Twitter blew $36m on patents to avoid death by lethal injunction
New document reveals what it took to get IBM off tweet biz's back
Twitter spent about $36m buying nearly 1,000 patents from IBM to avoid a perilous legal fight, official paperwork has revealed.
The micro-blogging site's annual 10-K filing with the US Securities and Exchange Commission (SEC) includes a note about the patent acquisition, which was part of a $38.5m expense the company logged as "intangible assets".
The hefty document sheds new light on the patent settlement between IBM and Twitter that emerged in February this year: back then we knew Twitter had acquired 900 of Big Blue's protected designs, but there was no word on any financial terms.
The price breaks down to roughly $40,000 per Big Blue patent. To put the figures in context, the tweet biz's full-year revenue to December 31 was $664.89m (it rregistered a $645m net loss over the 12-month period due to an IPO-related charge). So five per cent of the year's sales was spent on this patent acquisition.
"Companies in the Internet, technology and media industries own large numbers of patents, copyrights, trademarks and trade secrets, and frequently enter into litigation based on allegations of infringement, misappropriation or other violations of intellectual property or other rights," Twitter said in the filing.
"Many companies in these industries, including many of our competitors, have substantially larger patent and intellectual property portfolios than we do, which could make us a target for litigation as we may not be able to assert counterclaims against parties that sue us for patent, or other intellectual property infringement."
Talk of a patent deal between Twitter and IBM was first floated in November of 2013 as Twitter prepared to launch its initial public offering. Shortly before the offering was set to take place, Big Blue notified Twitter that the microblogging service infringed on three of its patents and invited the company to engage in a round of negotiations least it face a messy courtroom battle.
The two sides settled on the deal that dramatically boosted Twitter's patent holdings. The website reports that it now has some 953 patents with an additional 100 patent applications pending approval.
"We presently are involved in a number of intellectual property lawsuits, and as we face increasing competition and gain an increasingly high profile, we expect the number of patent and other intellectual property claims against us to grow," Twitter said.
"There may be intellectual property or other rights held by others, including issued or pending patents, that cover significant aspects of our products and services, and we cannot be sure that we are not infringing or violating, and have not infringed or violated, any third-party intellectual property rights or that we will not be held to have done so or be accused of doing so in the future." ®