Patents are Important: Bursting the Twitter Patent Mythology

By Gene Quinn
September 29, 2014

One of the frequent claims made by those in the anti-software patent community relates to Twitter and the clearly erroneous belief that patents are not important to the company. Indeed, recently when I wrote Fairy Tales and Other Irrational Beliefs About Patents the claim arose in the comments suggesting that Twitter is proof that patents are unnecessary to succeed. Quite to the contrary. If you actually concern yourself with facts, Twitter is a perfect case study to demonstrate just how important patents, particularly software patents, are to a start-up company that has aspirations of going public.

Doubt me? Perhaps you will believe Twitter themselves. In repeated filings with the Securities and Exchange Commission since October 2013, Twitter has explained over and over again just how important their patented technology is to the company. They have also repeatedly explained that unlike other companies and competitors, even with nearly 1,000 patents, their own patent portfolio is extremely small by comparison. This poses real concerns for Twitter, which is why they warn the SEC and investors of the ramifications of such a small patent portfolio with every new filing.

Let’s begin our tale at the start. Twitter, founded on March 21, 2006, was initially believed to be of the opinion that patents didn’t matter. Behind the scenes and unknown to many, Twitter was actively filing patents very early on in the development of the company. This is hardly shocking news given that Twitter’s initial round of funding dated back to 2007 and the near universal reality that high-tech investors not only love patents, but they demand patents. Investors love patents because if the company does not succeed at least some valuable patent assets will remain, which can be sold to recoup losses.

In any event, on March 18, 2013, Twitter was issued a patent on tweeting, U.S. Patent No. 8,401,009, but the patent application was filed on July 22, 2008. Twitter also obtained U.S. Patent No. 8,448,084, which issued on May 21, 2013, on an application filed April 8, 2010. Indeed, leading up to Twitter going public on November 7, 2013, the company made a filing with the Securities and Exchange Commission on October 24, 2013. This October 2013 filing explained: “[A]s of September 30, 2013, we had 9 issued U.S. patents and approximately 95 patent applications on file in the United States and abroad.” Thus, it is indisputable that before Twitter went public it had long since filed patent applications and obtained core patents that cover the very essence of the service provided.

[Patent-Business]

Also noteworthy, in the October 2013 filing with the SEC Twitter explained that their patents and patent applications are a indeed very important to the company. In Twitter’s own words, the company wrote:

Our trade secrets, trademarks, copyrights, patents and other intellectual property rights are important assets for us. We rely on, and expect to continue to rely on, a combination of confidentiality and license agreements with our employees, consultants and third parties with whom we have relationships, as well as trademark, trade dress, domain name, copyright, trade secret and patent laws, to protect our brand and other intellectual property rights.

Even more telling, Twitter specifically explained in the October 2013 filing with the SEC that even with the patents and patent applications it had amassed the company had far fewer patent assets than is typical for a company in this space. With such few patents there was a real risk for the company. Twitter explained:

Companies in the Internet, technology and media industries own large numbers of patents, copyrights, trademarks and trade secrets, and frequently enter into litigation based on allegations of infringement, misappropriation or other violations of intellectual property or other rights. Many companies in these industries, including many of our competitors, have substantially larger patent and intellectual property portfolios than we do, which could make us a target for litigation as we may not be able to assert counterclaims against parties that sue us for patent, or other intellectual property infringement.

Such a statement is damning proof against those in the anti-software patent community who erroneously contend that it is rare for companies in this space to seek patent protection. Quite to the contrary, companies in the Internet/Technology space routinely have vast patent portfolios. While this admission from Twitter should burst that bubble it is hard to imagine how such obviously erroneous beliefs could have ever been held. A simple search of the public records from the USPTO would show that companies in the Internet, technology and media industries own large numbers of patents. Frankly, it is those companies who do not own patents that are the oddballs.

But let’s go further as we dispel the myth that patents have never been a concern. Shortly after going public, in December 2013 Twitter acquired 900 patents from IBM. Given that the acquisition occurred within weeks of going public it is certain that the acquisition was well underway prior to Twitter going public and that the institutional investors were apprised of that fact while doing due diligence.

In a 10-K filed with the Securities and Exchange Commission in March 2014, Twitter explained:

As of December 31, 2013, we had 956 issued patents and approximately 100 filed patent applications in the United States and foreign countries relating to message distribution, graphical user interfaces, security and related technologies. Our issued United States patents are expected to expire between 2016 and 2031.

The latest 10-K filed with the SEC by Twitter on August 11, 2014 explains that the company now has 962 patents as of June 30, 2014. Furthermore, even after nearing 1,000 issued patents Twitter continues to state to the SEC that the portfolio they have is much smaller than the portfolios owned by other companies, including Twitter competitors. In August 2014, Twitter explained:

Many companies in these industries, including many of our competitors, have substantially larger patent and intellectual property portfolios than we do, which could make us a target for litigation as we may not be able to assert counterclaims against parties that sue us for patent, or other intellectual property infringement.

Clearly Twitter knows what the anti-software patent crowd refuses to believe. Companies in this space frequently file for and obtain patents, with successful and growing companies amassing many thousands of patents.

Twitter also went on to explain:

There may be intellectual property or other rights held by others, including issued or pending patents, that cover significant aspects of our products and services, and we cannot be sure that we are not infringing or violating, and have not infringed or violated, any third-party intellectual property rights or that we will not be held to have done so or be accused of doing so in the future.

Instead of responsibly moving forward to innovate and seek patents they acknowledge that there very well may be patents owned by others that cover “significant aspects” of the products and services offered by Twitter. It seems overwhelmingly clear that to the extent that Twitter was slow to seek patent protection initially, which they were, such an anti-patent stance will come at a severe cost in the long term.

You really have to wonder where the anti-software patent community gets its information. Clearly, Twitter considers patents an important asset, they filed their first patent application as early as 2008, they are aggressively acquiring patents and they say that they have every intention to continue to seek patent protection on their innovations.

If patent protection is good for Twitter then why exactly isn’t it the right idea for your start-up company that has dreams of being the next Twitter? If Twitter being slow to amass patents causes them and their investors so much concern that they continually have to make ominous warnings in filings with the SEC why should you ignore the patent system yourself as a fledgling start-up?

Don’t make raising money any more difficult for yourself than it already is. Secure core innovations with patent applications as you responsibly move forward with building your business. It is the wise decision, which is why Twitter, Google, Apple, Facebook and Priceline, to name but a few, were all built with strong patent protection.

The Author

Gene Quinn

Gene Quinn is a Patent Attorney and Editor and President & CEO ofIPWatchdog, Inc.. Gene founded IPWatchdog.com in 1999. Gene is also a principal lecturer in the PLI Patent Bar Review Course and Of Counsel to the law firm of Berenato & White, LLC. Gene’s specialty is in the area of strategic patent consulting, patent application drafting and patent prosecution. He consults with attorneys facing peculiar procedural issues at the Patent Office, advises investors and executives on patent law changes and pending litigation matters, and works with start-up businesses throughout the United States and around the world, primarily dealing with software and computer related innovations. is admitted to practice law in New Hampshire, is a Registered Patent Attorney and is also admitted to practice before the United States Court of Appeals for the Federal Circuit. CLICK HERE to send Gene a message.

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 28 Comments comments.

  1. J September 29, 2014 10:53 am

    “It seems overwhelmingly clear that to the extent that Twitter was slow to seek patent protection initially, which they were, such an anti-patent stance will come at a severe cost in the long term.”

    But that is because their competitors have patents, right? I don’t think your argument works here Gene. Let’s say it is difficult, if not impossible to gain a software patent circa 2007. That means neither Twitter nor their competitors would have hardly any patents. Twitter said it needs patents to beat back litigation, but without the competitors having patents, then why have any patents?

    Which isn’t to say that Intellectual Property rights are not important for Twitter and the like, just that maybe copyright and trade secret law is the better route for these companies to go.

  2. Curious September 29, 2014 11:33 am

    You really have to wonder where the anti-software patent community gets its information.

    I believe that it boils down to the meme of “If it is on the Internet it must be true.” Over the years, I’ve read many patent-related articles on Ars Technica and Slashdot (both have heavy anti-patent slants). The amount of misinformation there (even from the writers of the articles, i.e., supposed “experts”) is astounding.

    If I didn’t know better and assumed that everything written there was true, I would probably be anti-patent as well.

  3. Gene Quinn September 29, 2014 12:06 pm

    J-

    I suggest you re-read the article and try and focus on the facts. The reality is that Twitter investors demanded patents. Twitter could not have raised money initially or ever gone public without patents. Furthermore, if Twitter had been more active in protecting their innovations they wouldn’t be facing as many lawsuits because they would own the rights rather than others.

    Acquiring patents for defensive purposes is certainly a part of the Twitter strategy, but it is incorrect to suggest that is the only reason to acquire patents. Protecting core innovations from competitors is very important, as well as having assets to create value and obtain investments.

    Finally, as markets mature patent infringement litigation between competitors becomes less likely. But if you don’t have a substantial patent footprint you will miss opportunities to cross license and grow. If you don’t have patents you have no asset to cross license, which causes great concern over time.

    -Gene

  4. Eric P. Mirabel September 29, 2014 2:20 pm

    In a related vein, the adage “Coca Cola relied on keeping its formula secret instead of patenting” is also FALSE. Coke has over 1000 US patents in its own company name today (not counting patents owned by its subs)

  5. J September 29, 2014 5:49 pm

    Gene,

    It is a fair point to say that Twitter was at a disadvantage when having a thin patent portfolio, but what if it was difficult/impossible to get a patent in the software industry in 2007? Would investors have demanded patents, or even considered patents, if everyone in the industry had a thin patent portfolio?

    You can say one of several things. 1) Yes, investors still would have demanded patents because other industries have patents, and if Twitter, Facebook, IBM, Apple, Samsung, ect. can’t get patents, then the investors will take their money to industries that can. 2) Yes, investors will still demand patents but will just be more difficult to get quality patents. 3) No, investors would not have demanded patents, because computer/software industry was a huge cash cow with or without patents, so what that Twitter doesn’t have patents, no one in the software industry has them! Or, finally, 4) No, investors will not care about patents, but they will not invest in software companies unless there is a strong portfolio in other areas of intellectual property.

    I tend to side with argument 4. You might say argument 1, and I would be interested in you making the argument that it is necessary to have industry-wide software patents or else the industry would no longer be funded. But if you make that argument, your facts here do not support that proposition, because even if Twitter was disadvantaged by not having a patent portfolio, that was in the context of its competitors having a strong portfolio. So I ask, what if no one in the software industry had anything much in their patent portfolio?

  6. Curious September 29, 2014 11:53 pm

    So I ask, what if no one in the software industry had anything much in their patent portfolio?

    Then what is to stop me and my team of 10, 100, 1000 engineers from reverse engineering any “cool” software idea and reproducing it? The likes of Microsoft, IBM, and Apple could have done so 10 or 15 years ago.

    Ask yourself, what would happen if all software patents disappeared today? I’ll tell you who won’t be immediately disadvantaged — the big established players who already have a huge advantage in market size. The smaller developers will be out of luck. Try breaking into the business when all one of the larger players has to do is update their preexisting software to include whatever the smaller developer creates.

    Eventually, the Chinese (or similar situated country … i.e., with a large yet low cost work force) will reverse engineer just about everything and do it cheaper (either for the end user or to advertisers).

    There isn’t a lot of patent-protected products in Walmart. Next time you are there, try to see if you can find some (non-food) products that are made in the US.

  7. Mark Richardson September 30, 2014 6:10 am

    Interesting that Twitter has so many visible patent properties now. A couple of years ago it looked as though their portfolio was very small.

    Gene – any thoughts on Twitter’s Innovator’s Patent Agreement? We took a look at this a while ago on our blog (see http://ipcopy.wordpress.com/2013/03/05/twitters-patent-agreement-with-inventors-a-closer-look/)

  8. step back September 30, 2014 6:19 am

    Gene Gene

    Please stop trying to confuse the digitari with facts.

    They’ve made up their story and they are going to stick to it, come high water or that other thing.

  9. Vance Proust September 30, 2014 8:01 am

    What you have demonstrated is: investors want proof that no one may compete with whomever they invest in, and successful businesses will employ whatever legal means they can to prevent competition. In that sense, yes, patents are a valuable tool to lock up a market. What this does not demonstrate is that patents are necessary for innovative behavior.

  10. Anon September 30, 2014 9:44 am

    Vance,

    You are laboring under the false “but for” thinking that the patent system only exists “but for” rewarding innovation that otherwise would not take place.

    Such a view cannot remain in place when talking about why we have patents.

  11. step back September 30, 2014 12:26 pm

    Vance,

    There you go again. making up false narratives about the positions of those who are knowledgeable about patents and want to maintain a strong patent system.

    Way back when (1780?), even the drafters of the US Constitution understood that inventing would go on even if there was no patent system.

    The point of the patent system was never to “cause” inventing in the first place but rather to hasten it and to hasten (promote) the bringing forth of its fruits for the benefit of the general welfare and the progeny of American society.

    To “promote” the [already there anyway] “progress” of science and the useful arts … Article 1, section 8, clause 8 among the enumerated powers of (not the US Supreme Court but rather exclusively that of) the US Congress.

    Modern patent practitioners understand that as well. So why do make up your own facts instead of coming to grip with the actual facts? No different than saying Twitter never had patents.

  12. Gene Quinn September 30, 2014 5:29 pm

    Vance Proust-

    You say: “What this does not demonstrate is that patents are necessary for innovative behavior.”

    That statement is so breathtakingly dishonest that I almost don’t know where to start. In order to make such an ignorant statement you have to actually believe that innovation doesn’t require any capital. Perhaps in the future you should refrain from making comments that clearly demonstrate that you are clueless on the topic at hand.

    Obviously, any innovation requires capital. Innovations do not fall from the sky or invent themselves. Research and development takes time and a lot of money. To suggest otherwise is to merely lie.

    Thanks for the chuckle! I always get a kick out of the ridiculous responses people like you come up with when I have clearly demonstrated I am right and backed it up with volumes of indisputable facts.

    _Gene

  13. Gene Quinn September 30, 2014 5:35 pm

    J-

    You say: “but what if it was difficult/impossible to get a patent in the software industry in 2007?”

    But what if pigs could grow wings and fly? That is about the same statement you are making here. It was not difficult/impossible to get software patents in 2007. Hundreds of thousands of software patents issued from 2007 to 2014. So the very premise of your question/point is hopelessly flawed. If you did even the most basic research on freely available public databases you would have known what you are saying is clearly wrong.

    -Gene

  14. Amber September 30, 2014 5:45 pm

    Vance – I don’t think there is the distinction you are trying to make. Innovation isn’t magical and doesn’t happen in a vacuum. Innovation at the scale of Twitter doesn’t happen overnight and there are a lot of costs involved. Of course investors aren’t going to put money in without some sort of “guarantee” of a return, which is where patents come in. Without a patent, all Facebook or Google would have had to do was co-opt Twitter’s technology and Twitter would never have become what it is today. And without patents, the next Twitter or Google will never come into being because their technology, if not protected, will be co-opted by the big guys.

    Gene has pointed it out in another article recently, but take inventory of the world economies and where the ‘innovation’ is coming from. It is being driven by the countries that provide the mechanisms that help companies protect their investment/ technology /product/etc. You see so many tech companies here in the U.S. because they can protect their new, innovative technology and ensure the big guys don’t steal it.

    Did you read the article? A very clear case, with clear examples, was made on how doing away with patents actually help the established, big business not just lock up the existing market, but block new markets and companies from even coming into existence.

  15. Vance Proust September 30, 2014 9:46 pm

    Oh I read all these articles, they are quite amusing. I actually thought this was a satire site for a while, then I realized you’re all really true believers, and apparently dissenters get banned. I expect I’m next.

  16. Curious October 1, 2014 12:23 am

    I actually thought this was a satire site for a while
    I wouldn’t have admitted to that.

    I realized you’re all really true believers, and apparently dissenters get banned
    Dissenters don’t get banned — disseminators of false information get banned. If you want to drink the anti-patent Koolaid, go to Slashdot or Ars Technica. From there, you can get all the uninformed opinions you want to your heart’s desire.

    What this does not demonstrate is that patents are necessary for innovative behavior.
    Patents aren’t necessary for innovative behavior. However, assuming that fact to be true, it does not necessarily follow that patents do not promote innovative behavior.

    There is a lesson that each generation needs to learn in their own way — altruism is not a viable business model. Sure, there will be some people that will invent for the love of inventing and will give away their inventions for free. However, most people are self-interested (not a bad thing) and the patent system caters to that.

  17. Gene Quinn October 1, 2014 1:05 am

    Vance-

    No, dissenters don’t get banned. People who get banned are liars, intentionally misrepresent facts, use profanity or get in the way of thoughtful discussion. We are always happy to enlighten people like you who have apparently been fed a bunch of lies your whole life and bought into what is really and easily provably false.

    The issue I took with your comment was that it is so ridiculous on its face that no one with even half a brain could believe what you wrote. You really think that inventing costs nothing?

    So why would you think this was a satire site? Everything I say is backed up by actual fact with links to primary sources of information. Everything in this article is perfectly true and accurate. You cannot dispute anything written here, so why do you continue to believe what I’ve thoroughly disproved?

    Why exactly did you find other articles amusing. Is that the full extent of your logical capabilities? Seriously, it seems you have first level understanding (at best) and you aren’t able to even express your point of view. I understand how difficult it must be to express something that is factually erroneous and present it like you really believe it, but the fact that you have no reply other than “quite amusing” speaks volumes about the credibility of your position.

    If you want to participate in discussion then you really need to do more than provide uninformed commentary that doesn’t convey any thoughtful desire to move the debate forward. Otherwise please go elsewhere. There are plenty of places on the Internet that eagerly welcome your brand of mindless blather.

    -Gene

  18. step back October 1, 2014 7:34 am

    Gene,

    History shows that most people are not influenced by logic, facts, proof and science.
    They simply go with their “feelings”.

    They simply go with the crowd.
    They are sheep –but don’t know it.

    Today’s feel-good movement is one that bashes real science and the folk who work in it.
    Take for example one piece of “scholarship” that implicitly claims that electrons are not part of the “physical world”. It asks us to believe in discredited alchemy. It asks us to eschew the evil “software patents” even though clearly it has no definition for what those evil things are. And … it is written by a law “professor”.

    You don’t believe such “scholarship” can exist in the modern, 21st century world?
    Check it out at this link:
    http://patentu.blogspot.com/2014/09/electronic-scholarship-denies-existence.html

  19. J October 1, 2014 11:50 am

    Gene,

    It was a hypothetical, I’m not saying that it was the state of the law in 2007 that software patents were difficult to obtain. What I am asking is, if the state of the law as it is now in 2014 (when it will be difficult to get a software patent), was the state of the law in 2007, what would happen? Would investors have demanded patents, or even considered patents, if everyone in the industry had a thin patent portfolio?

    With that understanding, I would welcome your thoughts on my previous post @5. Of course you may do whatever you like with your time.

  20. Gene Quinn October 1, 2014 1:00 pm

    J-

    You ask: “Would investors have demanded patents…”

    Investors have always demanded patents. Those familiar with the surveys, studies and realities of the industry know this to be true.

  21. Mike October 1, 2014 3:11 pm

    @ J –

    I think I understand your hypothetical question, but I don’t think it can be evaluated as simply as you put the question. The historical situation is that to obtain investments, software companies need to be able to convince investors not only that their product is commercially viable, but that it will remain commercially viable for long enough to generate a good return on investment. Just like any other research-based industry. And of all the research-based industries, software is remarkably vulnerable to counterfeiting and to integration by competitors into their own products. If a startup software company with a new product is unable demonstrate in some manner that they will be able to provide that product at a profit to the investors in the face of established software giants, then they will not get investments. It is that simple. Patents give the developers a relatively short period of exclusivity to practice their invention, but the key is that the period of exclusivity is a known quantity. It is that limited time period of exclusivity that makes a software developer with a patent more likely to get investment funding that one without a patent. If software patents were as hard to get in 2007 as they seem to be now, then investment funding would have been as hard to get in 2007 as it will become soon.

    Trade secrets are not a substitute for patents, especially in the software world. When you are practicing your invention in the open, on anybody’s machine to be reverse engineered or copied, then the invention is not a trade secret. And even if they did provide protection, they also prevent competitors from building on the invention. A patent is open information, for free use by anybody, once the period of exclusivity is past.

  22. Curious October 1, 2014 7:18 pm

    A patent is open information, for free use by anybody, once the period of exclusivity is past.
    Small correction, a patent permits the inventor to talk about their invention — either in the application itself or via other vehicles (e.g., technical conferences) and the knowledge is available for anybody to use at that moment. They can improve upon the technology or take it in a different direction. If how they use it infringes upon the original patent, then there is an opportunity for cross-licensing, but the salient point is that the knowledge is available for use today <– this promotes innovation.

  23. J October 2, 2014 10:58 am

    Mike-

    Thanks for your reply. I would disagree that patents give a relative short period of exclusivity, because by the time the software becomes “public domain”, it is obsolete. I would also point out that one does not need a patent to recoup investment costs in software (unlike, say, pharmaceuticals), and also that patents are not the only form of intellectual property protection.

    Twitter has survived, and has become profitable, with relatively few patents. Twitter listed all the forms of protection, and patents were last. Gene argues that it hurt Twitter not have patents because there was not near the number of investors. That would not have mattered if Twitter’s competitors did not have many patents, either. And that is where the state of the law is going.

    Will there be less overall investment? Yes, but those investors will spend there money elsewhere and we’ll get patented products in other fields. Will the rate of software development change as a result? Probably not an appreciable rate. Why do we need patents in the software field anyways if, as Alice’s lawyer conceded, these programs are not difficult to create.

  24. Anon October 2, 2014 1:25 pm

    J,

    Why do you ask, “Why do we need?”

  25. J October 2, 2014 1:55 pm

    Because if we are going to change the language in 101 to encompass software claims, that is a question worth asking.

  26. Anon October 3, 2014 7:11 am

    Sorry J, but you too need to understand that “need” is a symptom of looking at the patent system as only a “but-for” system and such is clear error.

  27. Curious October 4, 2014 11:36 pm

    Why do we need patents in the software field anyways if, as Alice’s lawyer conceded, these programs are not difficult to create.
    Ease of creation is immaterial. For software, what one should be worried about (if you are a software developer) is ease of copying. Spend 4000 man-hours developing a piece of software and with no patent protection it’ll be copied with ease by one of the larger players in the field (and likely given away in the next update of their software).

  28. Chris October 8, 2014 4:28 am

    J – You are generally posing a question that has been answered for millenia by hundreds of successful civilizations. Patents were created in ancient Greece, and have been used ever since to promote useful innovations in every leading country. Do you, and the other newborn naives of the anti-patent crowd, honestly believe that all of civilization created patent systems for nothing, over and over again, or that they arose out of thin air, when they actually hurt progress? No. Patent systems kept on being developed and applied in country after country, century after century, to countless new technologies, because the answer to your question is that it is worse without them. Billions of people, over lifetimes, applied a collective wisdom to this that vastly exceeds your armchair quarterbacking here. They were able to observe what happens without patents, and it isn’t pretty, and they chose patents, plain and simple. We would have to ignore all of the world’s history and experience with patents — not to mention common sense — to believe your hypothesis hasn’t been disproven. Do a little research before you doubt the existence of gravity like that. Do you really think Google would have succeeded the way it has without the pagerank, etc., patents? Or would one of the 500 pound gorillas of the time have stolen it from them? Or, would all of the investment that went into Google, and the many innovations that arose, all have materialized, and as quickly, without those protections? History tells us “no,” and society shouldn’t have to throw out its plumbing every time an ignorant child throws out naive ad hominem, like “I doubt it works.”

    Another thing you should think about when you read the anti-patent stuff kicked around by Chairman Moa’s infants these days: The anti-patent movement was hatched by rich industrialists pretending to be feel-good liberals. As Curious and others have pointed out, above, it’s the little guys, with low resources and no market share, that need protection in order to bring new things to us. Many of the big guys, behind anti-patent, would be just fine without them because they are in a much stronger position, and would prefer to be able to take any great invention of any start-up, not get sued, and not lose any market share to that start-up. That’s why industrialist-owned media sources are so vested in questioning patents, and have lobbied so hard against them. Don’t be a tool to the fatcats by buying into their disengenous anti-patent PR. Anti-patent is not a liberal ideal. Even a country as far left as the Soviet Union had patents. Why? Because they work.