International Business Machines Corp. (NYSE:IBM) announced today that it had entered into an agreement with Twitter Inc (NYSE:TWTR) to sell the up-and-coming social media concern more than 900 of its patents and enter into a cross-licensing agreement. The terms of the agreement were not publicly disclosed.
Big Blue has received the most U.S. patents annually for 21 consecutive years, and is widely acknowledged as the “patent king” of the IT sector.
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“This acquisition of patents from International Business Machines Corp. (NYSE:IBM) and licensing agreement provides us with greater intellectual property protection and gives us freedom of action to innovate on behalf of all those who use our service,” said Ben Lee, Legal Director for Twitter, in the jointly released statement.
“We are pleased to reach this agreement with Twitter Inc (NYSE:TWTR) because it illustrates the value of patented IBM inventions and demonstrates our commitment to licensing access to our broad patent portfolio. We look forward to a productive relationship with Twitter in the future,” said Ken King, General Manager of Intellectual Property for IBM.
Twitter needed IP
Twitter Inc (NYSE:TWTR) was definitely light on IP compared to most other public technology firms before the deal. The company only had nine patents and 95 pending applications prior to its IPO a couple of months ago, only a fraction of the IP of other leading technology companies. An SEC regulatory filing even warned investors that the lack of intellectual property could make the company a target for litigation and that the business might be hindered in litigation because it could not assert its own patents.
According to Richard Doherty, research director of Envisioneering Group, patent battles are becoming an “increasing distraction” for technology companies, even though apparently Twitter itself wasn’t facing an immediate threat. “At some point it becomes just a balancing function to take advantage of warehouses of intellectual property, like at IBM.”