Trolling for Dollars

Google bought Motorola Mobility. Is it trolling?

In fishing, trolling is when you run a boat under low power and let your line dangle, pulled along by the boat. When I grew up in Minnesota, my family went trolling for certain fish all the time.

But there’s another type of trolling happening in the technology market. It’s patent trolling. That’s where investors buy a series of patents and use them to sue others for patent infringement. They don’t have any intention of manufacturing the patented product—they just use the patent as a way to extract rents from other manufacturers who might use a protected component or process.

In the tech world, patents are serious. They protect and encourage innovation. Apple recently sued Samsung over the Galaxy tablet, and Samsung can’t sell that in Europe right now. But that’s a legitimate dispute that the parties are trying to settle. Trolling is different. Trolls buy patents cheaply, often from companies in bankruptcy. Then they go looking for parties to sue. Because defending against a patent-infringement suit can be so expensive, companies often settle even frivolous suits. Unfortunately, this just encourages the trolls, whose activities just throw sand into the gears of innovation and capitalism.

Google isn’t trolling—but their acquisition of Motorola Mobility’s portfolio of 25,000 hardware patents will be a valuable defensive weapon in the legal arms race. If Apple threatens to sue Google over Android, Google can use Motorola’s patents to threaten Apple back—a “patent deterrence” model. Call it, trolling in reverse. It’s too bad they had to spend billions to do this.

Douglas R. Tengdin, CFA
Chief Investment Officer
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By | 2017-07-17T12:35:02+00:00 August 16th, 2011|Global Market Update|0 Comments

About the Author:

Mr. Tengdin is the Chief Investment Officer at Charter Trust Company and author of “The Global Market Update”. The audio version of each post can be heard on radio stations throughout New England every weekday. Mr. Tengdin graduated from Dartmouth College, Magna Cum Laude. He received his Master of Arts from Trinity Divinity School, Magna Cum Laude and received his Chartered Financial Analyst (CFA) designation in 1992. Mr. Tengdin has been managing investment portfolios for over 30 years, working for Bank of Boston, State Street Global Advisors, Citibank – Tunisia, and Banknorth Group. Throughout his career, Mr. Tengdin has emphasized helping clients manage their financial risks in difficult environments where they can profit from investing in diverse assets in diverse settings. - Leave a comment if you have any questions—I read them all! - And Follow me on Twitter @GlobalMarketUpd

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