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Twitter's Patent Strategy: Don't Bother.

Twitter co-founder Evan Williams predicted yesterday that the social media company will hit a billion users in time. It seems like wishful thinking if you look at the company's traffic trend lines, but there's no question that Twitter is big in social media. That's why I find its patent strategy curious. Check US Patent Office records week after week and you begin to notice that Twitter doesn't appear to ever file an application, let alone receive a granted patent.

This isn't a mistake, but a deliberate strategy that runs counter to what you'll hear from almost every experienced high tech executive and investor. It's a strategy encouraged by at least some of the venture capitalists that invested in the company, and it may be one that works and saves money.

Given that a first prototype was up in 2006 and that Twitter spun off from Odeo/Obvious Corporation in 2007, initial patent applications, which the US Patent and Trademark Office publishes no later than 18 months after filing, should have shown up by now.

And yet they haven't. There isn't even one patent application on file. Early this year, I emailed Fred Wilson, a principal of Union Square Ventures, a VC firm that is a big Twitter investor and supporter, about Twitter's lack of public patent activity. At the time, he responded that he didn't know "what Twitter's patent situation is." He suggested that I try Twitter, which I did but never heard back. (And if anyone from Twitter is reading and willing, I'd be interested in chatting.)

VCs used to be the driving force for protecting intellectual property of all sorts so there was more tangible value to sell and protective measurements to keep competitors at bay. However, at least in high tech, there seems to be a wish for a different approach among at least some investors. Brad Burnham, also of Union Square, wrote about the problem that patent trolls cause for start-ups and noted that a third of the firm's investment portfolio was "under attack by patent trolls":

Maybe there are some markets where you could make a credible argument that someone who creates a foundational piece of technology should be able to control all of the downstream innovation that follows. Perhaps this can be argued in the case of pharmaceuticals. I think it is a stretch even there, but in information technology, I have never seen a software invention that is foundational in that way. Much more often, I see cases where a naïve patent examiner is hoodwinked into approving a patent on the software equivalent of the word "the" and when the patent later falls into the hand of a troll, it becomes the platform to systematically extort as broad a segment of the market as they can.
The strategy is to first sue smaller financially-constrained companies, make smaller amounts, and bankroll suits against large companies. Clearly Twitter is among those that have been targeted.

Why doesn't Twitter do the same? I suspect there is an intrinsic trade-off between protecting your territory and moving ahead at a speed that leaves would-be competitors eating dust. Currently, no other company -- including such larger competitors as Google (GOOG), Microsoft (MSFT), Yahoo (YHOO), or even Facebook -- has been able to supplant Twitter's popularity in the particular niche ability it offers people. It's like a race: look back and you lose speed and, eventually, the contest.

Settling a suit is cheaper than fighting one, especially if, as Burnham notes, you're dealing with companies that will take far less than they might otherwise because they're focused on large prey. You could see how a promising start-up could do the following:

  • Find an innovative area and move quickly to gain customers and establish a first-mover advantage, as was the rage during the dot com bubble.
  • Budget for two or three patent trolls to avoid being tripped.
  • Do everything publicly and quickly, eliminating your own potential patent advantage but also undermining the ability for another company to patent in and around what you are doing.
There are plenty of areas where this wouldn't work -- just ask Google, which not only faces a suit from Oracle (ORCL), but sees its hardware partners that use Android getting sued by the likes of Apple (AAPL) and Microsoft. There is too great a mass of conflicting patents in the mobile space, so a company has to have its own IP to help negotiate cross-licensing deals. But for a Twitter, the space is far more open and it's possible to ramp up faster than a larger company can respond.


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