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IBM Accuses Twitter of Patent Infringement (IBM, TWTR)

IBM Accuses Twitter of Patent Infringement IBM, TWTR

The timing couldn’t be worse—or maybe it couldn’t be better depending on who you ask but only a few days from its IPO, Twitter (NYSE: TWTR)  updated its S-1 filing with details that involved IBM (NYSE: IBM).

Specifically, it disclosed that IBM is accusing it of three patent violations.

“…we recently received a letter from International Business Machines Corporation, or IBM, alleging that we infringe on at least three U.S. patents held by IBM, and inviting us to negotiate a business resolution of the allegations.”

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The S-1 goes on to detail the patent numbers and brief descriptions—tech speak that the layperson wouldn’t understand like “programmatic discovery of common contacts.” Twitter believes that it has a defense to these allegations but as it says in the filings, “there can be no assurance that we will be successful in defending against these allegations or reaching a business resolution that is satisfactory to us”

Related: What You Need to Know About the Twitter IPO

Possibly more alarming to investors, it admits that it’s a little fish in a large patent pond with many of the players having deep pockets. It even calls out patent trolls saying, ““In addition, various ‘non-practicing entities’ that own patents and other intellectual property rights often attempt to aggressively assert claims in order to extract value from technology companies.”

As everybody knows, there’s no absence of patent litigation, especially among technology companies. Patent trolls and other tech companies will closely watch how Twitter resolves the IBM situation. If it puts up a fight in court, (although IBM isn’t expected to take it that far) that sends one message. If it quickly tries to reach a settlement and pay big dollars to make it go away, that could invite a flood of patent claims against the company.

Twitter reportedly has new technology in the pipeline that it expects to roll out in the near future and it acknowledges that with every new innovation, it opens itself up to more patent battles despite having a reputation of being very developer friendly with its own technology.

But what about the timing of this announcement? Is IBM really that concerned about these supposed infringements or does it have another motive? Maybe it’s looking for Twitter to offer it a piece of the IPO in exchange for turning the other cheek.

Disclosure: At the time of this writing, Tim Parker had no position in the companies mentioned.

Posted-In: IBM twitterNews Legal IPOs Tech Best of Benzinga


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