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Twitter’s IPO is likely to be one of the most scrutinised since Facebook went public in May 2012. The company’s estimated value is almost $10 billion; but don’t look to patents for the reason why. Twitter’s portfolio is miniscule; but it has spent seven years building its brand and it is here where its true value lies.
Twitter has just two patents - US 8448084: “User interface mechanics” and US 8401009: “Device independent message distribution platform” – along with nine others in acquired companies TweetDeck, Bluefin Labs and Dasient. A decent-sized portfolio can make IPOs more attractive to many investors as they can give reassurances that the company is not completely powerless to fend off attacks. Prior to its IPO, Facebook focused on increasing its arsenal, acquiring 750 patents from IBM and 650 from Microsoft to add to 143 it already owned. Twitter may decide to do the same, via purchases and membership of entities such as the Open Invention Network.
What we do know is that Twitter has given patents a lot of thought. IAM reported the company’s implementation of its Innovator’s Patent Agreement (IPA), which significantly restricts Twitter’s use of its patents in litigation. As we pointed out, this could substantially reduce the value of the rights that Twitter owns now and those that it may procure/acquire in the future.
However, the company has huge customer loyalty; with more than 200 million users worldwide. Being voted the world’s 8th coolest brand by the CoolBrands Council, just behind YouTube (6), and Google (7), demonstrates Twitter’s appeal. It is this audience advertisers want, having realised the reach social media platforms can provide. Estimates suggest that Twitter will generate $583 million in advertising sales this year; surpassing $1 billion by 2015.
It is Twitter’s anticipated growth that will entice investors to the business – growth that is largely a result of the way in which the company has leveraged its brand. The size and quality of its patent portfolio is pretty peripheral to this. And if the worst does comes to the worst, it can always go out and buy or license what it needs. Sometimes it’s not patents that set technology-based companies apart.
Brands, Patents, IP business, IP valuation