On February 5, 2014, Google and Cisco announced a long-term cross-licensing deal. The agreement permits either company to utilize the other company’s patent portfolio. That day, Cisco also agreed to a similar cross-licensing agreement with Samsung. Last week, Google also reached a cross-licensing agreement with Samsung.
Why are there so many of these cross-licensing agreements? It begins with intense competition in the technology sector. Companies with large patent portfolios have a financial incentive to sue other infringing companies to either procure licensing fees or protect market share. Of course, other companies may have large patent portfolios as well, and they can counter-sue for infringement of their patents. Thus, we have a form of mutual deterrence. Each company is infringing on patents of the other, and it is often impossible to predict how a judge or jury will decide the case. Companies don’t deal well with uncertainty and often choose not to roll the dice. As a result, very few of these cases go to court. The cases that we do see involve highly sophisticated markets such as the smartphone battle between Samsung and Apple, which resulted in a near $1,000,000,000 judgement to Apple.
There is another aspect to the patent litigation game. As mentioned above, large companies are deterred from suing each other because of the risk of countersuit. However, a large company could contract with a patent assertion company (or “patent troll”) to sue the other corporation on its behalf. The company maintains anonymity and gains the desired market advantage. In these proxy lawsuits, it is often hard to determine the actual interested parties. Companies can in effect hire paid guns to do their dirty work. Fittingly, this practice is called “patent privateering.” And to many, this is seen as inefficient and undesirable for the economy.
The Coalition for Patent Fairness is such a group that believes that the current method of doing business is broken. As stated on their website, the Coalition is “a diverse group of companies dedicated to enhancing U.S. innovation, job creation, and competitiveness in the global market by modernizing and strengthening our nation’s patent system.” Google, Cisco, and Samsung are companies in the Coalition. By negotiating long-term cross-licensing agreements, these companies are announcing that they are tired of the gamesmanship and shadow tactics common in the technology industry, and they are choosing to compete in the marketplace. Hopefully, in time, more companies will follow their lead.
George Orwell would be impressed by the double speak of “The Coalition for Patent Fairness.” This is a group of large companies who want to rig the patent system for their benefit.