AP
Twitter CEO Dick Costolo
The companies did not disclose how much Twitter will pay IBM.
IBM sent a letter to Twitter shortly before the company went public threatening to sue Twitter, Twitter revealed in its S1. In the S1, Twitter said there were three main patents involved. These were issued in 2006 from applications that dated from the mid-1990′s or before, Gigaom's Jeff John Roberts reported.
One covered tech that helped find URLs, another covered a method for putting ads in "an interactive service," and a third covered a way to discover common friends in a list of contacts.
At the time of the S1, Twitter said it had "meritorious defenses to IBM's allegations." In other words, that it's tech didn't infringe.
But the problem is, patent litigation is hugely expensive and outcomes are very unpredictable. For instance, SAP is currently in this weird legal black hole where it owes a $400 million fine after losing an infringement case even though the patent was later dissolved.
So the wisest and least expensive thing to do is to settle lawsuits by including hundreds or thousands of patents in a license agreement.
Armed with those patents, if another company comes threatening with a lawsuit, Twitter can perhaps dig through its IBM arsenal and whip out a patent that will protect it.
But this way of thinking has created an almost blackmail-like system in the software industry. Tech companies are spending huge amounts of money on patents, not to acquire new tech, but to ward off expensive, even ridiculous, litigation.
For instance:
- Microsoft has managed to get most of the Android/Linux device makers to sign patent agreements that makes them pay Microsoft a fee every time they sell an Android/Linux device.
- Google paid $12.5 billion for Motorola Mobility patents, selling it off in parts for about $6 billion (The handset unit sold to Lenovo for $2.91 billion, the set-top box business to Arris Group for $2.3 billion ,and some factories to Flextronics for $75 million.)
And so on.
The Supreme Court has agreed to rule on two patent cases that could help reign in the problem, reports Ars Technica, making it harder to win infringement cases with vague patents. But when the Supreme Court has heard similar patent cases in the past, its rulings have not fixed the problem.
In his State of the Union speech this week, President Obama asked Congress to fix the patent system, too.
Here's hoping that software patent common sense will one day prevail.