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Over the years executives at Hewlett Packard have often been very critical of many of the activities of NPEs. Recently, the company’s head of IP litigation penned articles, on IP Watchdog and IP 360 (subscribers only), that restated the company’s concerns and which subsequently generated a strong counter-attack from prominent figures in the NPE community.
Unlike other operating companies, which have often been high on rhetoric, but which in reality have been happy to do business with NPEs in one way or another, HP has backed up its words with actions. Specifically, it is the only big technology company that I can think of which has had a stated policy of not selling patents to any entity which may then use them for offensive purposes. No doubt, this has cost HP considerable amounts of money - because sales that could have been made were not made and because when you rule out a section of the buy-side you have much less leverage in pricing. Now, it seems, HP could be about to have a change of heart.
Writing in the most recent issue of IAM, in the Transaction talk column the company pens for the magazine, HP’s licensing VP Charlie Chapman and senior licensing manager Pallavi Shah explain that some current provisionsin sales contracts – including no offensive uses and remedy sub-licensing clauses – are under review. “By incorporating these provisions into its patent sales agreements, and by doing so in a way certain to be noticed, HP had hoped to encourage other patent sellers to take similar steps. This hope was driven in part by HP’s view that the activities of patent assertion entities were fundamentally anti-consumer and anti-innovation,” they write.
But the reality is that others have not taken similar steps. More and more operating companies are selling to NPEs; so far from initiating a trend, HP has actually found itself somewhat isolated. Although Chapman and Shah state that it is difficult to assess what impact the restrictions have had on HP’s monetisation efforts, they do confirm that “it has been a topic of discussion” inside the company. It is important, they say, “to assess what strategic benefits were gained by those practices and to ask whether the trade offs were in the best interests of the company’s shareholders”. Chapman and Shah conclude: “This assessment process should be ongoing to capture developments within the company and in the marketplace. The current assessment underway at HP already points to a much more flexible approach going forward.”
So, while there has been no official announcement of a change in policy at HP yet, the signs are that it is going to happen, at least to some extent. For HP investors this should mean bigger returns in the future, as the sales team will have greater deal-making scope. But there will also be important framing considerations for the company as a whole. After all, how can you continue to be a strident critic of NPEs, while at the same time opening up the possibility that you will sell patents to third parties which may use them for offensive purposes? There is, I suppose, an argument that goes along the lines of “if you can’t beat them, join them”, but I am not sure how many people will buy that. More realistically, HP may just have to admit that it accepts the world is what it is: there are no moral judgements to be made about how patents are used - as long as they are used legally - and that the job of a company is to make sure it gets the best possible returns for its shareholders.
IP management, Licensing, IP politics, IP litigation, Patents, IP business