The Social [Amazon] Network: Intellectual Property Analysis of Amazon.com's social networking patents
Amazon owns a growing set of social networking patents that describe key aspects of Facebook and legally predate Facebook by seven (7) years. Given Facebook’s strategy of back-filling its patent portfolio to retroactively protect itself (i.e. the company filed over 410 US patent applications in the past 18 months vs its 56 granted US patents), what do these Amazon patents mean to Facebook's investors and its forecast $100 billion dollar valuation?
Following its February 1, 2012 filing for an Initial Public Offering, Facebook’s anticipated $100 billion valuation places it well within the top 20 businesses worldwide. At the same time, a bigger patent litigation target is painted on the company's back, and raises the obvious question: does Facebook have the intellectual property to defend its business activities?
As we reported on February 10, 2012, Facebook clearly has doubts about its patent portfolio. Over 65% of Facebook's US patent portfolio was originally issued to other entities (e.g., Facebook was NOT the source of the innovation). Additionally, in the past 18 months alone, Facebook's patent filings have increased nearly 800% versus their entire cumulative 8-year history (over 410 US patent applications in the past 18 months versus 56 issued US patents). Unsurprising, considering the company has been sued over 30 times for patent infringement since 2007 alone, and has already tasted defeat at least once. In 2010, Facebook was found to have infringed eleven patent claims from a company called Leader Technologies.
Given this massive effort to backfill its patent portfolio, à la Google, perhaps Facebook is currently searching for its own $12.5 billion “Motorola Mobility” patent trove? If so, it needs look no further than Amazon.com (“Amazon”).
Though, that's assuming Amazon wants to play nice.
Amazon has been quietly building a family of six (soon to be seven) social networking patents that continue to describe, in increasingly specific detail, key aspects of Facebook that predate Facebook by seven years. Amazon’s latest patent, for instance, is titled “Social networking system capable of notifying a user of profile updates made by the user's contacts.” Does this bring a certain red icon to mind? One of the patents even describes a way that “users can identify other users based on their affiliations with particular schools or other organizations.”
Perhaps the most important question that future investors may want to ask: what could these patents mean to Facebook's forecast $100 billion valuation? As we’ve seen over the past few years in the mobile device field, patent assertion can ultimately lead to blocking the sale of a product, or, at the very least an innovation tariff that drags down earnings. Amazon’s position is reminiscent of NTP’s effects on Blackberry.
Though, that's only if Amazon wants to play hardball.
Read on as we look further into Amazon's social networking portfolio.ShareThis