I've always wondering how large companies buy and sell patents in bulk like that. Do they just point at a filing cabinet and say, there's 650 patents in there, it's yours for 550M$, take it or leave it. Or do they have an army of lawyers pour over them one by one?
No need for an army of lawyers. Most patent shops, either NPEs (ie, trolls) or large corporations big patent warchests will use legal case management software, eDiscovery systems, and patent ownership/submission tracking software.
In short, patents, like people, offices and other "assets" are managed using enterprise software.
I would assume that it's pretty easy for a company to take a set of claims/wording (ie, patents asserted in Yahoo's suit) and search using their systems against a corpus of both internal (patents, etc) and external sources (case findings and news - ie, like Lexis Nexus) the best fits to meet a given "need" - either the company is being sued, filing suit, or in this case, helping an ally/customer (note: Microsoft also owns an not-insignificant chunk of Facebook).
It's a bit of both. I don't work in legal but I see them going at it from time to time when patent stuff comes up. There is definitely 'the filing cabinet' (more like a room) and it contains one of several copies of the important documents - but the lawyers are the interface to those documents.
Sometimes I can't help but feel that most lawyers do not much more than present an obfuscation layer around standard forms.
Sometimes I can't help but feel that most lawyers do not
much more than present an obfuscation layer around
standard forms.
I bet non-technical people also have that feeling about engineers.
"It took you a second to change the behavior of this. You're obviously not working very hard." ..when in reality, it took a lot of effort to make a system flexible enough to adapt its behavior quickly to changes in requirements.
Great point, my lawyer has saved me much more than she costs because she alerts me to things I had no idea I was even doing incorrectly. Things like an audit waiver so I don't have to pay an auditor to audit my own companies' finances.
Its not about how much a lawyer costs, its about how much they make you.
$550M in cash this week for a patent portfolio. $300M last week for Instagram (edit: typo). This has been a very expensive few days for what is still a private company. How much cash does Facebook have?
I dunno. I look at those same numbers and read "They've just blown through 25% of their cash on hand within a week." Something's weird. Could be they know the IPO is going to be huge, or they have a new revenue source, or they're desperate the IPO is going to tank and need to look wealthier than they are. But that's a high burn rate even for Apple or MS.
Uh... how so? I mean, I understand you're argument: you're basically saying that the sample size is too low because of these two outliers and that the aggregate burn rate is much less. Which is true, but IMHO completely misses the point.
The goal here isn't to measure the burn rate with precision, it's to figure out what the risk is of Facebook running out of money. And in that context, dropping a quarter of everything you have, without warning, on two very large purchases of questionable[1] real value seems like a really important data point to me.
[1] Lest I be misunderstood, I'm not saying that they are without value. I'm saying that the value isn't at all obvious even to expert observers -- two weeks ago, had someone suggested that facebook buy a $1B photo startup or $550 worth of patents from Microsoft they probably would have been laughed at.
The fact that they've spent 25% of their cash in one week doesn't really tell us how much they have spent in the past, nor if they are going to(or even likely to) spend as much in the next few weeks.
The reason is that these are one-off purchases. Burn rate is typically used for recurring expenses like office rent, salaries etc. For example, if your startup's burn rate is 100K/mo and has 1 million in cash, it will need another funding event before 10 months(if everything remains the same).
Regarding the purchases, I think Zuckerburg knows much more than we do. He has proved to be a very shrewd negotiator (see the IPO terms) and there seems to be more around this than has been let on, especially regarding the patents and chances of Google integrating Instagram into G+ and turning it instantly into a photosharing hub.
Considering they made two one-off huge burns in a week, what are the odds they will manage not to make two other similar burns and spend another 25% of their reserves? If they had the need to make them, what are the chances they'll need to do it again and what the penalties will be for not making them?
I agree the burn rate is not hugely impacted by these two events, but they signal the burn rate is not constant. If in early April we knew Facebook had money for, say, 1 year, we now know they have money for 8 months.
You simply recapitulated your sample size argument. Did you read what I wrote? There's a difference between computing an average and computing the variance. Big spending sprees may not affect the former, but the clearly affect the latter. And from an investing perspective right now, given the impending IPO, it's the latter that is more important. "What is the risk that Facebook will run out of money in the next N days?" is not a question that can be answered by multiplying N by their average burn rate!
It is Intagram, not Infogram. And the purchase price was $1B, not $300M. Facebook's trailing 12M revenue was a billion dollars, so it's not as if they have cash problems.
It was a billion in nominal value, but most of that was Facebook stock (at a valuation of $75B, thus all the stories last week about whether the IPO would cover that or not).
Instead of just working out a licensing deal on Yahoo's 10 claimed infringing patents, Facebook spends $550 million to buy 650 aol/m$ patents. I bet FB's board was involved with this decision.
While Microsoft is making a tidy profit from these patents, keep in mind that they have a +- 3% stake in Facebook. I'm sure they would love these Yahoo! lawsuits to go favorably for Facebook.
Then again, Yahoo search is powered by Bing. Microsoft has a stake in both aspects of the fight. I expect they'll be playing mediator, doing their best to make sure no one loses.
I think we are about to witness a Software Patent World War unfold in MAD-style (mutually assured destruction). The software patent laws have trapped everyone into corners from which it is no longer possible to innovate without trampling on someone else's intellectual property. The absurdity of our litigious bureaucracy is going to de-evolve into madness that will make patent lawyers every where squeal with joy and the make the lives of technology workers everywhere suck.
The analogy fails because, in MAD, the unthinkable scenario happens quickly and there is no turning back once the process starts - effectively preventing it from starting - while in the lawsuit-standoff-from-hell it is a very long and expensive process with plenty of opportunities to abort and negotiate a deal.
Still, the MAD doctrine won't prevent this war. The damage is spread across periods too long to effectively prevent lawsuits. Or innovation. It will just raise entry barriers and prevent small players from entering the market (or impose additional costs when they become large enough).
