IBM dropped a major bombshell on Twitter this month. Prior to Twitter’s Initial Public Offering (IPO), IBM sent a letter to the social media site claiming Twitter infringed on at least three of IBM’s U.S. patents. The patents at issue include, (i) method for presenting advertising in an interactive service, (ii) efficient retrieval of uniform resource locators and (iii) programmatic discovery of common contacts.
IBM has not filed suit at this time. However, Twitter looked to be rolling up its sleeves and preparing for battle, saying in its revised IPO filing that it has “meritorious defenses to IBM’s allegations.” Twitter also noted in the filing that IBM invited them to “negotiate a business resolution of the allegations.” Such an invitation could raise suspicion that IBM may be looking for a potential deal involving the acquisition of Twitter stock.
The filing also revealed that Twitter has only nine U.S. patents and 95 pending U.S. patent applications, as of September 30th. By contrast, Facebook had 774 U.S. patents prior to its IPO last year and IBM currently holds over 73,000.
Despite the strong early performance of Twitter’s initial share price, Twitter’s lag in obtaining patents may be a cause for concern for potential investors, as it could potentially expose the company to other patent and intellectual property claims.