Last week, I gave IBM the nod pre earnings for a number of separate reasons.
One of the factors in our analysis was their rich patent pipeline. we noted:
Huge Patents: IBM Leads in U.S. Patents for Thirteenth Consecutive
Year; This is potentially a rich pipeline for the company in the
future. They currently garner about $1Billion a year in (high profit)
revenue from licensing their patents.
Well, that didn’t take long:
IBM now alleges that Amazon has knowingly infringed upon five patents, related to: customer recommendations, purchase systems, advertising, web site navigation and the way its stores data on its network.
This is not the first time we have brought up the issue of monetizing intellectual property. Back in January 2005, we mentioned the Rise of the Pure Patent Business Model:
Patent
litigation in the U.S. is substantial and rising. High-profile patent
suits will only accelerate in 2005. Why? The new business model: the
pure patent play. Consider VC Intellectual Ventures, which has been
creating and buying patents. The defunct Commerce One’s 39 Web services
patents were auctioned off in bankruptcy to the unknown JGR
Acquisitions for $15.5 million. I expect to see a slew of patent
litigation from these (and other) players in 2005.
This promises to be an intriguing area of investing.
Oneof our biggest winners in 2004 / 2005 was the small cap stock Ampex (AMPX). Understanding the legal intellectual property issues — and how they could create an investable thesis — was definitely an advantage in the marketplace . . .
Some of those IBM patents smell bogus, like “customer recommendations”. I think we need to improve the patent system to keep only real patents in play.
Amazon also had this stupid “one-click purchase” patent a while ago. They should eat their own shit now.
Bogus patents don’t matter in the lovely game of digital IP because the USPTO is understaffed, underbrained, and a virtual sieve. Because of this, the plan for most software companies — even the open-source, friendly ones like RedHat — has been to assemble a “defensive patent portfolio”.
The idea’s been that because everyone can get nuclear IP weapons so easily, each player had better have a full arsenal themselves. It’s been a cold intellectual war for awhile which has chilled the uptake of a lot of projects by the broader community because many organizations do not have nuclear IP weapons and wouldn’t use them if they did, e.g. Apache project.
Microsoft recently promised not to shoot if certain standards they like were implemented: http://www.microsoft.com/interop/osp/
And most big players have behaved well, until now. It remains to be seen whether this is the Duke Ferdinand of digital IP or not.
You might enjoy this short scifi story, related to the concept of patents and technological progress.
Anon,
So let’s review: with with 2 1/2 months to go, you are want to declare the game over; you give no no credit for the bullish call in June, or the 11,800 Dow and SPX 1350 calls in January; and you make a an overnight 7% gain in IBM to be meaningless. And of course (LOL), the cowardly anonymous post on a day when we are up 100 (so typical of you weasels)
Bottomline: On unimpressive volume, mediocre breadth, a poor macro environment and heretofore negligible, institutional participation, we are attaining records. And the trolls come out of the woodwork
Say buh bye to anon
Uh-uh… Anon killed by friendly fire. I better stay in my hole…
Here’s my routine: I get a comment I find particularly offensive: it is either really obnoxious, or blatantly wrong, or simply troll bait.
-I see if there’s an email address (nope)
-I check out the past posts by the same IP address (sporadic and snotty inthis case)
-Then I reread the comment (even more annoying then I originally thought).
Most of the time, I let them stand. I am not looking for cheerleaders or “Yes Men.” But this is my house, and if someone behaves like a jerk, than I ask them to leave the party. And in this case, that’s done via “unpublish and de-permission” for commenting.
Definitely bogus. I worked at IBM from 1992 through 1996, and the pressure to patent anything and everything was definitely there; a certain type of employee was notorious for not doing any actual work but making a ton of bonuses by patenting what seemed to the rest of us to be obvious ‘inventions’.
On the other hand, they’re going up against “one click” Amazon. Really, who can you root for here?
per BR:
“Bottomline: On unimpressive volume, mediocre breadth, a poor macro environment and heretofore negligible, institutional participation, we are attaining records.”
I suppose you saw Saut’s commentary about “mysterious buyers” in the futures markets as well as the discussion of the remarkable simultaneous spikes yesterday evening in S&P, Naz & Rut futures. Couple that with the peculiar drop in oil prices prior to the end of driving season and the discovery of 810,000 uncounted jobs and I’m sure you’ll agree that it is entirely a coincidence that Bush is due to start talking about the stock market, lower gas prices, and employment tomorrow.
Lest anyone accuse me of having my tinfoil hat on, I can assure that I really believe in coincidences, like Saddam’s verdict and sentencing being scheduled for 2 days before the elections- they just couldn’t get to it before then I suppose. But it’s all so good that after watching the DIA Dec124 calls that I bought for $.25 go to $.75, I decided to buy some DIA Nov122 calls as well, because I believe in the power and wisdom of our MBA in Chief and his coterie of friends. But you can bet your ass that I’ll dump everything at the close on the day before the elections.
re: really, who can you root for here.
I haven’t read the suit, so I don’t know the nature of IBM’s claims, but note that Amazon never tried to enforce the one-click patent. I think bezos is on record saying that they don’t plan to.
Barry,
If time permits you, could you talk about where an individual investor could look for patent plays?
I’m guessing the list of highest patents by company would be a good start.
We have been seeing a lot of NANO-technology investing by Intel, IBM and other big tech companies, but as you know investing in this sector requires specialized expertise, but Hey! We have you! :)
Enlighten us sometime about possible plays, if it’s not asking too much.
Merci Beaucoup!
Just read Jeff Saut’s article – wow ! I guess I’ve made a lot of money on this manipulation but not sure I will enjoy it. This country is seriously ill. Everything the republicans have touched is tainted, cynical, and phony, whether people, places, or things.
The supreme court, the congress, every aspect of the government, the constitution, foreign policy, religion, the financial markets, the Fed especially Greenspan and now Bernanke, the military, Colin Powell.
per blam:
“Just read Jeff Saut’s article – wow ! I guess I’ve made a lot of money on this manipulation but not sure I will enjoy it. This country is seriously ill. Everything the republicans have touched is tainted, cynical, and phony, whether people, places, or things.”
yep, the bus is being driven by cocksucking whores who will turn right around in two months to blame everyone else once they have been kicked out of power and the economy does crash.
per gop:
“^Everything the Dems have touched is stupid and poor, so I’ll be voting GOP thx.”
sounds like you need a trip to gitmo, some quality time in a pyramid along with your heroes. Looking forward to it are you?
IBM is the global monster of patents. It is a machine. Amazingly many of their patents are in areas you wouldn’t even associate with their business such as life sciences.
That said, I worked in that patent machine and I can tell you that if it was even close to being IP, it was patented. Much of the patent war has become just that. A war to be near the top where companies even patent leather.
That said, I do hate the stock.
Sestina,
One might suppose that a company might do frivolous wide-reaching patents so they’d have a weapon against other companies’ patent-infringement claims, both good and bad. Thus, the one-click patent need not be ‘enforced’ in order to be valuable.
IE, expect a cross-licensing arrangement which may lead to Company A getting access to some good (or frivolous) patents as a result.
I had a business a few years ago based in the UK selling Adult Herbal Products and the like, and setup websites named ‘amazonhealth.com’ and ‘amazonhealth.co.uk’. The business was started perfectly legally and traded under the name of Amazon Health Limited. Then came the bombshell 3 years down the line, when I rec’d a letter from Amazon.Com’s legal dept intending to sue me for using the word AMAZON in the domain names. Because I could not afford to fight the goliath, (my business was only a part time venture) I was forced to give up all the domain names and to close the business down, without any form of compensation! It would have cost me hundreds of thousands of dollars to pursue the case – which I could not afford to do. Now I find that Amazon.com are currently selling the very same products that I used to sell (adult herbal products) and not just BOOKS as you’d expect. I was really dis-heartened by these events… I even offered to sel lthem the domain names BEFORE my online business started, but they just said that they were NOT Interested in it at that time…