In order to avert expensive patent litigations, Cisco Systems, Inc. (CSCO) entered into a long-term patent cross-licensing agreement with Google Inc. (GOOG). However, the details of the agreement, which was announced earlier this week, were not disclosed by either of the companies. The deal was described as a “cross-licensing agreement covering a broad range of products and technologies.”
As a result, Google and Cisco have granted each other perpetual licensing rights that remain even if the patent is subsequently sold off. The agreement is intended to oppose the patent deals of other firms that have engaged in "patent privateering.”
At times, technology companies transfer their patents to a patent assertion entity, which is not bound by the same laws and is therefore able to extract bigger licensing fees from competitors. These entities, or patent trolls as they are called, engage in significant litigation that wastes time and money of the competitors. This process is referred to as privateering.
Both Cisco and Google are part of an alliance called the Coalition for Patent Fairness that seeks to minimize litigation between technology companies and thereby devote more energy to innovation. Samsung, Dell and Adobe (ADBE) are other major players that have joined this coalition.
On the one hand, this deal ensures that neither party will use these patents to litigate against each other, while on the other it ensures that no other party can use these patents to litigate against them.
That is a direct attack on tech firms that are part of the Rockstar Consortium, including Microsoft Corporation (MSFT) and Apple Inc. (AAPL) that try to impose patents and are involved in multiple patent litigations.
Cisco, a San-Jose based company founded in 1984, designs, produces and sells Internet protocol (IP) and other networking equipment to the information technology industry worldwide.
For Cisco, its focus on cross-licensing comes after a number of high-profile fights against shell companies that abuse the patent system while for Google, it is the second cross-licensing deal after the one with Samsung.
Currently, Cisco holds a Zacks Rank #4 (Sell) while Google carries a Zacks Rank #3 (Hold).
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