Tech Giants Join Together to Head Off Patent Suits

By AMOL SHARMA
Wall Street Journal
June 30, 2008

Several tech-industry heavyweights are banding together to defend themselves against patent-infringement lawsuits. Their plan: to buy up key intellectual property before it falls into the hands of parties that could use it against them, say people familiar with the matter.

Verizon Communications Inc., Google Inc., Cisco Systems Inc., Telefon AB L.M. Ericsson and Hewlett-Packard Co. are among the companies that have joined a group calling itself the Allied Security Trust, these people say.

One high-profile patent case that sent shivers through the tech industry was BlackBerry maker Research in Motion Ltd.'s $612.5 million settlement in 2006 with NTP Inc., a small Virginia firm that held patents related to wireless email delivery but had never produced a mobile-email device. The four-year legal battle at one point threatened to shut down BlackBerry service nationwide.

Also troubling for tech firms, a number of companies have emerged in recent years with a business model based on acquiring intellectual property and using it as leverage to extract royalties from companies whose products or services rely on that technology. These companies, which critics call "patent trolls," look for patents that come on the market from companies going out of business, universities and individual inventors.

The Coalition for Patent Fairness, a group of technology and financial-services companies that has lobbied for patent legislation in Washington, says the number of patent-related lawsuits rose to nearly 2,500 through October of last year from 921 in 1990. The so-called trolls aren't the only ones suing. Many companies, including Qualcomm Inc. and Rambus Inc., have been aggressive about enforcing their patents on their rivals.

The new Allied Security Trust aims to buy patents that others might use to bring infringement claims against its members. Companies will pay roughly $250,000 to join the group and will each put about $5 million into escrow with the organization, to go toward future patent purchases, the people familiar with the initiative said.

Full story available on the Wall Street Journal website.

Photo of fountain outside Cisco System's HQ by gtmcknight.