Facebook’s Efficient Infringement of Social Media Platforms Continues to Impact Snap Shareholders

By Steve Brachmann
November 6, 2017

“Snapchat, Social Media, Smartphone” by TeroVesalainen. Public domain.

The world’s most popular social media platform is the one operated by Menlo Park, CA-based Facebook Inc. (NASDAQ:FB) according to statistics published this March by the World Economic Forum (WEF). As the WEF notes, Facebook’s 1.8 billion monthly users gives it a population that, were Facebook its own country, it would be the most populous nation in the world. In Russia, China and parts of Africa, Facebook isn’t first among social network providers, bowing in those regions to V Kontakte, QZone and LinkedIn, respectively. But in 119 countries out of a total 149 countries analyzed, including the entire Americas, Facebook reigns supreme.

Facebook’s domination of social media does not simply revolve around its flagship eponymous social media platform. The tech giant also owns the second- and third-most popular social media services, WhatsApp and Facebook Messenger, each of which is used by 1 billion people every month. Instagram, the photo-sharing platform acquired by Facebook in April 2012 for $1 billion, is in seventh-place with 600 million monthly users. Collectively, that’s many multiples higher than the 300 million monthly users who are on Snapchat, the social media platform owned and operated by Los Angeles-based Snap Inc. (NYSE:SNAP) Snapchat places 11th among social media platforms around the world, according to the WEF.

Recent months have not been friendly to Snap’s business activities. Although shares of Snap stock reached highs of more than $29 per share in early March, Snap shares fell below the $17 per share price, the price per share at Snap’s initial public offering (IPO), by mid-July and they’ve continued to decline. Sales of Snap’s Spectacle wearable hardware devices have not materialized as the company imagined and this October, Snap CEO Evan Spiegel remarked that the company would slow hiring practices during 2018 after having already laid off some workers this year. Shares of Snap are also reportedly seeing increased short sale interest, a sign that financial analysts think that the price per share has not yet bottomed.

Snap has attempted to remain competitive with new features, such as increasing the allotted time for video capture and introducing new drawing tools this May. But it hasn’t been able to gain a foothold against Facebook, a company which reportedly offered to buy Snap for $3 billion prior to Snap’s IPO. In a piece published in the January 2014 issue of Forbes, Spiegel is quoted as saying that Snap turned down the Facebook offer because they wanted to build the business themselves and not give it up for a short-term gain.

In the context of Facebook’s seeming eagerness to buy Snap and the Snapchat platform for more than it was worth at the time, the tech news publication Engadget ran an article in mid-September with a very interesting headline: Facebook knew about Snap’s struggles months before the public. The piece is a follow-up from an article published by The Wall Street Journal which reported that Facebook has been keeping tabs on Snapchat traffic beginning in late 2016 with the use of data collected through an app developed by Israeli firm Onavo, a mobile analytics company that Facebook acquired in 2013. Onavo’s data security app ha enabled Facebook to find out that Snapchat’s growth was slowing months before Snap announced slow growth in February 2017.

The disclosure of Snapchat’s waning growth came in documents filed by Snap with the U.S. Securities and Exchange Commission (SEC) on February 2nd of this year, particularly Snap’s S-1 filing to go public in an IPO. A good deal of language from the S-1 filing, especially where it is concerned with competition from Facebook, now seem prophetic from the vantage point of nearly nine months. Facebook is mentioned a total of six times in the S-1 filing and it’s noted that Facebook, along with other competitors like Apple and Google, could release features that compete directly with Snapchat. “For example, Instagram, a subsidiary of Facebook, recently introduced a ‘stories’ feature that largely mimics our Stories feature and may be directly competitive,” the S-1 filing reads. The S-1 filing notes that competitors like Facebook have much larger user bases and financial resources than Snap and that they could use their dominant position to gain a competitive advantage in several ways, such as integrating social media features into search engines or mobile device operating systems, making acquisitions of complementary products or impeding accessibility to Snapchat by modifying existing hardware or software. Facebook continues to make acquisitions of companies offering features competitive to Snapchat, such as its mid-October acquisition of anonymous polling app tbh for a reported $100 million.

“If we are unable to protect our intellectual property, the value of our brand and other intangible assets may be diminished, and our business may be seriously harmed,” one of the section titles in Snap’s S-1 filing reads. Of course, in the current IP landscape, there is no real ability to protect that property, especially where it pertains to patents. And Facebook’s copying of features which are valuable on the Snapchat platform has been blatant. It reportedly came up in an interview that Miranda Kerr, an Australian model who is now married to Evan Spiegel, gave to UK news outlet The Times: “Do they have to steal all of my partner’s ideas?” And news media has been picking up on the similarities between recently released Facebook features and those from other social media platforms, including features like Messenger Reactions, Facebook Camera and Messenger Day.

Interestingly, the title from the Quartz article linked in the previous sentence really drives home an important point of the whole Snap/Facebook situation: Facebook is proof that you don’t need an original idea to be wildly successful. And in today’s IP climate in the United States, you don’t need to be original to be successful. You just need to have a dominant market position and the willingness to be unscrupulous in taking the original ideas of others. Simple, really. And it will likely stay that way in the years to come, much to the chagrin of smaller, more nimble entities in the tech world who want a fair chance to compete in the marketplace. It will remain at least as long as the Patent Trial and Appeal Board (PTAB) created by the America Invents Act (AIA) continues to render defective more than 90 percent of patents challenged at that agency. As long as the U.S. Supreme Court’s patentability standard coming from its 2014 decision in Alice Corp. v. CLS Bank International remains, tech companies like Snap cannot hope to protect many of their most innovative and popular software features, regardless of whether they hold a patent covering that software now. And the situation likely won’t get any better as long as the person serving as the well-paid chairman of the House IP Subcommittee continues to hold hearings with panels stacked with witnesses biased against patent owners as he hurls invectives against plaintiffs bringing patent infringement claims in a way that would define himself, an inventor holding patents which were asserted in district court, as a “patent troll.” The decline of the U.S. patent system in recent years has been well-documented and while it may be heard in Washington, it’s barely listened to.

The Author

Steve Brachmann

Steve Brachmann is a writer located in Buffalo, New York. He has worked professionally as a freelancer for more than a decade. He has become a regular contributor to IPWatchdog.com, writing about technology, innovation and is the primary author of the Companies We Follow series. His work has been published by The Buffalo News, The Hamburg Sun, USAToday.com, Chron.com, Motley Fool and OpenLettersMonthly.com. Steve also provides website copy and documents for various business clients.

Warning & Disclaimer: The pages, articles and comments on IPWatchdog.com do not constitute legal advice, nor do they create any attorney-client relationship. The articles published express the personal opinion and views of the author and should not be attributed to the author’s employer, clients or the sponsors of IPWatchdog.com. Read more.

Discuss this

There are currently 5 Comments comments. Join the discussion.

  1. f23f32f2 November 6, 2017 12:30 pm

    And Snap “copied” the whole idea of sharing media on a social network; and “copied” the idea of applying filters to a photo; etc. etc. If all these things could be patented in the first place, then Snap wouldnt be able to exist…. The fact that these are not considered patentable is what allows a company like Snap to build itself from nothing in the first place.

  2. Gene Quinn November 6, 2017 12:47 pm

    f23f32f2-

    Copying an idea, which cannot be protected, and stealing protected property rights are very different things.

  3. f23f32f2 November 6, 2017 6:04 pm

    Gene, the author is accusing FB precisely of stealing Snap’s “ideas.” It never says anything about FB stealing Snap’s “protected property rights.” As I said, if such ‘ideas’ were patentable, then Snap could not have existed in the first place.

    “Do they have to steal all of my partner’s ideas?”
    “For example, Instagram, a subsidiary of Facebook, recently introduced a ‘stories’ feature that largely mimics our Stories feature and may be directly competitive,” the S-1 filing reads.”

  4. Chris Gallagher November 7, 2017 11:49 am

    “And in today’s IP climate in the United States, you don’t need to be original to be successful. You just need to have a dominant market position and the willingness to be unscrupulous in taking the original ideas of others. Simple, really. ”

    In this short excerpt Steve says it all.
    Big IT tech uses their users to sell ads. They use PTAB petitions as buy-out bargaining chips. And if all else fails, they use efficient infringement .
    They use our patient system abusively because THEY CAN . If SCOTUS doesn’t rescue US innovation by its Oil States decision, it is destined to continued domination by big tech incumbents.

  5. evan j November 17, 2017 8:56 am

    This is late, but I will say, the line “If we are unable to protect our intellectual property, the value of our brand and other intangible assets may be diminished, and our business may be seriously harmed,”is standard boiler plate language for an SEC filing. I would be surprised if there were many companies that do not say this precise language in their S-1.

Post a Comment

Respectfully add to the discussion.

Name *
Email *
Website