Google has been one of the most vocal critics of so-called patent trolls, more formally referred to non-practicing entities (NPEs) or patent assertion entities (PAEs), as well as a proponent of measures designed to improve software patent quality. At the same time, Google is one of the largest patent holders in the world. Though Google files its own patent applications, it also actively acquires patents from others. In 2011, for example, Google paid $12.5 billion for Motorola Mobility and its purported 17,000 patents. In 2014, Motorola Mobility was sold to Lenova for $2.9 billion. But Google kept almost all of those 17,000 patents.
Apparently looking to further expand its patent portfolio, last week Google announced a Patent Purchase Promotion. Described as an “experimental marketplace” for patent owners to sell their patents to Google, the program runs May 8-22, 2015. Patent owners interested in selling their U.S. patent to Google can make a binding offer to sell via an online portal.
If Google is interested, submitters will be notified by June 26, 2015.1 Following notification of Google’s interest, a brief period of due diligence will follow. Google will then decide by July 22 if it accepts the offer, and payment will be made within 30 business days thereafter.
So what’s the catch? For starters, the program requires patent owners to make a binding offer to Google, including the price, under non-negotiable terms set by Google. Once such an offer is made, the owner is obligated to sell the patent to Google at the offer price unless Google does not indicate its tentative interest in the purchase by June 26 or the offer is not accepted by July 22. The Patent Purchase Agreement does give the seller a royalty-free, irrevocable license to practice the patent, however, that license cannot be sublicensed or transferred to another party (e.g., if the seller is later acquired by another entity).
As for Google’s motivation in all this, the company has stated that it is seeking to “remove some of the friction in the secondary market for patents” to “yield better, more immediate results for patent owners versus partnering with non-practicing entities.” In other words, Google wants to buy your patent before it gets into the hands of a patent troll who might then sue Google, leading to “generally bad karma.”
Though unstated, this also is likely a part of Google’s continuing effort to grow its patent portfolio for defensive purposes (i.e., if a competitor sues Google for patent infringement, Google can probably find something in their patent portfolio that the competitor is infringing). Growing its patent portfolio might also help Google entice more competitors to enter into patent cross-licensing agreements. Google currently has cross-licenses with Samsung, LG, Cisco Systems and Verizon (and probably many others). These deals often make sense for the two parties, but others view them as being anti-competitive in some instances.
It remains to be seen whether this experiment will result in Google purchasing a significant number of patents. Google has made no commitment to purchase any patents under the program, nor to provide any details of the results. Still, although the non-negotiable purchase terms will need to be carefully considered by prospective patent sellers, for some it may be worthwhile to give it a shot.
1 We should note that the published information from Google is inconsistent with respect to dates. For example, the published terms of Google’s Patent Offer Submission form state that Google will notify submitters by June 19 if they are interested. Similarly, the deadline for acceptance by Google is inconsistent. In some instances, it is indicated as July 22; elsewhere in the same document, it says July 15.