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PERCEPTION PARTNERS SPONSORS FIRST ANNUAL CORPORATE IP INSTITUTE
Published October, 2007

PERCEPTION PARTNERS ANNOUNCES 2007 SPEAKING SCHEDULE
Published January, 2007

PERCEPTION PARTNERS PREDICTS PIVOTAL VERDICT 
IN KINETIC CONCEPTS VS. BLUESKY
Published August, 2006

PERCEPTION PARTNERS FOUNDER DISCUSSES BRAND LICENSING
Published May, 2006

INTELLECTUAL PROPERTY SURVIVES HURRICANE KATRINA
Published September, 2005


PERCEPTION PARTNERS DONATES SERVICES ON WORLD IP DAY 2005
Published April, 2005

KEEPING TABS ON COKE
Published January, 2005

CUSTODIAN OF WORLD'S MOST VALUABLE IP PORTFOLIO JOINS PERCEPTION PARTNERS
Published October, 2004

GOOGLE - IP IS MORE THAN TWO-THIRDS OF IPO
Published May, 2004

IS YOUR BUSINESS METHOD PATENT PENDING?
Published January, 2004

GOOGLE - IP IS MORE THAN TWO-THIRDS OF IPO
Published May, 2004 at www.techlinks.net

The recent exuberance over the upcoming Google IPO may yet be classified as irrational. Google faces a number of intellectual property (IP) challenges that may hamper its growth and more importantly, its impressive profits. While many risks are addressed in the company's April 29 SEC filing, the risks related to IP may be the most menacing.

In 2003, 95% of Google's near-$1 billion in revenues was derived from AdWords & AdSense, the company's keyword-centric contextual advertising programs. However, these programs are also the targets of a patent infringement lawsuit - in a case pending since 2002 - filed by archrival Overture, now owned by Yahoo! If the company loses the case, they could realistically lose the right to collect revenues through their primary income source.

Google's Patent Issues

The most significant challenge for Google is that the company did not invent the lucrative concept of cost-per-click keyword advertising - they only launched the feature in 2002. In fact, Overture has the earliest patents granted in this area, dating to 2000. The patent war is far from over, as Overture has at least two additional U.S. patents pending in the space (both published in 2003), and Google has at least one (published in 2004).

Did Yahoo! know the power of Overture's IP when they bought the company? Think about this - Yahoo! paid $325 million for Inktomi (their current search technology) vs. $1.6 billion for Overture's paid-placement and contextual advertising technology (the real moneymaker in search). The near $1.3 billion premium should hint at how strongly Yahoo believes in the assets - including the IP - behind the company.

If Yahoo's gamble pays off, Google's options are not enviable. In the company's own words:

With respect to any intellectual property rights claim, we may have to pay damages or stop using technology found to be in violation of a third party's rights. We may have to seek a license for the technology, which may not be available on reasonable terms and may significantly increase our operating expenses. The technology also may not be available for license to us at all. As a result, we may also be required to develop alternative non-infringing technology, which could require significant effort and expense. If we cannot license or develop technology for the infringing aspects of our business, we may be forced to limit our product and service offerings and may be unable to compete effectively. Any of these results could harm our brand and operating results.

It will take some time to know the victor in this contest. Even if it loses the infringement case and an inevitable appeal, Google still does business in 250+ countries, of which only the U.S. requires the patent owner to be the first-to-invent. In other countries, it is the first-to-file that wins patent protection. It is quite possible that Google is ahead of the curve in many other locales, and could profitably practice technology that may still have been found to infringe in the U.S. However, if Yahoo! proves infringement and obtains an injunction against Google, it could decimate the company's current and future revenues.

To Google's credit, it continues to innovate at a voracious pace. As this article was being composed, the company launched contextual image advertising, permitting graphical ads - in addition to text - to appear as the result of relevant searches via its AdSense program. This is clearly a proactive response to pending IP challenges, and is evidence of how competition continues to drive innovation. Clearly, IP threats are pushing Google to "add the fuel of interest to the fire of genius," as Abraham Lincoln articulated when he described the benefits of the U.S. Patent Office.

Google's Trademark Issues

Google has also faced a number of trademark infringement and other claims over "the display of ads in response to user queries that include trademark terms." A French court recently ruled against the company for permitting advertisers to link ads to trademarked keyword terms. Although the fine was nominal ($126,000), Google has appealed this decision. In contrast, a German court found no liability in a similar case. In the U.S., Google has proactively sought declaratory judgment on the matter in order to reach a prompt decision on whether or not it will be liable for a host of other current and potential trademark infringement lawsuits.

While the U.S. matter is still pending, Google has announced that it will no longer respond to advertiser complaints regarding targeting ads to potentially trademarked keyword terms, unless a registered trademark is specifically used in the body of an ad. This has opened the door to new competitive advertising tactics, where companies can now have their ads come up when a search is performed on one of their competitors. Google should certainly benefit financially from this move - at least in the short term - as the only alternative to best these guerilla tactics is that the companies being searched for must pay more to appear higher in contextual results than the trespassers. Google's long-term outlook could be less favorable, if companies dissatisfied with the company's policy continue to seek opinions from the courts.

Google's Technology Issues

In addition to Yahoo, Google counts Microsoft as its top competitor. The company notes that Microsoft is hard at work in binding search functionality into its upcoming Longhorn operating system. This presents technology risks to Google that are wholly IP-centric.

Google prides itself on the relevance of its search results. However, it has acknowledged that an increasing amount of information on the Internet is provided in proprietary document formats such as Microsoft Word. Google points out that Microsoft could engineer the document format to prevent or interfere with the ability to access document contents with the company's search technology, even if the contents were directly relevant to a search.

The real issue comes in the form of royalties. Microsoft has every right to require Google to pay them royalties in exchange for giving them the ability to search documents in their format. Further, the company notes that if Microsoft also competes with Google in the search business, they may give the Longhorn search technology a preferential ability to search documents in their proprietary formats. Additional formats currently searched by Google include PowerPoint, PDF and most recently, Flash.

Innovation is Key

An investment in Google, therefore, is clearly not without its risks, More importantly, the IP issues at the heart of Google's staggering growth are hotly contested, with outcomes likely to seriously influence the price of their securities. However, it is apparent that Google has integrated innovation into the core of its culture, providing a greater likelihood that more leading-edge products will emerge - hopefully those that are better equipped to survive in an increasingly litigious environment. But even if that's the case, can the culture sustain the magic that brought the company a $600+ million increase in net revenue last year? Proceed with caution.