By Brent T. Yonehara
INTRODUCTION
There has been a lot of commentary on Twitter, Inc.’s lack of patent portfolio.[1] It has only increased in light of Twitter’s recent disclosure that growth potential has begun to wane with unique users remaining stagnant at around 255 million users.[2] Furthermore, its chief operating officer resigned resulting from poor growth results for which he was charged with expansion.[3] These are disturbing signs from a company that only had an initial public offering (IPO) in November of last year, and questions about the soundness of its patent strategy.
DISCUSSION
A search of the United States Patent and Trademark Office (USPTO)’s patent database reveals that the company that valued at $21.7 billion,[4] through its own prosecution, only holds four patents to its name.[5] One additional Patent Cooperation Treaty (PCT) application was found on the PATENTSCOPE database at the World Intellectual Property Organization (WIPO)’s website.[6] The issued patents and patent applications are listed below:
| 8,682,895 | Content resonance |
| 8,612,529 | Method and system for suggesting messages and accounts from a real-time messaging platform |
| 8,448,084 | User interface mechanics |
| 8,401,009 | Device independent message distribution platform |
| 20120089681 | Prioritizing Messages Within a Message Network |
| WO/2014/028871 | Search Infrastructure |
This chart does not include the nearly 900-patent estate purchased from IBM for a heady price tag of $36 million earlier this year, in order to stave off what would have been a costly patent infringement litigation filed by IBM against Twitter.[7] This would increase Twitter’s patent estate to 956, up from the nine which it owned prior to its initial public offering in November 2013.[8] It should be noted that these patents have not been formally assigned to Twitter and officially recorded with the USPTO so that the public records reflect Twitter’s ownership of these patents.[9]
Twitter’s product can be encapsulated in two of its originally-owned patents: US 8,448,084 (‘084 patent), entitled “User interface mechanics”[10] and US 8,401,009 (‘009 patent), entitled “Device independent message distribution platform.[11]
The ‘084 patent contains two independent claims. Claim 1 is a method claim directed towards scrollable content through inputted scrolled commands.[12] Claim 11 is a software claim related to method in Claim 1.[13] The ‘009 patent contains three independent claims. Claim 1 is a method claim directed towards broadcasting text messages through a computer screen.[14] Claim 9 is a software claim related to the method in Claim 1.[15] Claim 16 is a computer system claim related to both Claims 1 and 9.[16]
So, what does this all mean? The limited number of patents leads some commentators to conclude Twitter is pursuing a defensive patent strategy aimed at limiting patent infringement litigation directed toward Twitter.[17] This is correlated to the new patent agreement which Twitter requires its engineering staff to sign as part of its patent invention disclosure program.[18] The so-called “Innovator’s Patent Agreement,” begins as a standard patent assignment document which nearly every other company requires to be executed by its engineering staff, with the perfunctory preamble, consideration clauses, and specification of the patent or patent application for assignment.[19] However, further down the document, Clause 2 specifies that the subject patent is to be used for defensive purposes only.[20] By refusing offensive patent assertion against allegedly infringing competitors, Twitter can then take advantage of the smaller competitor’s innovations without going through the lengthy and expensive negotiations for licensing that competitor’s intellectual properties.[21]
There are a few problems with this defensive patent strategy. First, it does not prevent another (probably larger) company from litigating a patent suit against Twitter.[22] Without a pack of patents in its arsenal, Twitter will be unable to sufficiently counterclaim defenses to these suits.[23] Second, it is a well-established process that every successful tech company must follow: grow your patent estate.[24] A large patent portfolio helps to keep competition at bay until the company can expand on its innovations, or create new ones. One thing that Twitter is doing along the licensing route is get involved with the Open Invention Network, Linux’ patent protection licensing pool.[25] However, this alone may not be enough to help Twitter’s bottom line.
CONCLUSION
In conclusion, Twitter has been noble in its pursuit of a patent strategy designed away from offensively protecting its core innovations. However, a “Make Love, Not War” policy does not encourage confidence among shareholders of a publicly-traded company; whatever the lofty ideals of the company may not jive with the rough-and-tumble world of the high tech industry. In this world, only those that continually innovate survive; Twitter is showing alarming signs, at this early stage post-IPO, that its patent strategy will reduce it to a Silicon Valley Darwinist experiment.
By Brent Yonehara. Originally published at: http://yonaxis.blogspot.com/2014/06/normal-0-false-false-false-en-us-x-none.html (June 14, 2014).
[1] See, e.g., Mike Masnick, Is Twitter’s Patent Strategy to Not Get Any Patents?, TechDirt, retrieved June 13, 2014 from https://www.techdirt.com/articles/20101013/10402211413/is-twitter-s-patent-strategy-to-not-get-any-patents.shtml (October 15, 2010, 6:40 AM) (positing that Twitter’s patent strategy leads to questions of whether the company is actually inventing anything innovative); Gene Quinn & Steve Brachmann, Facebook and Twitter: Patent Strategies for Social Media, IPWatchdog, retrieved June 13, 2014 from http://www.ipwatchdog.com/2014/02/14/facebook-and-twitter-patent-strategies-for-social-media/id=48004/ (February 14, 2014, 4:48 PM) (theorizing that a tech company that can develop a robust patent portfolio as a strategic management tool is in a better position to grow revenue, something which Twitter is not currently doing).
[2] See Nicole Perlroth, Revenue Up at Twitter, but Growth Is a Worry, The New York Times, retrieved June 13, 2014 from http://www.nytimes.com/2014/04/30/technology/twitter-revenue-jumps-but-user-figures-worry-wall-st.html?_r=0 (April 29, 2014).
[3] See Supriya Kurane & Gerry Shih, Twitter Chief Operating Officer Resigns as Growth Lags, Reuters, retrieved June 13, 2014 from http://www.reuters.com/article/2014/06/12/us-twitter-managementchanges-idUSKBN0EN07420140612 (June 12, 2014, 4:31 PM EDT).
[4] See Peter Cohan, Are Twitter Shares Worth $60?, Forbes, retrieved June 13, 2014 from http://www.forbes.com/sites/petercohan/2014/06/13/are-twitter-shares-worth-60/ (June 13, 2014, 9:15 AM) (noting that market valuation is down 47% from the January peak of $41.2 billion).
[5] Search conducted of USPTO Patent Full-Text and Image Database on June 13, 2014.
[6] Search conducted of PATENTSCOPE database on June 13, 2014.
[7] See Joe Mullin, Twitter Paid $36 Million over IBM Patent Threat, Arstechnica, retrieved June 13, 2014 from http://arstechnica.com/business/2014/03/twitter-paid-36-million-over-ibm-patent-threat/ (March 8, 2014, 9:49 AM PDT) (noting that the $36 million purchase price amounted to more than 5 percent of Twitter’s 2013 revenue); Klint Finley, Twitter Pays $36 Million to Avoid IBM Patent Suit, Wired, retrieved June 13, 2014 from http://www.wired.com/2014/03/twitter-ibm/ (March 7, 2014, 2:42 PM) (noting from Twitter’s SEC disclosure that it currently owns 956 patents, with 100 applications pending, up from nine before its November 2013 IPO).
[8] See Finley, supra note 6. The Twitter’s patent estate does not include nine patents obtained through acquisition of TweetDeck, Bluefin Labs, and Dasient. See George Anders, Twitter’s Odd Patent Portfolio: No Sign of 140-Character Gold, Forbes, retrieved from http://www.forbes.com/sites/georgeanders/2013/09/14/twitters-slim-patent-portfolio-lacks-any-140-character-gold/ (September 14, 2013, 6:41 PM).
[9] Based on experience, perfecting assignee name changes and assignments takes anywhere between six months to two years, depending on the complexity of the acquisition, volume of patents in question, and jurisdictional requirements.
[10] See User interface mechanics, United States Patent 8448084, Free Patents Online, retrieved June 13, 2014 from http://www.freepatentsonline.com/8448084.html (June 13, 2014).
[11] See Device independent message distribution platform, United States Patent 8401009, Free Patents Online, retrieved June 13, 2014 from http://www.freepatentsonline.com/8401009.html (June 13, 2014).
[12] See ‘084 patent, supra note 8.
[13] Id.
[14] See ‘009 patent, supra note 9.
[15] Id.
[16] Id.
[17] See Finley, supra note 6; see also Bruce Horwitz, Twitter’s MAD IP Policy – Don’t Try it Yourself, Intellectual Property Directions Blog, retrieved June 13, 2014 from http://techroadmap.com/ipdirections/tag/defensive-patent-strategy/ (May 1, 2012, 6:14 PM) (likening Twitter’s IP policy to the Cold War nuclear deténte policy of Mutual Assured Destruction).
[18] Id.
[19] See Innovator’s Patent Assignment, Version 1.0, GitHub, Inc., retrieved June 13, 2014 from https://github.com/twitter/innovators-patent-agreement/blob/master/innovators-patent-agreement.md#innovators-patent-agreement-ipa-version-10 (May 21, 2013).
[20] Id. (“ . . . The Company, on behalf of itself and its successors, transferees, and assignees (collectively the ‘Assignee’), agrees not to assert any claims of any Patents which may be granted on any of the above applications unless asserted for a Defensive Purpose. An assertion of claims of the Patents shall be considered for a ‘Defensive Purpose’ if the claims are asserted . . . (a) against an Entity that has filed . . . a patent infringement lawsuit against Assignee . . . ; (b) against an Entity that has filed . . . a patent infringement lawsuit against another in the past ten years . . . ; or (c) otherwise to deter a patent litigation threat . . . . “).
[21] See Horwitz, supra note 15; Finley, supra note 6. This type of strategy also raises trademark management and brand protection issues, especially because as Twitter acquiesces in a potential infringer’s use of its trademarks, it runs the risk of having an equitable defense of laches or estoppel being used against it in the event of an actual trademark infringement litigation.
[22] See Finley, supra note 6.
[23] See Anders, supra note 7.
[24] Id. Other large tech companies have sizable patent estates: Google, Inc., has 3,370 issued patents as of 2013, Yahoo!, Inc., has 1,449, Facebook, Inc., has 143, Zynga, Inc., has 83, Netflix, Inc., has 21, and LinkedIn, Inc., has 5. Id.
[25] See Steven J. Vaughan-Nichols, Cisco and Twitter Join Linux Patent Protection Pool, ZDNet, retrieved June 13, 2014 from http://www.zdnet.com/blog/open-source/cisco-and-twitter-join-linux-patent-protection-pool/9372 (August 10, 2011, 7:56 AM PDT).
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