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In The Art of War, Sun Tzu advises military commanders that if the enemy is strong on his right flank, he will be weak on the left side; and that if the enemy is strong on the left flank, he will be weak on the opposite side. "Nuclear Option": Patent Portfolios Business leaders are following the Chinese general's sage advice when it comes to intellectual property (IP).
Today's CEOs, particularly those in Silicon Valley, are aggregating patents into massive IP portfolios as a means for attacking their competitors. Observers consider IP portfolios as a nuclear option in the competitive landscape.
Companies sue competitors for copyright infringement to harass their operations, extract billions in licensing fees, and/or delay the introduction of products and services into the marketplace. Threatening Technology Innovation is seen by most consumers as a good thing: Better products improve their lives.
But competitors hate threatening technology as their profits are rooted in outdated forms of doing business. Using patents to harass competitors is not a new phenomenon. For example, Samuel Morse (the big name in telegraph technology in the 1800s) sued his rival Royal Earl House, claiming that the Morse Company owned the ability to transmit electrical signals for the purposes of communication. House's invention, which resembled a typewriter and printer type interface, threatened Morse's empire "by enabling people to transmit and receive telegraphs to and from their own homes" instead of requiring human interpreters to translate Morse code, according to Florida-based security company ADT. Patent Wars An organization who implements an IP nuclear strategy is considered a "patent troll".
Corporate trolling is leading to patent wars, such as in Google's and Samsung's case. Microsoft, and its outdated reliance on pc, is threatened by Google.
Apple has been losing market share to Samsung, partly because of the Android operating system. What's the solution?
Litigation. Rockstar Trolls In late 2013, Rockstar Bidco -- a shell entity owned by Microsoft, Apple, RIM, Ericsson, and Sony -- filed a lawsuit against Samsung and Google.
If you can't beat 'em in the marketplace, sue 'em. In 2011, Rockstar outbid Google and bought a portfolio of more than 6,000 patents from Nortel for a whopping $4.5 billion.
The patent portfolio included IP on 4G wireless and other technologies. It wasn't the patents that Microsoft and Apple were after, per se.
It was the portfolio's ability to attack Google and Samsung with a judge's punishing gavel -- and through injunctions, to delay innovations; prevent new products and services; extract massive licensing fees, and harass business rivals. Nearly 2,500 years ago, Sun Tzu wrote: "To fight and conquer in all your battles is not supreme excellence; supreme excellence consists in breaking the enemy's resistance without fighting." Patent-related lawsuits are a way of attacking a business rival outside the battlefield.
When you buy 6,000 patents, someone somewhere is infringing on your IP arsenal.
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