SOCIAL media companies are increasingly hitting the headlines of the business pages of our papers. As the popularity of platforms like Facebook, Twitter and LinkedIn has spread over the last ten years or so, analysts and the tech industry have been keen to see how these companies fare.
Earlier this month we had another insight into the business strategy adopted by these platforms, with Twitter purchasing 900 patents from tech giant IBM – increasing its IP portfolio a hundred-fold.
As many readers will be aware, patents give their owner the right to stop others using their invention in the course of business. This means that they can give companies, both large and small, great leverage to defend their space in the market – particularly if that company is offering a niche service.
Take Scotland’s own social media platform, Kiltr, for example – having patents behind its software will give its founders peace of mind their invention is protected. Without patents, companies are vulnerable to competitors and other parties moving into their commercial space and taking the market share.
If this happens – and it will if patents are not in place – it can have serious commercial implications, particularly for SMEs, as building and defending market share is essential. For technology companies, patents are an important part of any commercial defence strategy. Twitter’s agreement to purchase 900 patents appears to have come following a dispute in which IBM had accused the social media platform of infringing three of its patents.
Negotiation took place behind closed doors and any further details will likely remain out of the public domain – however, the fact that Twitter agreed to purchase such a substantial portfolio of patents demonstrates a desire to strengthen its commercial armoury, perhaps in an attempt to avoid a repeat of its weak position (having only owned nine patents prior to this) as it entered into negotiations with IBM. With so few patents to counter any attacks from other companies, it is no wonder Twitter decided to substantially increase its portfolio.
In stark contrast, social media giant Facebook has been building its own very large portfolio for a number of years. Other high profile tech giants enjoy patent portfolios of more than a thousand each, with many filing for thousands more new patents every year. This cautionary tale is not just for the tech giants however, as tech companies of all sizes need to get patenting if they are to stand on their own two feet.
While Twitter is in the fortunate position of having substantial resources and so is in a position to buy a large patent portfolio from IBM, many companies, and in particular SMEs, are not so lucky.
Being on the wrong side of a patent dispute is commercially very disruptive. If there is arguably infringement, one tactic is to try to design around the patent or change product line. However, SMEs often have limited ranges of products, and changing commercial and technical direction in response to a potential patent infringement action can be difficult. In the event that a company is accused of patent infringement, going into complex legal and commercial negotiations with no patent portfolio of its own weakens its negotiating position.
One, often misunderstood, area of patenting that offers particular opportunities for our high-tech sector is software patents. Although the ins and outs of what can actually be patented in the world of software are quite complex, it is well established that computer-implemented inventions can be patented in Europe and the US if you know what to apply for. So, the opportunity is potentially there for any business that has developed its own proprietary software – and it’s not just software companies, but engineering firms, healthcare companies, travel companies and more.
According to data from Thomson Reuters, international patent applications for computer-implemented inventions rose 21 per cent to a record high of 17,324 in 2013 from 14,265 in 2012. So, while we are unlikely to see our emerging home-grown tech companies take part in high-profile and high-value patent transactions, if they want to make it big they would do well to take a look at their systems to see if there is any clever functionality that could be protected.
• Maureen Kinsler is patent attorney and partner at Marks & Clerk www.marks-clerk.com