Technology Focus: Mediating the Patent Wars

This is big business: Apple largely invented the market with the original iPhone in 2007. Because it outsources all manufacturing, Asian suppliers like HTC, Samsung Electronics and others, which have rival products now, have similar products, albeit on the Android OS.

If the ITC finds infringement, it could conceivably bar HTC from importing into the U.S. Last quarter, HTC sold about 25 percent of all U.S. smartphones, estimates market research firm Canalys. Samsung held a 21 percent share.

The wars don't stop at the ITC, a quasi-judicial independent body whose members are appointed by the president. Apple has sued in federal courts throughout the U.S. brought suits to the European Commission and in individual courts in farflung Germany, Australia and Spain.

Patents are big business. For years, the No. 1 recipient worldwide has been IBM, currently the No. 2 U.S. computer services company. IBM knows there's money in intellectual property and holds five Nobel prizes for inventions like the scanning tunneling microscope.

Smartphones aren't the only technology patent battleground. Oracle and Google are battling in two California federal courts over Oracle's contention Google's Android OS infringes upon Java patents Oracle bought when it acquired Sun Microsystems for $7.3 billion in 2010.

While Sun was still independent, then-CEO Scott McNealy promoted the original Java as an open source product available to all, unlike proprietary Internet software from arch-nemesis Microsoft.

Some companies, like ultraspeed DRAM developer Rambus have been embroiled in patent lawsuits for years, alleging theft by the likes of Samsung and many other chipmakers of IP without paying royalties. Shares of the Los Altos, Calif.-based designer have been on a 10-year rollercoaster, buffeted by every verdict in favor or against. For 2011, they're down 64 percent.

Rather than sue, for an average cost of $3 million per lawsuit, patent lawyers told International Business Times, companies can also see what the market will pay for patents.

IBM sold 1,023 patents to Google in September for a sum neither company disclosed. Trustees for bankrupt Nortel Networks obtained $4.5 billion selling wireless patents to an Apple-led syndicate that included Research in Motion, Ericsson, Microsoft, Sony and EMC. That led the board of developer InterDigital to see if it couldn't auction the entire company for its patents in an still-unconcluded deal.

InterDigital last week was valued around $1.9 billion with enterprise value of $1.45 billion, about the same as its pre-auction value. Shares had doubled in July.

Other companies are all seeking to rake in cash, notably Eastman Kodak, whose auction of 1,100 old patents that could yield as much as $3 billion, has been underway for months. The cash is badly needed for the 131-year-old photography giant to complete a transition to the digital era.

Often, like last week as well as in late September, the market doesn't believe Kodak can do it. On Thursday, shares slipped as low as 93 cents.

Technology giants sue each other constantly and sometimes with great justification. Nearly 30 years ago, the FBI raided U.S. offices of Japanese-based Fujitsu and Hitachi claiming IBM mainframe computer technology had been illegally copied. Under an agreement, there were designated houses were the companies could inspect each other's products to guard against theft.

IP is expensive. So far this year, IBM has reported spending $4.7 billion, around 6 percent of overall revenue, on research; Hewlett-Packard spent $3.25 billion, around 2.5 percent of revenue and Intel has spent $6 billion, around 15 percent on research.

For all that, it's understandable the players are jealous of their IP. But wouldn't it be cheaper to cross-license in the end and collect royalties? That scheme has worked wonders for the likes of Texas Instruments and Intel for years.