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We’ll have to wait and see if Google throws Intellectual Ventures out of the Nest

We learned this week that Google has acquired Nest Labs – an SME that produces ‘smart’ internet-connected thermostats – for $3.2 billion.

That is a very significant amount of money to spend on a company of about 300 employees that was founded just four years ago. As our homes become increasingly web-connective, products such as thermostats that can be remotely controlled from a user’s mobile device are going to become more popular – and Google has clearly seen an opportunity to be involved in that burgeoning marketplace. That around a third of Nest’s staff – including CEO Tony Fadell – previously worked at Apple according to RTÉ News is also likely to have attracted Google’s interest. But there is another aspect about Nest that may have helped to encourage Google to make the investment it has; the fact that, for a company of its size and youth, Nest has a particularly advanced understanding of and approach to IP strategy (thanks in no small part to the expertise of Nest’s general counsel Chip Lutton, who was chief patent counsel at Apple between 2001 and 2011).

As this blog has previously reported, part of Nest’s IP strategy has involved a fairly close cooperative relationship with Intellectual Ventures (IV). In September last year, the SME signed up to IV’s ‘IP For Defense’ scheme, granting it a licence to some portion of the aggregator’s 40,000-plus strong patent portfolio. Nest has also acquired a number of patents outright from IV.

Now that Nest has been taken under Google’s wing, it will be interesting to see if the relationship with IV stays the same. Google has made clear in recent years that it is not the biggest fan of patent monetisation-focused business models. It invested in IV’s first patent purchasing fund – which was launched in 2003 – but stated that it would not be participating in IV’s proposed third acquisition fund, with a spokesperson from the company saying: “Once we came to understand IV's operating model, we didn't join its later funds."

On a related note, Google itself has been focusing more closely on IP strategy recently. Research released this week by IFI Claims reveals that Google was granted almost twice as many patents by the USPTO in 2013 than in 2012, moving up to 11th place in terms of recipients of US patents after coming 21st the previous year. Google didn’t even make the top 50 in 2011. 

Speaking at last year’s Intellectual Property Owners Association annual meeting in Boston, Allen Lo, Google’s deputy general counsel for patents and patent litigation, said that his company’s patenting and IP acquisition strategies were largely determined by the need to defend the Android ecosystem and Google’s business partners from attack. As Google has moved into new and diverse areas of technology, the threat from competitors and NPEs has increased, he explained – necessitating a more intensive approach to patent filings and purchases.

Perhaps, then, there is a chance that Google will see an advantage in the purported defensive benefits of Nest’s hook-up with IV. Furthermore, IV’s recently launched transparency drive may sugar the pill for those at Google who harbour particularly anti-NPE views. Either way, it is worth keeping an eye on how Google – and its public relations team – handles Nest’s partnership with IV.

Jack Ellis
IAM Magazine
16 January 2014

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