LG has signed a deal with patent house Intellectual Ventures (IV), making it the latest smartphone manufacturer to do so. Intellectual Ventures generates revenues primarily by licensing out its huge patent library instead of using these patents to manufacture its own products. The deal will give LG access to IV patents that will allow it to counter attack against any competing firm which decides to launch an intellectual property suit against it.
This deal reflects a trend that is taking shape in the industry, as many other tech companies are likely to strike similar patent deals in years to come. The spike in breach of patent lawsuits in the technology world has caused firms to look for ways of limiting their exposure through deals with large patent houses like Intellectual Ventures.
Intellectual Ventures is considered by many in the tech industry to be a patent troll, and a notorious one at that. A patent troll is any firm which grows by collecting royalties on patents they purchase from bankrupt firms, research institutes or top universities, without manufacturing their own products. The deal between LG and Intellectual Ventures allows the South Korean electronics company to access up to 35,000 patents in the IV patent portfolio.
The deal gives LG the ability to sue any other companies which are using IV technologies without a formal licensing agreement. This frees up LG to focus on their core business of creating and manufacturing innovative electronic devices without the concern over patent disputes. The terms of the deal were not disclosed, but it follows on the heels of a similar deal between Samsung and IV last year.
Other major smartphone makers including Research in Motion and HTC have signed similar patent licensing deals with IV in order to avoid potential lawsuits. Korean mobile phone maker Pantech has also signed a licensing agreement with IV, and it seems that among the major phone manufacturers Motorola remains the only one willing to fight IV in court.
Handset makers must weigh the costs of litigation versus the cost of a licensing deal and decide which option is in their best interests. When the cost of the licensing deal is reasonable, the choice is often clear because the cost of fighting it in court can really add up over time. It is notable that Motorola refuses to sign an agreement with IV, in part because Google is an investor in IV and is also planning to acquire Motorola.
