Apple and Microsoft land a lawsuit punch on Android manufacturers
Rockstar Bidco, a consortium owned by Apple, Microsoft and three other tech companies, filed a flurry of lawsuits against eight Android manufacturers, highlighting the high stakes patent battles being waged in the tech world today.
Subscribe Today to the Monitor
Replace the 6,000 pounds with 6,000 patents and that metaphor becomes the real story of a barrage of patent infringement lawsuits filed by a consortium named Rockstar Bidco against eight tech companies, including Google, Samsung, and HTC Corp.
On Thursday, Rockstar filed patent infringement lawsuits against eight Android-affiliated companies, which target key technology such as Google’s search function that matches terms with relevant ads and 4G capabilities on Android smart phones. A tech giant consortium leading a lawsuit onslaught against an equally powerful group of companies may seem like a major clash to begin with, but a peek at the events leading up to this filing reveals a vicious battle between tech behemoths that has likely only just begun.
RECOMMENDED: Seven rules for tech investing
Nortel, whose patents Rockstar now owns, was a Canadian telecommunications company that filed for bankruptcy in 2009 due to financial mismanagement. In the last years that Nortel remained together, the patent section of the company bought up “protective” patents, essentially patenting small details and prototype technology that could be used as a defense if any other large tech companies attempted to sue Nortel for patent infringement. So when Nortel filed for bankruptcy, the company had amassed more than 6,000 patents for search algorithms, smart phone technology, and 4G capability that offered a treasure trove of tech innovation ownership to the highest bidder.
In 2011, Nortel ended up auctioning off 6,000 patents for $4.5 billion to a newly created consortium Rockstar Bidco, bankrolled by Apple, Microsoft, Blackberry, Ericsson, and Sony.
Rockstar narrowly won the bidding war over a partnership between Google and Intel called Ranger, who put up $4.4 billion before bowing out of the race. Google subsequently acquired Motorola Mobility for $12.5 billion, a move many believe was motivated by Motorola’s extensive patent library.
Rockstar was relatively quiet about the patents for the last two years, as it slowly built its case against the eight Android manufacturers. A 2012 profile of Rockstar by Wired Magazine noted the company employed 10 “reverse-engineers” who spent their days deconstructing devices to see what could potentially be a case of patent infringement. The culmination of that research popped up in this massive lawsuit that aims at some of the strongest parts of Android technology, as well as Google’s search functions.
But things were not quiet in the patent world while Rockstar did its research. Apple and Motorola have been in a patent lawsuit dance since 2010. In October, Samsung agreed to stop patent lawsuits for five years as the EU said the company was breaking anti-trust laws by filing a constant slew of lawsuits against its competitors (there are currently Samsung-versus-Apple lawsuits happening across 10 countries in Europe alone, according to the BBC). Just this week, Nokia, whose mobile division was just bought by Microsoft, won a patent victory over HTC that could stop HTC imports into the UK and other European countries.
RECOMMENDED: Seven rules for tech investing
The case has brought up controversy over non-practicing entities, (NPEs) or “patent trolls,” which are companies created to buy and sell patents, without creating any actual products or innovations themselves. Congress recently introduced a bill into the House of Representatives that would require the losing party in a patent lawsuit to pay the legal fees of the winning party, unless they could show the case was “substantially justified.” It's a move that aims to discourage ambiguous cases.
The lawsuits are filed in an eastern Texas district known for being friendly to patent plaintiffs.
Android has a firm grip on the smart phone market, accounting for 81.3 percent of worldwide smart phone shipments in the third quarter of 2013, according to smart phone research firm Strategy Analytics. Time will tell whether these lawsuits can tear apart that lead piece by piece.