Patent Paranoia Hitting New Highs

NEW YORK ( TheStreet) -- This has been an unusually busy week for tech intellectual property, with Samsung ratcheting up its patent fight with Apple ( AAPL) and Nortel kicking off what could potentially be the world's biggest patent auction.

The advent of technologies such as 4G, coupled with a fiercely competitive smartphone market, is fueling an atmosphere of intense patent paranoia, say experts.
Recent events prove that patent paranoia is alive and well in Silicon Valley.

"We're at a transition point in the wireless world," Ron Gruia, principal telecom analyst at Frost & Sullivan, told TheStreet. "We have the move to 4G and the near field communication (NFC) market beginning to grow for mobile payments, so there are all these developments that are happening, and it's conducive to all this patent activity."

Nortel's 4G LTE technology has already garnered lots of attention, and a host of other patents, including wireless video, Wi-Fi, Internet search and social networking, are reportedly up for grabs. Google ( GOOG) secured the $900 million opening bid for the Nortel IP treasure trove, but a host of other tech heavyweights, including Apple, Intel ( INTC) and Ericsson ( ERIC), have reportedly joined the fray.

Google is the highest-profile patent bidder, noting that Nortel's technology will help it fend off any future patent litigation. Essentially, a large arsenal of patents boost a tech company's ability to counter-sue in the event of patent disputes.

Alexander Poltorak, CEO of IP firm General Patent Corp., believes that the patent paranoia is driven largely by market forces. "I don't think that it's the technology driving the patent feeding frenzy," he told TheStreet. "It's jostling for position in the marketplace that drives the patent world."

Poltorak points to smartphone arena, where market share has shifted rapidly thanks to the rise of Apple's iPhone and Google Android devices. "This shift in tectonic plates is forcing companies to see if they can bolster their revenue by extracting some revenue from their rivals," he said, pointing to Nokia's ( NOK) recent patent settlement with Apple. "Nokia lost market share to Apple, but they tried to gain some advantage by asserting their patent portfolio against Apple."

Earlier this month, Nokia said that it had resolved its patent spat with Apple over smartphone technology, with the iPhone maker making a one-time payment to the Finnish firm and paying royalties going forward. The deal was a big positive for Nokia, whose next big smartphone move is not expected until next year, when its first handsets powered by Microsoft's Windows Phone 7 will debut en masse.

Frost & Sullivan's Gruia also points to the emergence of companies like RPX ( RPXC), which offers "defensive patent buying" and "patent intelligence" on behalf of a growing number of tech companies, including Intel, Sony ( SNE), Research In Motion ( RIMM), Nokia and Juniper ( JNPR).

RPX, based in San Francisco, went public last month, and Gruia says it and fellow patent specialist Acacia Research Group, part of Acacia Research Corp. ( ACTG), reflect a bigger trend.

"It's interesting, because this market barely existed 10 years ago," said the analyst, noting that the so-called invention capital market is growing at a rate of 25% to 30% a year.

RPX is said to be involved in the Nortel auction, but the company declined to comment when contacted by TheStreet.

As for Apple's ongoing patent battle with Samsung, General Patent Corp.'s Poltorak said that he would be amazed if the companies end up in front of a judge -- Apple is one of the Korean firm's biggest customers.

"They can't afford to ruin that business relationship; it's symbiotic, it benefits both companies," he said, adding that the firms are indulging in some old-fashioned strategic bravado. "Both companies are positioning, they are posturing to get the best cross-licensing deal."

--Written by James Rogers in New York.

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