Richard Lloyd

Whatever you think of the possible motives, you can’t fault Google for trying. The search giant launched another initiative yesterday targeted at solving what it terms the “NPE problem”: the fact that 70% of the patents that are litigated by non-practising entities originate from operating companies.

Google’s new solution, the Patent Purchase Promotion, is intended to offer sellers a quick and efficient way of offloading their rights to the tech company. Between May 8th and 22nd entities will be able to make submissions providing details of the relevant assets and naming their price. Google will then spend 30 days going through everything it gets and, if there are any that it would like to buy, the whole process will be done within 90 days.

Although there are no restrictions on who can put assets forward, the hope is that the scheme will attract plenty of operating companies. In speaking with the IAM blog, Google senior patent licensing manager Kurt Brasch stressed the experimental nature of the project. He admitted that it wouldn’t work for some operating companies and that a lot of patents that do come in may be of “varying quality”.

He also stressed the data-gathering advantages that Google should get if the scheme attracts a lot of interest; for a company that has been one of the big data pioneers in the patent market that should not be underestimated. However, that would seem to immediately rule-out many rival tech companies from making a submission and handing one of their competitors details of patents they are willing to sell.

In reality, even though this may be pitched at operating companies, it isn’t for the Microsofts, IBMs and HPs of this world - they already have sophisticated monetisation operations and will not be attracted by the business terms on offer. So, that leaves the question: just how much interest is there going to be from patent owners? Brasch wouldn’t offer any numbers, saying only that the Google team “expect quite a few inquiries” before reiterating the experimental nature of the new programme.

The prospect of a quick deal may appeal to some, especially those in need of a cash fix, but the terms that Google is offering place some significant constraints on sellers. Here’s perhaps the most relevant piece from the additional information that Google released as it made its announcement:

Once you submit a patent through our form, you are obligated to transact with us at the amount you have indicated in your submission so long as we contact you via the email you provided to us by June 26, 2015. During the Submission and Review period, you may not sell your submitted patent to any other party or enter into any further encumbrances relating to your submission.

So, no negotiation and no looking for a better offer while Google considers your patent. For many patent owners that must surely be too much to swallow. Brasch described the lack of any negotiation over price as a “CarMax style pricing model”, referring to the American used car business which claims to be upfront about price.

This isn’t Google’s first attempt to stem the flow of patents from operating companies to NPEs. Last year it helped launch the License on Transfer Network along with a number of other tech companies, such as Canon, SAP and Dropbox, who agreed that if they did ever sell patents to an NPE the rest of the group would automatically be granted a licence. Although it has picked up its first car industry clients this year, with Ford and Mazda both signing on, and has most recently seen Uber join, LOT has not been a runaway success. Not a failure by any means, but at 18 members including Canon and Google itself, which are never going to sell to an NPE anyway, it may not yet have had the impact that was hoped for.   

Of course, how you view the “NPE problem” depends on where you sit in the patent market. There are those who see it as linked to the position of many large, typically high-tech, companies that refuse to engage with prospective licensors before a suit is launched and therefore force some owners into deals with NPEs with the resources to assert. If you have that view then changing the prevailing licensing dynamic in the market generally is going to have much more impact on who owns what than simply offering a quick and easy way of disposing of patents. Brasch wouldn’t be drawn on this when asked.

The more you think about it, the more it raises questions around why a patent owner with a high-quality asset who understands the IP market would consider this option, even under current tough conditions. Instead, the likelihood is that if Google does come across something interesting it will be offered by a party that may not fully appreciate what it owns and needs some money quickly; and that probably means a smaller, cash-strapped business with little access to specialist IP knowledge. Whether such entities are best placed to assess patent value and to transact with a company which does have considerable expertise, and then some, is a moot point. But, in truth, that is how many NPEs get their patents, so why shouldn't Google do the same thing?

To be fair to Google, it is not unaware of the challenges it faces. Brasch described the promotion’s ambition as “typical Google”. As a company, he pointed out, it doesn’t usually go in for incremental changes. You can be sure that any information it does glean from this process will be pored over internally and will closely inform Google’s decision on whether it repeats the promotion or tries something completely different.

“I suspect you’ll continue to see Google doing different things to solve problems in this industry,” Brasch commented when asked if there were more initiatives in the pipeline. So, in true Silicon Valley start-up tradition, if this does not work out the patent team will move onto something else. And for that, at least, they deserve credit.