Microsoft used to really push the ad campaign of being ‘scroogled’ to show that Google was giving a bunch of pointless search results instead of what you actually wanted. We can now use that word and its roots appropriately to describe what just happened to Google in a Virginia District Court, where Google faced a huge Patent War loss. Google’s AdWords software, which they use to make the super majority of their profits through ad placement on websites, as been found to be in violation of two patents involving the ranking and placement of ads. These patents, which are currently held by a company called Vringo, where bought from the original company called Lycos, and were used to sue Google. In late 2012, a similar trial in Virginia sentenced Google to pay Vringo $30 million, and also ruled that Google should pay Vringo an ongoing royalty until the patent expires. The two parties negotiated for quite the while, with Vringo insisting on a 1.26% royalty. Google claimed that they modified AdWords after the ruling, but District Judge Raymond Jackson ruled that it “clearly replicates the infringing elements of old AdWords”, and hence ruled that Google is to pay a royalty rate of 1.3585% from the date of the original infringement, November 2012, until the patent expires in 2016.
Google will most likely appeal this ruling, but should the rate stand, then the technology giant will pay hundreds of millions of dollars to Vringo. Google has yet to make public just how much cash flow AdWords generates, but rough estimates put it at around $15-18 billion. At that royalty rate, Vringo would bring in close to $250 million a year, and as the infringement has been set as a four-year period, that means that they will be getting close to $1 billion out of our beloved Android creator. Vringo is a perfect example of a ‘patent troll’, or a company that purposefully buys patents with the intent of suing other companies for infringement. Vringo has successfully sued Google, ZTE, ADT, settled outside of court with Microsoft, and others. This is a major problem, as patent courts, which were not intended for such frivolous litigation, are being plagued by these trolls. It has gotten to such a point that Congress passed the Innovation Act back in December, which will hopefully stem the tide of these pointless cases. Among many other things, the Act establishes a new policy in patent court that the loser of a case must pay the winner’s court fees, which will make the stakes of these multi-million dollar lawsuits even higher, and hopefully reduce the amount of times people will be willing to go to court. How do you feel about this? Have the Patent Wars gone too far and on for too long? Let us know that and any other thoughts in the comments!