Twitter buys patents from IBM, enters into cross-licensing deal


Twitter (TWTR -1.2%) has bought 900 patents from IBM (IBM -0.9%) for an undisclosed sum.  The sale, along with an attached cross-licensing agreement, ends an IP dispute between Twitter and IBM related to patents the latter believed the former was infringing.

In prior years, IBM has sold 750 patents to Facebook, and over 2K patents to Google. The company has consistently topped U.S. patent grant rankings for two decades, and is believed to generate ~$1B/year in patent licensing revenue.

The deal shores up Twitter's relatively paltry IP portfolio, a portfolio that some have considered a business risk. Twitter, through its Innovator's Patent Agreement, has promised it won't use patents created by its own engineers/designers for "offensive litigation" without their creators' consent.

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Comments (18)
  • Momintn
    , contributor
    Comments (6073) | Send Message
     
    Over the past 5 years, #IBM generated more than $5 billion in intellectual property income. http://ibm.co/1kfu5on (Income, not revenue)
    31 Jan 2014, 09:57 AM Reply Like
  • benitus
    , contributor
    Comments (3462) | Send Message
     
    No big deal. Goes to show how TWTR has been stealing patents to get their show going. Who knows how many more such shady work has been going on?
    31 Jan 2014, 09:57 AM Reply Like
  • samuel_liu
    , contributor
    Comments (2753) | Send Message
     
    The IP laws are ambiguous. as Steve Jobs, Bill Gates et al said die to the legal environment it would be nearly impossible to begin such industries.
    31 Jan 2014, 10:24 AM Reply Like
  • Tom Armistead
    , contributor
    Comments (6209) | Send Message
     
    This intellectual property income raises the question, why IBM doesn't develop the products that are supported by their technology?

     

    Twitter, Facebook and Google are big, and all of them rely on IBM technology, to judge by their purchase of the patents.
    31 Jan 2014, 10:12 AM Reply Like
  • Oguz Erkol
    , contributor
    Comments (105) | Send Message
     
    So when will Twitter start to make income? I thought it would do in 2019, but I now think I should set the date.
    31 Jan 2014, 10:58 AM Reply Like
  • Tales From The Future
    , contributor
    Comments (7572) | Send Message
     
    IBM does a lot of great research work and basic R&D. But I'm doubtful what kind of patents TWTR needs.

     

    Broad Internet or messaging concepts (such as the infamous 1-click shopping patent awarded to AMZN) shouldn't be given patent protection in my opinion.

     

    Hoping for patent reform one day in the U.S.
    31 Jan 2014, 12:37 PM Reply Like
  • benitus
    , contributor
    Comments (3462) | Send Message
     
    Strict patent protection is very necessary to encourage more investment into R&D, which has always been IBM's forte, as they used to assemble a great team of powerful minds, until recent times. IBM has always a snobbish attitude that if the market is not big enough to satisfy their ravenous appetite, they won't expend further resources to develop their discoveries, besides publicizing them, so they're perfectly content with letting others do the dirty work for a price and if the market does materialize, then they'll get involved themselves.
    31 Jan 2014, 02:50 PM Reply Like
  • ValueinvestorEU
    , contributor
    Comments (562) | Send Message
     
    What is fun about this is that Twitter gets away with not disclosing the amount.

     

    at the same time every time bad news comes out, some unknown investor steps in and buys up on the small float to calm investors. If the stock price rises it cant be that bad can it?

     

    Then the media wont comment on it either.

     

    Twitter has most likely paid between 500 million and a billion dollars for those patents (if Microsoft and Facebook can be benchmarks). It doesnt seem to me that a billion dollar financial hit is a minor thing and its not somethig the market expected.

     

    the SEC should look into the activity in Twitter. this is not only retail investors that love a stock. I take moral issue with whats going on.
    1 Feb 2014, 02:46 AM Reply Like
  • benitus
    , contributor
    Comments (3462) | Send Message
     
    Yes, valueinvestor.....the SEC should look into this matter seriously. Something fishy here. Buying up patents just to make the legal dispute go away. One wonders whether it's lawful to do so because the law was broken in the first place when they infringed on IBM's patents. No one can rape another and then marry her just to make the charge of rape go away. That may happen in third world countries but certainly shouldn't be allowed to go un-noticed in the U.S. If SEC is so fastidious going after malpractices in the financial markets, then they must go after this fish.
    1 Feb 2014, 09:27 AM Reply Like
  • digiTrader
    , contributor
    Comments (56) | Send Message
     
    The IPO filing of Twitter informed that
    „We are currently, and expect to be in the future, party to intellectual property rights claims that are expensive and time consuming to defend, and, if resolved adversely, could have a significant impact on our business, financial condition or operating results“

     

    and:

     

    IBM claimed at least three U.S patents to have been infringed, such as :
    U.S. Patent No. 6,957,224: Efficient retrieval of uniform resource locators,
    U.S. Patent No. 7,072,849: Method for presenting advertising in an interactive service and
    U.S. Patent No. 7,099,862: Programmatic discovery of common contacts. Based upon our preliminary

     

    Well that kind of sucks, because IBM is bullying TWTR based on patent filings from the early days of web computing.
    But I agree on what has been said above, that the sum should be disclosed.

     

    End of comment:

     

    Now "off topic", ( if I may)
    The IPO filling with its more than 200 pages is all you need to take a look at in order to see how far away TWTR is from its real value.

     

    e.g
    "October 2013 Underwriter Valuation"

     

    "We determined the fair value of our common stock to be $20.62"
    "As discussed above, in October 2013, we and our underwriters determined an estimated offering price range of $17.00 to $20.00 per share of our common stock to be sold in this offering, and this estimated initial public offering price range was determined prior to conducting any marketing activities related to this offering. Subsequently, on
    November 3, 2013, we and the underwriters determined to increase the estimated offering price range to $23.00 to $25.00 per share. This revised estimated offering price range was the result of discussions between ourselves and the underwriters following the commencement of marketing efforts for the offering and reflect initial indications of interest
    from potential investors."

     

    Another highlight: on dilution:
    Existing stockholders 474,696,816 shares avg price per share: $ 2,21
    New investors 70,000,000 shares avg price per share $ 26.00
    Totals: 544,696,816 shares

     

    On Underwriting:
    "The underwriters must close out any naked
    short position by purchasing shares of our common stock in the open market."
    3 Feb 2014, 12:15 PM Reply Like
  • benitus
    , contributor
    Comments (3462) | Send Message
     
    digi.....great input, my friend. Thanks for the info and helping us muggles to have a better insight into the situation.
    5 Feb 2014, 06:47 AM Reply Like
  • ValueinvestorEU
    , contributor
    Comments (562) | Send Message
     
    Its illegal to withhold material insider information.

     

    I think legally the shareholders should know:

     

    What the effect of the huge new headquarter will be on their expenses

     

    What they have paid for the patents and what the terms are.

     

    If for some reason Twitter is putting this off or not mentioning this in their quarterly report, then I think investors could rightfully sue Twitter. Because their only incentive to not tell that would be to hold up the price till they can sell in may which is highly unethical.
    3 Feb 2014, 12:51 PM Reply Like
  • digiTrader
    , contributor
    Comments (56) | Send Message
     
    Valueinvestor, I do agree on what you said. Regarding stock price I would strongly assume that it is being "supported" by underwriters or related parties.
    Based on current free float of 70mn shares it doesn't take much to drive prices in any direction. Once lock-up shares come flooding in that game will end soon.
    3 Feb 2014, 03:32 PM Reply Like
  • ValueinvestorEU
    , contributor
    Comments (562) | Send Message
     
    I agree.

     

    But honestly, how come Barclays Goldman sachs and others havent had their banking liscenses withdrawn? I mean how many scandals of manipulation do you have to be in before the regulators can conclude its not just 1 employee in some firm, its on a broad basis they do this.

     

    To me it seems like the fines are just "business expenses" to these companies. If 1 of the big ones were actually told they had to sell of their company at some maximum price or have their liscences withdrawn I think it would make alot more of these company respond to authority.

     

    Right now market makers are free to manipulate the market as they see fit, why do we have the fed if they dont do anything about the most harming behaivors?

     

    I agree with the manipulation not being worthwhile once the float increases. they are most likely doing this because they have an option to purchase stocks and their fee is reliant on how well the stock does
    3 Feb 2014, 04:14 PM Reply Like
  • ValueinvestorEU
    , contributor
    Comments (562) | Send Message
     
    I meant why do we have the SEC.
    4 Feb 2014, 03:41 AM Reply Like
  • benitus
    , contributor
    Comments (3462) | Send Message
     
    valueinvestor....welcome to the real world. I've always said that this market is manipulated by the big boys and market makers (hedge funds, banks, corporations, etc.). The rest of us are minions and pawns being played over and over again. Where is the SEC when they are needed?? Probably in somebody's pockets!! Look at people like Madoff, whom I believe was head of the SEC at one time (correct me if I'm wrong), and who has bilked billions from his investors. What we make from rock-solid investments are often either swallowed up or diluted by these manipulations that we often end up feeding off each other's plays. Thanks for making the point better than I could.
    5 Feb 2014, 06:58 AM Reply Like
  • ValueinvestorEU
    , contributor
    Comments (562) | Send Message
     
    I dont think manipulation is present at any large scale in the vast majority of stocks, there is just these few hot stocks and IPO that they have incentive to manipulate and therefore try to.

     

    It is possible to outperform the market handily as I have done for many years now, but on the top of a bullmarket the investment banks seems to become still more scrupulous in their methods.

     

    You can tell something funny is going on when you look at the Twitter trades. It really gets to my moral code that they can get away with trading it up. It will cost so many retail investors a fortune.

     

    Specifically Twitter always seem to enjoy great support on days where the market is falling, also the bid / asks often doesnt make sense. at one time few thousand shares in the premarket were traded 0.5 to 2% higher each day regardless of what would happen when the trading started. I bet you they will be trying to buy up the stock in the afterhours tonight as well to erase any critical thought.

     

    Nothing works better at calming investors than a risng stock price, it erases a great deal of critical thought
    5 Feb 2014, 07:15 AM Reply Like
  • benitus
    , contributor
    Comments (3462) | Send Message
     
    Yes, valueinvestor, I can't agree with you more, except that I believe that any stock is fair game to these manipulators and blood-suckers (not just a few stocks) but it depends whether there is enough free-play interest on the market in any stock before they play with them. If nobody is interested in any stock, they will stay away from these stocks. Stocks like TWTR, FB, GMCR, FLSR, BBY, etc. are great for them because they can play the stocks up and down without batting an eye-lid and keep making money off them. That's why I'm able to make money just by following them, which is a no-brainer. Any stock that has a daily spread of $2 is fair-game for them. They will play up any stock, like TWTR, even when the market is down, just to inject more excitement to the investors, and bleed them when there's an excuse to turn around. I believe the insiders of TWTR are complicit in this game and they may keep on pushing up the price even when it's supposed to be down, so that they can release their shares eventually without pushing the price down too much and when they're done, that will be when the collapse begin, so that they can pick them cheaply at the bottom and restore their shares in the company.
    5 Feb 2014, 11:04 AM Reply Like
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