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Social network Twitter has acquired more than 900 patents from IBM and signed a cross-licensing deal with the technology company.
Financial terms of the agreements, signed in December but announced on January 31, were not disclosed.
“We are pleased to reach this agreement with Twitter because it illustrates the value of patented IBM inventions and demonstrates our commitment to licensing access to our broad patent portfolio. We look forward to a productive relationship with Twitter in the future,” said Ken King, general manager of intellectual property at IBM.
Twitters’ legal director Ben Lee said the agreements provide the company with “greater intellectual property protection” and the “freedom of action to innovate on behalf of all those who use our service”.
The deals come three months after it emerged that IBM accused Twitter of infringing three patents. The inventions are directed to an “efficient retrieval of uniform resource locators”, a “method for presenting advertising in an interactive service” and a “programmatic discovery of common contacts”.
Twitter revealed the accusations in November 2013 when amending its S-1 form – issued when it filed for an initial public offering (IPO) earlier that year. In the document, the company said: “We believe we have meritorious defences to IBM’s allegations, although there can be no assurance that we will be successful in defending against these allegations or reaching a business resolution that is satisfactory to us.”
In November last year, Twitter floated on the New York Stock Exchange with a value of $14.2 billion.
The deal with IBM was probably prompted by its claims that Twitter had infringed three patents, but it’s much bigger than that, said Alex Chachkes, partner at Orrick, Herrington & Sutcliffe LLP.
“It’s 900 patents against three: this is clearly such a bigger deal than just the three patents that IBM mentioned in their letter.
“I think we can take Twitter at its word: they said this is about the sense of value of having a healthy patent portfolio. I don’t expect them to use patents offensively like an NPE would; it’s not conceivable. There is other value to acquiring an enormous chunk of patents – there is enterprise value ... it gives them something to trade and there is a strategic value to pre-empt a space. But the strategic value and enterprise value doesn’t seem to be the case here – it seems to be a sense of value, protecting them in the future,” he said.
Chachkes said he assumes Twitter has paid “some sort of lump sum” for the patents and that “if you’re going to speculate, Twitter has acquired all the rights with a licence back to IBM, so that IBM has guaranteed that they won’t be sued on their own patents”.
IBM, which is believed to own more than 41,000 patents, has filed more US patents than any other company for the last 21 years. In 2013, the company’s inventors received 6,809 patents, followed by Samsung (4,676) and Canon (3,825).
It has also licensed its patents on a large scale.
The latest deal, Chachkes continued, “falls into the context of deals that have been going on for the last three years”.
“IBM has been selling patents in 1000-patent blocks for a long time ... IBM is the largest patent holder in the world, so it’s not surprising that they’re capturing value.”
twitter, ibm, twitter ipo, ken king, ben lee