Weekly Update

Why the patent wars will move to the cloud

Google’s $12.5 billion acquisition of Motorola this week has been widely interpreted as a bid to control the mobile phone company’s portfolio of 17,000 mobile patents. As Colin Gibbs noted last week, handset manufacturers such as Apple, Samsung and HTC appear increasingly willing to claim patent infringement in order to distract or derail rivals. But in cloud computing, despite the presence of big companies and their wealth of technology patents, we haven’t seen widespread use of patent-related litigation. Yet.

Let’s start with the basics, the term “cloud computing.” Back in 2007, Dell filed an attempt to patent the term and completed several steps of the registration process before the claim was abandoned. Dell was not the first to try this. NetCentric had made a similar attempt a decade earlier and had secured the patent for a time before losing it through lack of use.

Even if a patent were granted for the phrase “cloud computing,” it’s unlikely that any company could successfully pursue competitors through the courts for “abuse” of such a common and generic term. But patents granted to protect the technologies and processes that underpin the cloud are easier to defend and have more potential to result in expensive litigation. The United States Patent and Trademark Office, for example, records 292 patents concerned with “virtualization” and 170 with “cloud” in the title. Many more relate to storage, networking, processing and other aspects of any successful cloud deployment, and mining patent databases for the valuable gems is the work of a growing industry. For example, in May of this year GTT Group announced a patent sale. It had identified 9 U.S. patents “essential to the present and evolving cloud computing ecosystem” and offered them to the highest bidder.

There are few examples of cloud patent litigation. Microsoft sued Salesforce in 2010 for infringement of 9 patents. Legal blogger Andres Guadamuz was unimpressed by Microsoft’s suit, described at the time as “puzzling.” Salesforce countersued before reaching an out-of-court settlement, which most likely favored Microsoft. Just this month, Oracle sued Oasis Research LLC to force a legal ruling on claims that Oracle had infringed 6 patents Oasis had acquired. Another company with a wealth of likely patents is Google. However, fears from as long ago as 2008 that Google would “use its cloud patents against competitors” so far appear unfounded.

As cloud products proliferate and the market becomes crowded, though, litigation becomes a more likely tool with which to obstruct competitors. CIO.com’s David Taber suggests that public cloud applications increase the likelihood of being targeted by those trying to enforce spurious patents. These so-called patent trolls, Taber argues, have a far easier time checking applications in the cloud than they would if these never left the corporate data center. And New York–based litigation attorney Nolan Goldberg is reported as raising a far scarier specter: that customers of cloud services may be targeted for alleged infringements. Suits of this kind have already been brought in the manufacturing sector. Network World quotes Goldberg as saying, “If the supplier makes a machine capable of performing A, B, and C, but the customer is the one who actually presses the button that performs the steps, in that case the customer could be the direct infringer, and the supplier might be the indirect infringer.”

It is easy to imagine scenarios in which cloud providers and their customers are bombarded by expensive patent infringement claims, but the truth remains that very few cases have been brought, and only a fraction of those have resulted in an actual settlement. The real danger in the patent space isn’t the targeting of inadvertent infringement by small developers. Rather, it lies in the malicious uses to which big IT companies might put their patent hordes: suing and countersuing their equally large competitors in a fight for dominance of the enterprise cloud. Other than in the Microsoft-Salesforce case, they haven’t done it yet . . . but it’s only a matter of time.

Question of the week

Will cloud providers increasingly use patents to attack their competitors?