Alibaba buys up patents before IPO
Alibaba Group is beefing up its patent holdings in the US, a move that may help avoid the pitfalls that bedevilled Google, Facebook and Twitter before their initial public offerings.
China's largest e-commerce company has so far obtained 102 US patents, including 20 purchased from International Business Machines (IBM) last year, according to researcher Envision IP. Alibaba has applications on more than 300 others for technology like payment processing, product recommendations and picture searches, the US Patent and Trademark Office's database shows.
"It's a smart move," said Maulin Shah, managing director of New York-based Envision. "When a company announces IPO plans, they instantly become a target from competitors already in the market who want to hamper the IPO or those who see it as an opportunity to exploit the company at a vulnerable time." Patents, designed to protect a company's products from copying, are becoming commonly used as currency and as a shield against lawsuits by competitors.
Facebook, at one point with just 12 patents before it went public, and Twitter with nine each found themselves exposed to legal claims that their products infringed other companies' intellectual property.
"Right now is a time of great leverage with anyone who has an issue or potential issue with Alibaba," said Jim Altman, a patent lawyer with Foster, Murphy, Altman & Nickel in Washington who often represents Chinese companies. "They don't want anything hanging up an IPO."
Alibaba last month said it would begin the process of filing for a US public offering that may be larger than the US$16 billion raised by Facebook in 2012. While the Hangzhou province-based company has not said how much it will seek in the offering, a person with knowledge of the matter said Alibaba may sell about a 12 per cent stake.
Yahoo owns a 24 per cent stake in Alibaba and according to a recent court filing, holds more than 1,500 patents. Ashley Zandy, a spokeswoman for Alibaba in San Francisco, declined to comment.
Seven other Chinese internet companies have filed to raise a total of US$2.8 billion in New York this year, none of which have a US patent portfolio that could be found in a search of regulatory filings and the patent office databases.