LG signs deal with patent giant Intellectual Ventures

LG Electronics has become the latest smartphone maker to sign a deal with the patent house Intellectual Ventures.

IV licenses out its huge library of innovation rights rather than using them to build products of its own.

LG will be able to access IV's patents to threaten counter-attacks against any firm planning an intellectual property lawsuit.

Industry watchers say other businesses are likely to strike similar deals over the coming years.

"With companies claiming breach of patent across the board, firms can either defend every case that comes in or try to limit their exposure," said Chris Green, technology analyst at Davies Murphy Group Europe.

"Doing deals with big patent houses allows them to do the latter."

The South Korean electronics firm was wounded in a previous patent battle. It had to pay Kodak $414m (£257m) in 2009 for infringing the camera maker's digital imaging rights.

"Our alliance with IV gives us access to patents outside our core and allows us the freedom to focus on what's important in our industry - innovation," said Jeong Hwan Lee, head of LG's intellectual property centre.

Patent experts say the deal may allow the firm to become more adventurous.

"LG now has the opportunity to leverage IV's large patent portfolio and more aggressively expand product offerings in novel directions," said Andrea Matwyshyn from the University of Pennsylvania's Wharton School.

Intellectual Ventures' was set up by Nathan Myhrvold, former chief technology officer at Microsoft.

Over the past 11 years it has built up a portfolio of more than 35,000 patents covering areas such as text messaging and internet security.

The firm has signed licensing deals with HTC, RIM and Samsung among others.

However, it has also filed lawsuits against Motorola, HP, Dell and Hynix Semiconductor alleging they have infringed its rights.

"Its business model is that of an aggregator," said Florian Mueller, a patent consultant whose clients include Microsoft.

"It acquires patents and does some R&D of its own. But the vast majority of its patents are bought on the secondary market, and its business model is to license them.

"But that's not necessarily a bad thing if the technology involved is a legitimate innovation deserving patent protection."

However, others are more critical of patent owners who sue others but do not produce their own goods, describing them as "patent trolls".

A Boston University study recently claimed such organisations add over $30bn in costs to industry each year and contribute little in return.

However IV defends its business model.

"Our goal is to reach productive licence agreements that give our customers access to the patents that will help them minimise risk and stay competitive," said Andy Elder, the firm's executive vice president of global licensing.

"That's especially important in crowded markets like the mobile industry. Litigation is an option we have, but we prefer to negotiate a licence that's beneficial for both companies."