There's nothing like a good David/Goliath patent war to stir the market pot. Some would say that patent litigation has gotten out of hand in recent years, with lawyers upon lawyers getting richer and richer with money that could have otherwise been used to make our lives better with improved technologies. But this is not the fault of companies. They are just using tools provided to them to acquire as much money as possible, which is generally what all companies are created to do. If you claim that patent litigation has gotten out of hand, then you are basically arguing for the abolition of all patents. While this position has its merits as brand name and secrecy would be the name of the game and courts would stay out of it, it is not one that is currently seriously considered by anyone even close to power.
Be that as it may, the latest example of a David/Goliath patent war is Single Touch's (SITO.OB) November letter of notification to Amazon (AMZN) informing the latter that it may be in violation of one of their online streaming patents. Single Touch is the David here, a mobile advertising company that gets most of its revenue through AT&T (T) via an ad deal with Walmart (WMT). Walmart customers text #WMT through a phone and sign up for text messages about weekly deals, and Single Touch charges per text. They are a $53M company with retained deficits of over $120M, but Single Touch is still armed with $641,000 worth of patents (page 1), and they plan to defend them against Goliaths like Amazon.
Their letter of notification alleges that Amazon is violating Single Touch's online streaming patents by selling a video service similar to Netflix (NFLX) to its customers. And they have sued in the past, most recently Hulu this past August, owned by News Corp (NWS) and Disney (DIS), over the same online streaming patent. Lag time between the letter of notification sent to Hulu and the actual lawsuit was exactly one year, so we can probably expect something similar in the Amazon case as well.
The same thing has already happened in the casino gaming sector. MGT Capital Investments (MGT), a $14M company, has recently filed suit against four major gaming companies demanding a cut in the revenues for every slot machine game that has a "shared-display bonusing event," a game feature MGT supposedly has a patent on. With a David and Goliath patent fight already launched in the casinos and one threatening between Single Touch and Amazon, the question is who's next?
There has been no indication from the company itself, but the next David and Goliath patent battle could conceivable be between Mobivity (MFON.OB) and Google (GOOG) over US patent 6788769 B1, which, in Mobivity's words:
…covers a method and system for using telephone numbers as a key to address email and online content without the use of a lookup database. Using this system, a phone number is used to access a website or an email address in exactly the same way it is used to dial a telephone.
This sounds a lot like Google Voice, which allows a user to put his phone number into a system and receive both an email and a text message to a mobile phone of any voice message received. The technology Google uses to match a phone number with an email address could be covered by this patent.
Mobivity is a tiny $5.8M company but with some impressive revenue growth recently (Q1 through Q3 2012 revenue is already outpacing all of 2011 by 20%) and Google is, of course 38,827 times bigger than them, but a patent is a patent, and our judicial system is our judicial system, for better or worse.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it. I have no business relationship with any company whose stock is mentioned in this article.