Explaining Google’s Patent Strategy

Allen Lo outlines the intellectual property landscape and Google’s place in it as the company works to stay competitive—and to reform patent law

Allen Lo remembers a time when Google was small enough to need only a handful of patents. That was years ago. Today, Lo is the award-winning deputy general counsel who handles patents for the tech giant. As technology and the atmosphere in which Google operates shifts, Lo and his team must stay abreast of developments—even when legislation can’t keep up.

Patents as a business model

The idea of profiting off of patents was one very few companies considered when Google launched as a search engine. That changed in 1997, when the dot-com bubble burst. Stocks crashed, technology companies folded, and for many organizations, the only valuable asset that remained was patent portfolios.

In the aftermath, a new business model was born: the non-practicing entity (NPE). Executives began to see that patents were more than just writing a name on a product. Books like Rembrandts in the Attic advised companies to embrace the emerging business model. The book validated that someone could start a business without producing a product; all a company needs is a patent portfolio. The company generates revenue from it by collecting royalties when someone infringes on copyright law.

More patent lawsuits were filed in 2015 than in any other year, according to member organization Unified Patents. An estimated two-thirds of these lawsuits were filed by so-called “patent trolls”—people or organizations that attempt to enforce patent rights beyond the patent’s actual value. These trolls rarely create the products or services covered by the patent.

NPEs profited off of patent infringement, and patent trolls became a feature of the business landscape that threatened small and major businesses. Google is one of many companies that now proactively acquires patents to protect itself from litigation, especially after the company faced patent litigation initiated by Oracle.

Oracle alleged that Google infringed on its copyright of Java application programming interfaces. Google rewrote its version of Java for the Android OS, and Google claims this use falls under fair use and does not infringe on Oracle’s copyright. In 2014, Google filed a petition to take the case to the US Supreme Court, but the court denied the petition. The case will return to the district court for a trial in which Google will present a fair-use defense.

The smartphone as a battleground

The smartphone is another new and developing technology that has sparked intellectual property battles between some of the largest companies in the world. Apple, Samsung, Microsoft, and Sony have all appeared in lawsuits over patents related to smartphone software and technology. There’s a laundry list of lawsuits involving each one of the aforementioned companies. Lo says the volume of litigation has multiplied tenfold since Google launched the Android smartphone.

The Android is far from Google’s only product that requires a patent portfolio. When Nortel Networks, a multinational telecommunications company, went bankrupt in 2011, its 6,000 patents became available. Google, which planned to expand its mobile and desktop operations, seized the opportunity to acquire those patents. Google bid $900 million to obtain the portfolio. Ultimately, Google was outbid by several companies working together: Apple, Microsoft, RIM, EMC, Ericsson, and Sony, which bid $4.5 billion.

The intellectual property team seized another opportunity a year later to acquire Motorola’s smartphone portfolio. The acquisition brought in more than 20,000 patents on mobile phones and wireless technologies. Google purchased the portfolio to protect the company in ongoing patent disputes with competitors—mainly Apple and Microsoft—and to protect its smartphone.

Building a team of experts

Lo joined Google in the same year the company acquired Motorola’s portfolio. Lo had nearly twelve years of experience handling intellectual property at Juniper Networks—experience he would need for his new workload.

Lo was tasked with reorganizing the existing legal function and incorporating the Motorola patents into its operations. Lo reviewed Google’s three existing patent groups and knew the company needed more intellectual property experts.

Lo created distinct functions for this team. “One of them was our patent transactions team, and that basically allowed us to centralize and create deeper expertise around things like patent licensing and patent acquisitions,” he says.

Because of the threat of patent trolls and litigation, it may seem that much of Lo and his team’s work is reactionary. That isn’t so. Lo assembled a team that supports operations and analytics, and Lo wants the group to have a deep, nuanced understanding of the patent industry. He expects the team to monitor trends and understand developments in the US Patent and Trademark Office.

In a perfect world, Lo adds, the team would foresee threats of litigation and would keep Google out of the courtroom. “Part of that is negotiating with other companies for agreements and being proactive,” Lo says.

The war’s end

Lo’s initiatives all circle back to one thing, in his own words: finding “patent peace.”

“Patent peace is an aspirational goal,” he says. “As we started looking at the litigation, the path to patent peace is being successful in the defense of our cases, which we’ve had a good record in. Part of that is developing our own patent portfolio.”

Google made its initial public offering in 2004, becoming one of the largest publicly traded companies in the world. The company’s intellectual property portfolio has grown considerably since then; in January 2016, Google was listed at number five in Forbes magazine’s list of tech firms that were awarded the most patents in 2015.

Having a diverse portfolio is important to Google as it seeks to create new products, and Lo says the company is part of a movement to reform the patent system, which critics say currently stifles innovation.

“We are trying to help people understand the problems we are seeing in the system,” he says, “and to bring more balance to the system.”