Bloomberg News

Google Buys IBM Inventions as It Aims to Build Patent Hoard

July 29, 2011

(Updates share price in final paragraph.)

July 29 (Bloomberg) -- Google Inc., facing a growing threat of intellectual-property lawsuits, acquired a batch of patents this month from International Business Machines Corp. to bolster its portfolio.

The U.S. Patent and Trademark Office on July 11 and 12 recorded more than 1,000 patents assigned to Mountain View, California-based Google by IBM. They cover a range of topics, including microprocessing chips, regional databases and memory fabrication and architecture, said Bill Slawski, president of SEO by the Sea Inc., a Warrenton, Virginia-based research firm specializing in search-engine optimization.

“Like many tech companies, at times we’ll acquire patents that are relevant to our business,” Google said yesterday in an e-mailed statement.

Chris Andrews, an IBM spokesman, declined to comment.

Google’s Android mobile-operating system has been targeted in at least six legal complaints, increasing its need for intellectual property to defend the company against litigation.

“Among this collection of patents, there may be something that can help Google in these lawsuits,” Slawski said in an interview today. “It doesn’t hurt to have a big patent portfolio these days.”

Google Vulnerable

Google, the world’s largest Internet search company, aims to curb abuses of the patent system. It’s calling on Congress and the Federal Trade Commission to rein in lawsuits, and asking the Patent and Trademark Office to take closer looks at patents being used in litigation.

“The tech industry has a significant problem,” Google General Counsel Kent Walker said in an interview earlier this week. “Software patents are kind of gumming up the works of innovation.”

Google’s rivals have said the company is critical of the patent system because it has few patents of its own and entered a smartphone market where companies had been researching and selling products for years before Android phones went on sale in 2008.

The Android system is a free, open-source program that relies on some nonproprietary features Google didn’t create and allows outside developers to modify the code. That has left the company vulnerable to claims that it built Android on the backs of research done by other technology companies.

‘Fruit of Efforts’

“The patent is the fruit of a company’s efforts,” Slawski said. “It says you’ve given yourself a chance to develop technology and then actually do something with it.”

Google, which had $39.1 billion in cash and short-term investments as of June, put in an initial $900 million offer in April to buy the patents of bankrupt phone-equipment maker Nortel Networks Corp. It was outbid by a group that includes Apple Inc., Microsoft Corp., and Research In Motion Ltd., which all make devices that compete with Android phones.

Google fell $7.25, or 1.2 percent, to $603.69 at 4 p.m. New York Time in Nasdaq Stock Market trading. The shares have climbed 1.6 percent this year.

--With assistance from Susan Decker in Washington. Editors: Niamh Ring, Romaine Bostick

To contact the reporters on this story: Devin Banerjee in New York at dbanerjee2@bloomberg.net; Brian Womack in San Francisco at Bwomack1@bloomberg.net

To contact the editor responsible for this story: Peter Elstrom at pelstrom@bloomberg.net


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