U.S. Patent Privately: Apple's Pirate Ship

Nanjing Hua News: In the field of smart phones, Apple is not idle. In order to crack down on Google's Android system, Apple has adopted the same strategy as Microsoft, becoming a patent-predatory company.

1-Nuclear arsenals

Nortel Network was established in 1882. It originated from the telephone manufacturing and repair department of Bell Telecom in Canada. It once had 90000 employees and was a well-known international communication equipment supplier. After 2005, it gradually showed its old state, with overstaffing, poor management and repeated failures in the product market. In the end, the data center lost to Cisco, and the traditional telecom business was surprisingly won by China's Huawei. In 2009, Nortel declared bankruptcy, causing 30000 people to lose their jobs, some employees lost their medical insurance, all employee pensions were halved, and the company's top management was charged with fraud. The news caused a sensation all over the world.

Unlike Nortel's products and services, the company's patents are of high quality, and experts say they are comparable to those of Bell Labs or IBM and can withstand court trials. Nortel had 9000 patents when it went bankrupt. Patent coverage includes wireless networks, telecommunications switching, Internet routing, personal computers, modem, search and social networking and other areas of the information industry.

Nortel Network Company is very good at applying for patents. The technical department of the company attaches great importance to patents and applies for many patents every year. Employees who make patented inventions can receive bonuses and sometimes participate with company executives in colorful patent award ceremonies held in the most upscale hotels.

Unfortunately, until 2008, Nortel's patents did not do any external licensing, which is a fertile virgin land in the eyes of patent practitioners. Canadian companies have always been friendly and reluctant to sue to offend partners and customers. Nortel's patent application was intended to be purely defensive, encouraging engineers to apply for a counterattack against Nortel's patent attack. The application of defense patents is characterized by the enemy's advance, mainly through a variety of patent data analysis and market product research efforts to imagine the future direction of technological development of competitors, their own company ahead of the layout of relevant patents, stuck in the throat of competing enterprises. As a result, Nortel Networks has filed a large number of patents that directly refer to the products and services that competitors are operating. These patents may not be implemented by Nortel itself, but competitors are difficult to bypass. As long as Nortel operates normally, this dangerous patent arsenal will not be used to actively attack competitors, but once Nortel goes bankrupt, these patents are the most dangerous attack weapons.

Nortel has applied for many LTE (Long Term Evolution), which is the fourth generation of wireless communication technology patents, including the core technology of routing and switching. Data from the European Telecommunications Standards Agency shows that Nortel's patents can be used in emerging telecommunications standards, distributed in 43 standard areas, many related to fourth-generation wireless communication technologies.

In 2008, six months before the company declared bankruptcy, John Vicky, who had worked for Lucent and was in charge of patent licensing, took over Nortel's patent licensing business. Previously, he was surprised to find that he had been given a rare opportunity: a huge patent reserve of world-class quality that no one had ever tried to use.

All patent attorneys like a large patent portfolio because it facilitates settlement negotiations. The confrontation in patent litigation needs quantity to support. As long as a certain number is reached, the plaintiff in patent litigation has an absolute advantage, because no one can completely invalidate hundreds of patent claims of dozens of patents. In the United States, research and analysis of each patent costs 10000 to $15000, not to mention high patent invalidation attorney fees and lengthy patent invalidation procedures. The number of patents has led to a significant reduction in the cost of compulsory licensing of patents. Some experts in the United States pointed out that a combination of more than 200 patents is basically invincible. Nortel's patent portfolio far exceeds this quantity and the quality is excellent. Vicki felt it was like he bought top-performing stocks at the bottom of the stock market and had a very bright future. He thought it was a good opportunity to develop Nortel's patent licensing business, which, if properly operated, could catch up with Lucent or IBM's licensing scale. Unfortunately, Nortel declared bankruptcy before he let go.

2. Bid sale

Nortel's bankruptcy is an unprecedented opportunity for patent buyers, and no corporate patent has ever reached such a high level of concern. Thousands of high-quality patents flowed into the market, providing new weapons for the king's war between big companies. The patent war among smartphone companies is inextricable, and this new arsenal has become the center of contention.

The quality of Nortel's patents has attracted many investors. As an expert and managing operator of Nortel's patents, Vicky and his small team have been on the front line of the auction battle and have contributed a lot to the price negotiations.

His first job was to persuade management and creditors to sell the patents separately. At first some creditors did not understand, management also believed that other assets could not be sold at a good price without patents, and some management believed that they were not worth $1 billion. The parties are very controversial. Fortunately, the experts representing creditors have experience working at Ocean Tomo and see the value of Nortel's patents. With the support of this expert, shareholders and creditors saw the value of Nortel's patents and accepted Vitch's proposal. They began to build financial models and plan how to display Nortel's patent portfolio at Lucent Studios.

Their main job is to analyze Nortel's nearly 10,000 patents and calculate which can be sold in combination with the business module unit division of the enterprise and which can be auctioned independently. This is called patent separation work. After the work was done, Vicky's team screened out 6,000 patents and decided to auction them separately. Vicki's team built a patent database, charting and showing current and future network standards, as well as the space for Nortel Networks patents to realize value, and then working to prove the value of the patents for potential buyers.

These preparations proved to be very outstanding. Google quoted a starting price of $0.9 billion for the first time, and other companies actively followed suit. Initially, Apple, Intel, BlackBerry, these companies are interested, and then the defense fund RPX also joined the auction. The forces of all parties joined forces and finally formed two groups, one is the "Rolling Star" (Rockstar Bidco) established by Apple, Microsoft, BlackBerry, Sony, Ericsson, etc., and the other is the "Rangers" composed of Intel and Google ".

People in the patent circle know that Nortel's patent portfolio is a nuclear reactor, which is very dangerous in the hands of the wrong people, even in the hands of rational competitors.

Google revealed early on its desire to acquire the company's portfolio to balance the competition, and as a result, the Rangers lost to Rolling Star, and the patents went to Rolling Star, or Microsoft, for an unprecedented $4.5 billion, much higher than the valuation of the patent portfolio. $1.3 billion more than the sale value of all Nortel's corporate business modules!

Public opinion has long suspected that these will be used to attack Google. At that time, intellectual property experts believed that Rolling Star would serve the strategic interests of shareholders Microsoft and Ericsson and pursue Google and Android's partners, such as HTC.

Later disclosed information showed that the main character of the purchase was Apple, paying US $2.6 billion, Ericsson US $0.34 billion, RIM US $0.77 billion, Microsoft, EMC and Sony US $0.9 billion.

Given that the deal was designed to suppress Android, the U.S. Department of Justice launched an antitrust investigation. In the end, Microsoft and Apple were forced to promise to license core patents to competitors, including Google, at reasonable prices. Soon after, Google acquired Motorola Mobility's patent portfolio, which led the Justice Department to believe that Google's actions balanced the patent strength of both parties, so it passed the antitrust review of the Nortel patent transaction.

The Department of Justice's approval of the Nortel Network acquisition inadvertently endorsed the operational exercise of these patents. Microsoft and Apple no longer need to secretly set up shell companies to exercise power, and the two companies can openly and openly use these aggressive patents to wave sticks at their competitors. The CEO of Rolling Star was straightforward, arguing that Microsoft and Apple's commitment to use patents should not apply to Rolling Star, that Rolling Star is independent, and which principles Microsoft and Apple promised do not apply. This is tantamount to Microsoft playing the Justice Department together. Since Rolling Star is an independent company, it can do things to Microsoft and Apple's partners and customers.

Apple and Microsoft transferred 2000 patents to members of the original acquisition alliance. Transfer the remaining 4000 warhead patents to Rolling Star, and the newly formed privateer company will fight their competitors through trivial patent infringement lawsuits, hoping that competitors will continue to bleed to death in the constant patent bombing. Since the original members of Rolling Star are all bitter rivals of Android, the organization's strategy is clear, that is, to sue companies related to the Android platform industry chain and obtain a return on investment. Rolling Star will feed back the patent license fee revenue received from Android series companies to member companies such as Apple and Microsoft.

Google knew this day was coming, and its chief lawyer said after the failed bid that the patent alliance between Microsoft and Apple was a malicious and organized operation against Android. In response to the risk, Google had to spend $12.5 billion to buy Motorola Mobility.

Behind the scenes

The CEO of Rolling Star is Vicky, and the company's mission is to make a return through licensing and selling. In 2012, Rolling Star had 32 employees, 25 of them from Nortel, to help understand and sell these patent portfolios. They work with only one goal: to detect the various successful products on the market, routers, smartphones, and find evidence of infringement of these products. Rolling Star has a reverse engineering laboratory in Ottawa. There are many reverse engineering engineers. The simple point is to disassemble the machine and find the engineers who infringe the infringement points. The job of these reverse engineers is to read patent specifications all day, peruse computer reference books, and disassemble various consumer electronic products. The media vividly described it as "holding a logic probe in one hand and an electric soldering iron in the other".

Eight of Rolling Star's employees are lawyers. Once evidence of infringement is found, Rolling Star will record the file, and the lawyer will contact the relevant manufacturing company to threaten the other party with potential litigation and demand the payment of the patent license fee. In the two months from March to May 2012, Rolling Star has negotiated licenses with more than 100 companies. Because it controls the core technology of the third and fourth generations of wireless communications, almost all companies in the wireless communications industry infringe. It is inconceivable that some high-tech companies have not infringed their patent rights. The work of these lawyers seems to be very busy, and will be busy until these patents expire or the fourth generation of wireless communication technology becomes obsolete.

Most non-productive entities do not have thousands of patents from huge technology companies. So Rolling Star is the ultimate version of a purposeful pirate ship, where big companies change their patents to small shell companies, which do the dirty work and sue their competitors. In essence, it is American manufacturing enterprises that have embarked on the path of non-productive entities. It's really: "Take the ugly road, let the ugly have no way to go".

Exercise

The phenomenon of privateering has given Google a headache. In February 2013, Google sued British Telecom because the company not only directly sued Google, but also armed unproductive entities to bypass attacks. In order to do bad things, they can still push and know, they will say innocently: the non-productive entity is an independent company, we do not control it.

The smartphone market is becoming more and more valuable, the iPhone system and Android competition is fierce, the stakes are getting bigger and bigger. Google's competitors are willing to lose money to douse Android, while also trying to grab some money when they do something bad. The vast reserve of information and communication patents becomes an arsenal, and everyone can go in and choose the weapon they like. The smartphone patent war has been going on for several years, and the male and female have not been separated. In order to gain the upper hand, the alliance between Apple and Microsoft has launched the pirate ship program.

In November 2013, the patent war escalated into a nuclear war, and Rolling Star sued Google, and eight lawsuits were filed at once. The defendants in the lawsuit are Google and companies that make Android phones, including Asus, HTC, Huawei, LG, South Korea Pan Thai, Samsung, and ZTE. The court of the Eastern District of Texas-the ideal background for the story of patent ugliness. The lawsuit involves six patents, belonging to a patent portfolio, all called "associated search engine", and the content is about "advertising tools that provide advertisements for users who search for information on data networks". Patent topics include: graphical interface navigation tools, Internet protocol filtering, and integrated information centers.

Among the patents involved in the patent portfolio, the earliest one was applied in 1997, one year before Google was established. The latest patent was applied in 2007 and authorized in 2011. Roll Star's lawyers take Google's bid as an example: Google kept raising the bid price sharply, eventually reaching $4.4 billion, and although it didn't get these patents, it can prove that they have been infringing and continue to infringe.

The teams of lawyers on both sides are very strong. Rolling Star employs two different law firms, both of which have local experience in patent litigation. Google's lawyers have dealt with many cases suing the world, such as Paul Allen v. Facebook and Google's cases. The Android phone maker's case was represented by McKool Smith, a prominent local law firm. The lawyer represented the most large cases, representing VirnetX against Apple ($0.368 billion),i4i against Microsoft ($0.29 billion), and a company against Qualcomm ($0.173 billion).

I

With the cooling of patent litigation in the smartphone market, Apple and Google and Samsung Dacheng strategic settlement agreements, other shareholders of Rolling Star have also expressed their intention to retreat. The patented stick of the rolling star is no longer useful, becoming an autumn fan and an old shoe. Neither Microsoft nor Ericsson likes to license patents through litigation, and Apple BlackBerry wants to get rid of the notoriety of making money from patent scandals as soon as possible. For production enterprises, after all, this is not a mistake. In the increasingly deteriorating environment of patent exercise, it is better to make money by patent exercise than by production and manufacturing.

In February 2015, Rolling Star was acquired by RPX, with more than 4000 patents in hand for $0.9 billion.