Patent Struggles Replace The Browser Wars

Sometimes it’s comforting to meet a familiar face. At other times, it’s a real jolt when you realise just how much things have changed since you last saw them.

The news that Microsoft has bought 800 patents from AOL does just that – especially when it emerged that those patents apparently include ones from Netscape, the first successful web browser and the first major Internet IPO. A change of ownership for Netscape shows up just how much things have changed since the late 1990s – and could conceivably threaten web encryption standards.

Show us the money!

One major difference is the fact that the patents are the headline here. In the 1990s we followed the browser wars, a struggle for market share as the Internet emerged. But in 2012, while eyeballs count, patents have become the major way in which online companies stake out the territory and establish a pecking order.

Mostly, patents are used behind the scenes, to establish who pays what royalty to whom, or to broker mutual deals in which no one pays anything and the parties agree not to sue.

Those are the deals successful companies want, in which the patent itself doesn’t generate revenue, but it allows continued access to a valuable market.

To take part in that sort of argument, you need to have lots of patents and most of the big firms accumulate patents through buying and selling them.

Paradoxically, although patents are about protecting invention, it normally turns out that the companies who actually use the patent weapon are the ones who are losing in the market, who are behind the curve, and who have to mine their patent pool for revenue because they aren’t doing so well elsewhere.

Recent patent war stories include Yahoo’s suit against Facebook, widely seen as the final admission that Yahoo isn’t going to succeed long term as a social portal, so it might as well get money from those who will.

The browser wars

Microsoft and Netscape have a very interesting history. Marc Andreessen wrote Mosaic, the first dominant browser, and then went on to found Netscape in 1994, producing the second. Microsoft licensed Mosaic as the basis for Internet Explorer which was shipped free with Windows from the Windows 95 Plus Pack onwards.

IE4 was integrated with Windows, and the subsequent United States v Microsoft anti-trust case revealed just how explicit Microsoft’s strategy against Netscape was. Despite the result of the case, Microsoft’s browser had a leading share of the market, and Netscape was a spent force.

Microsoft’s dominance in web browsing has since been destroyed by Netscape’s descendant Mozilla as well as by Google’s Chrome and Apple’s Safari.

So, there’s now no reason why Microsoft shouldn’t own the Netscape intellectual property. But there are reasons why we should be wary.

Firstly, after paying $1 billion, Microsoft will be under pressure to make money back from these patents. Apparently, patent holders actively litigating on patents should expect to make several times as much money as the face value of the patents.

Will SSL go commercial?

Among the Netscape patents AOL holds are the following. Patent 6854085 covers form-filling, and Patent 7478142 packages applications to be delivered over a network. Patent  5774670 allows web servers to preserve “state” information

Finally though, Patent 5657390 governs Secure Sockets Layer (SSL), now called Transport Layer Security (TLS), which establishes a secure channel between the server and the browser. It’s been criticised but is widely used.

Netscape got the patent and swore never to charge royalties on it. If this changed, even to so-called “fair reasonable and non-discriminatory (FRAND)” terms, it would have a big effect on the Internet.

At this stage, Microsoft has yet to confirm whether the patents it has acquired include the Netscape IPR, let alone the particular SSL patent.

However, we need to carefully watch the status of SSL. Even if it stays at AOL, it may be at even greater risk of being commercialised. There is huge pressure from shareholders to make revenue from any assets of that once-huge company.

The difference between 2012 and 1994 is the difference between browser wars and patent wars. The later could be more brutal.

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