Patent Prosecution as Part of Business Models?

Patent Prosecution as Part of Business Models?

On Monday, July 13th, Mosaid Technologies Inc. filed a suit against IBM Corporation for patent infringement concerning six of Mosaid's United States patents. The suit was filed in the United States District Court in the District of Delaware. Mosaid, an Ottawa-based company, is well known for developing semiconductor technology. The patents involved in the suit concern Mosaid's fundamental dynamic random access memory (DRAM) circuit inventions that are used in IBM's microprocessors and Application Specific Integrated Circuits (ASICs). Specifically, Mosaid argues that IBM has, and is still, infringing on U.S. Patent Nos. 6,603,703; 6,580,654; 6,980,448; 7,038,937; 7,486,580; and 7,535,749.

DRAM is a type of random access memory which uses separate capacitors within an integrated circuit to store each bit of data. DRAM is a category of dynamic memory because each capacitor within the circuit is recharged periodically. Recharging is necessary since real capacitors leak charge over time so the charge needs to be replenished in order to continue to store data. DRAM is in contrast to SRAM (static random access memory), which uses bistable latching circuitry to store each bit of data and thus it is not periodically recharged. DRAM's primary advantage over other types of memory such as SRAM is that it is structurally simplistic; only one transistor and one capacitor are required per bit as opposed to the four transistors required in SRAM. This key difference allows DRAM to reach high density and therefore hold a large amount of information in a relatively small space. As with all RAM, DRAM is volatile memory and therefore loses its data when the power supply is removed from the circuit.

Mosaid Technologies Inc. has a patent portfolio including over 1 700 patents and applications, some of which have been acquired from other corporations. Mosaid has licenses for virtually all of the global commodity DRAM industry. John Lindgren, President and CEO of Mosaid, stated that Mosaid is taking action against IBM "to protect our intellectual property because we have been unable to reach a reasonable settlement with IBM, despite many years of negotiation." IBM argues that the patent infringement lawsuit is without merit and has expressed a desire to defend the case vigorously as opposed to settling. Mosaid has also initiated litigation against other companies for similar alleged infringements in the past, including Samsung and Micron Technology Inc., but both of these suits settled.

Despite Mosaid's trend in acquiring valuable patents from (often) struggling companies, industry professionals have yet to claim that the corporation is a "patent-troll": a person or company that enforces its patents in an overly-aggressive manner with no intention to manufacture or market the invention. Companies often walk a fine line between accusations of patent-trolling and using patents successfully within their business models in order to maximize the IP's return for investors. An example of a company accused of patent trolling is NTP, Inc. The company sued Research in Motion (RIM) for patent infringement involving the manufacture of Blackberry cellular devices which eventually resulted in RIM reluctantly accepting a $612.5 million settlement offer.

Patent portfolios are becoming an increasingly important aspect of business models. In the fiscal year ending April 30th, Mosaid reported their highest level of patent licensing revenues ever. As licensing fees become a larger source of revenue for many technology companies, investors have begun to realize the impact IP can have on business success. A clear example of the importance of patent portfolios occurred in July 2005, when Mosaid announced it would be licensing a portion of its portfolio to Hitachi. Within one week of the announcement, Mosaid's share price went from $20 to over $60. Conversely, investors are also aware of the business risk of patent infringement claims, which Mosaid's recent lawsuit has highlighted for IBM. Some patent specialists have gone so far as to say that corporations can no longer just exercise "prudent" IP management, but in fact have an obligation to shareholders to utilize IP to its maximum value. The increase in patent portfolio management within many companies such as Mosaid has left some people wondering as to how the law will develop in regards to fiduciary duties of officers to manage intellectual property. Rather than patenting solely for scientific merits, many corporations are looking to treat IP as any other important asset the company possesses and thus are patenting inventions which have business and marketing value as well. However, the true "value" of IP is often difficult to assess because it is usually intertwined with other aspects of the business. Businesses must also be careful to avoid developing a reputation for patent-trolling.

The widespread impact that intellectual property law has on most industries is highlighted by the idea that it is not only scientists and researchers that are interested in IP, but investors as well. For any business, IP will have an increasingly larger impact on a company's viability as science and technology frames the way we work, live and prosper.