The Patent Wars Rage On

PersonalWeb Technologies claims to be “not your typical, venture-backed, silicon valley, tech startup.” But at the insane rate of patent litigation among major Internet and tech companies recently, the small Texas group is shaping up to join the big shots. In fact, it’s already sued most of them.

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PersonalWeb was acquired by Brilliant Digital Entertainment subsidiary Kinetech in 2011. As part of the arrangement, Kinetech gave its Truenames patent portfolio to PersonalWeb. The portfolio includes “eight key patents dealing with the identification, access and use of data in distributed environments and are foundations for cloud computing, distributed search engine file systems, and content addressable storage solutions.” Claiming infringement on these patents, PersonalWeb has sued Amazon (NASDAQ:AMZN), Google (NASDAQ:GOOG), EMC (NYSE:EMC), Facebook (NASDAQ:FB), Microsoft (NASDAQ:MSFT), Yahoo! (NASDAQ:YHOO), Apple (NASDAQ:AAPL), IBM (NYSE:IBM), and most recently Rackspace (NYSE:RAX), among others.

The alleged infringements revolve around some core functions of web technology, which are widely considered ubiquitous industry standards. These lawsuits bring to surface just how terrifyingly complicated the line can be between enabling innovation and protecting it. This line is as ambiguous as the size of the patent, intellectual property, and associated litigation economy.

It’s unclear exactly how expensive it is to fend off “patent trolls,” but with lawyers fueling the economy of an entire town in Texas, litigation eats into margins. Patent lawyers can bill $1,200 per hour. Apple spent $32 million in one case against Google. Steve Jobs had famously told his biographer that he would spend $40 billion to prove Android phones copy the iPhone. Mark Lemley, a professor at Stanford Law School and a founding partner of Durie Tangri LLP, told the Wall Street Journal, “it wouldn’t surprise me if the smartphone companies have spent a billion in legal fees.” He added, “We know they’ve spent $15 billion in the last two years buying patents… so the companies clearly think there is far more at stake than what they are paying their lawyers.”

To sum up how Rackspace chief technology officer John Engates feels about the litigation, he said PersonalWeb is “a patent troll looking for a settlement.” PersonalWeb is located near the infamously plaintiff-friendly town of Marshall, Texas, known for seeing a disproportionate number of patent and intellectual property cases. According to LegalMetric, patent holders win 78 percent of the time in the Marshall court.

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