We can argue somewhere else whether the U.S. Patent Office is helping to foster innovation in 2007 or hinder it. But the bottom line is that yet another wide-ranging, fairly obvious patent has been issued – this time to Local.com – and local media and local search companies can ignore it only at their own peril.
Local.com’s patent basically covers all crawling of local businesses on the Web. It was written by Xiagwu Xia in January 2005. Xiagwu now runs Local.com’s R&D.
In recent years, many companies have made it a policy to basically ignore such wide- ranging patents. Google, in particular, seems to strong-arm anyone who hits them with a patent violation. But as Research in Motion (i.e. BlackBerry) found out when it was sued by a so-called “patent bandit” firm in Washington, D.C., patent violations come with major consequences.
Local.com CEO Heath Clarke says Local.com’s intention is not to be a patent bandit. The way he characterizes it is the company is mostly trying to protect Local.com’s growing portfolio of intellectual property, put Local.com on potentially favorable distribution terms with possible violators and return maximum value to shareholders.
A couple of years ago, Local.com itself fell prey to a wide-ranging patent from Overture.com and had to pay a sizable sum to settle. Overture waited until Local.com was going IPO to charge a violation and was “very strategic by doing so,” Clarke notes. But it ended up being a win-win since Local.com got a highly valuable distribution agreement with Yahoo! Search Marketing out of it. Clarke envisions similar results with other companies that settle with Local.com.
In any case, if a company (such as Google) tries to outlast Local.com’s legal efforts, it won’t work. “The company that (theoretically) buys us will carry it out,” he says. Indeed, it would put a rival (to Google or some other company) who buys Local.com in an advantageous position since it could use the patent to close down a business or some other aggressive action.
Clarke says Xiagwu is currently researching companies that violate the agreement. Yellowpages.com and some other directory companies definitely don’t violate it, he says. But others probably do.
The way the patent violation strategy typically works, adds Clarke, is you go after the small guys and establish a track record. “You validate it in the marketplace. Then you go after the big guys” who have the real money, channels and value.