'' choose to ''feed'' on patent infringement lawsuits, despite the fact that they do not operate in that particular business. However, the fact that they own patents wins them millions of dollars from the tech companies they sue.
While the trust is open to anyone who wants to join, the price tag limits membership to larger companies. While declining to give exact numbers, Allied Security Trust CFO Jonathan Brandl said the first year's initiation and annual fee would be "south of $500,000." In addition, each member has to put up $5 million, which is placed in escrow for patent purchases.
The trust will purchase patents covering technology that its members plan to use, spokesman Bruce Berman said. The group, based in Poughkeepsie, New York, won't buy patents as an investment, he said.
For example, if two or three members say they are interested in a particular patent, then the trust would offer to buy it from the patent holder, and the cost would be deducted from those companies' escrow accounts.
Purchased patents would be licensed to the interested trust members for the lifetime of the patent, which would then be sold or, if no one was interested in buying it, donated to a university or some other organisation. Such used patents would have considerably less value in the marketplace.
The technology giants have been lobbying the US Congress for patent-law changes that would make it easier to fight infringement cases and reduce damages if they lose suits.
Some patents are owned by "companies that are not essentially in the business of actually producing anything or using the patents, but are in the business of suing others," Verizon spokesman Eric Rabe said. Companies sometimes use unlicensed technology, unaware that a patent covers it, he said.
BlackBerry maker Research In Motion paid $612.5 million in 2006 to settle a four-year-long dispute with patent-holding company NTP that threatened to shut down BlackBerry e-mail service in the US. NTP claimed that the BlackBerry device used technology that was covered by patents NTP owned.
In another high-profile case recently, computer makers Acer, Apple, Dell and HP were sued last week for violating four patents held by Saxon Innovations, an intellectual property licensing company.
The call for patent reform has gone beyond the tech industry. Companies in financial services and manufacturing also are seeking action from lawmakers, as well as legal scholars, economists, consumer and public interest organizations, and government institutions. Currently, the Patent Reform Act, a bill championed by Google and other tech companies, remains stalled in the US Senate.
