Twitter Takes a New Approach to Avoid Patent Litigation

By Jill StarbuckPellegrino & Associates

Recent years have shown a significant increase in patent litigation. So much so that companies are frantically focusing on patents as a means of protection. However, while many companies rapidly embark on patent buying sprees and race to the USPTO to file patent applications to use as both a shield and a sword, Twitter recently decided to take a different tactic. Rather than using the patents as a sword, Twitter has decided to use patents only as a shield. Twitter announced that it will only assert its patents if sued or it needs to countersue. Giving its employees more control of their inventions, the company will also assert its patents if its employees implore the company to seek damages.

Twitter’s new approach to the patent frenzy is an effort to avoid patent litigation and spend more time and money on innovation instead. This idea seems logical as patent litigation prevents employees from focusing on new ideas or at least stalls the process, especially in small companies. Furthermore, employees may have more incentive to develop inventions because those inventions will essentially belong to them rather than the conventional method where the employees have to hand their brilliant ideas over to company ownership. Twitter’s unconventional tactic gives employees more focus on innovation rather than litigation.

With the recent increase in litigation, patents are proving great tools to aggressively protect company assets, both offensively and defensively. Some may view Twitter’s lack of aggression as a weakness and may prompt others to sue the company more willingly. Shareholders may not view this tactic as beneficial either, because Twitter won’t be aggressively pursuing infringers who could be taking revenue away from the company. Twitter’s reluctance to aggressively assert its legal right to exclude others from the market could potentially create an environment where competitors could easily market a similar product without repercussions.

As a company, Twitter currently has no patents, but it does have patents pending. While it hasn’t had to face many patent infringement cases, it is still a relatively young company that is competing in a growing social media realm. It may or may not see increased litigation. However, history is showing that companies with few patents can still suffer from lawsuits. Take Microsoft for instance. Historically, Microsoft has not filed for many patents. However, in recent years, Microsoft has increased its filing of patent applications and buying of patents from other companies, such as AOL, which recently sold 925 patents to Microsoft.

The main reason for Microsoft’s growth in patent activity is litigation. Between 2004 and 2009, Microsoft was party to more than 115 lawsuits regarding patent infringement matters. Over that same period, its patent activity grew 351% annually. Microsoft’s patent activity appears to have increased directly because of its increased patent lawsuit headaches. In fact, there is remarkable validation in the procurement of IP for protection. In 2011, a consortium including Microsoft, RIM, Apple, Ericsson, and Sony outbid Google for a collection of over 6,000 patents and patent applications owned by the bankrupt Nortel Networks. However, Google bought more than 1,000 patents from IBM a short while later to build out its patent portfolio. For Microsoft, the addition of patents has not only increased its defensive positioning, but has increased its ability to aggressively pursue infringers. This aggression has proven quite profitable for the company in recent years.

In light of the patent acquisition and application frenzy, Twitter’s concept seems alarming. While Twitter’s approach may have some logical aspects to it, many risks still surround it. If patent litigation continues to rise, Twitter’s policy may be its demise. It’s hard to imagine Twitter’s survival under this approach when a large company such as Microsoft had to succumb to patent power. While Twitter isn’t as large as Microsoft, the implications today are that patents are one of the best sources of protection.

By Jill StarbuckPellegrino & Associates

ICLEF • Indiana Continuing Legal Education Forum, Indianapolis, IN

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