A Pre-Emptive Strike on the Kindle Fire

By Evan Niu (TMFNewCow) | More Articles
October 11, 2011 | Comments (1)

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The fresh-off-the-press Kindle Fire from Amazon.com (Nasdaq: AMZN ) hasn't even made its way into the hands of eager customers, yet it's already facing a patent lawsuit.

The name of the offending patent troll is Acacia Research (Nasdaq: ACTG ) . More than likely, you've never heard of Acacia. Most people don't know patent trolls by name, other than Eastman Kodak (NYSE: EK ) . Acacia's sole business is that "through its operating subsidiaries," it "acquires, develops, licenses and enforces patented technologies." That's the most technical description I've heard of patent trolls.

Acacia is a small outfit out of California that sits with a $1.6 billion market cap and pulled in $39.7 million in revenue last quarter. The company owns or controls the rights to more than 184 patent portfolios. Interestingly, three licensees alone contributed 70% of last quarter's revenue. Acacia also frequently spars with other smartphone heavyweights, including Apple (Nasdaq: AAPL ) and Research In Motion (Nasdaq: RIMM ) . Microsoft (Nasdaq: MSFT ) surrendered and entered a licensing deal last year.

In this case, the company is alleging that Amazon is infringing on four patents. Like most software patent suits nowadays, the patent is obscenely vague and practically applies to everything. The patent in question is U.S. Patent No. 6,956,562 granted in October 2005. This is the patent's description:

"A method for software control using a user-interactive display screen feature is disclosed that reduces stylus or other manipulations necessary to invoke software functionality from the display screen."

Not only is that sentence grammatically cumbersome, yet in all its wordiness it fails to actually describe something worth patenting.

Regardless of the outcome, this suit will serve only to pester the enormous e-tailer. Amazon will naturally proceed with selling millions of tablets and cornering the Android tablet market.

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Fool contributor Evan Niu owns shares of Apple and Amazon.com, but he holds no other position in any company mentioned. Check out his holdings and a short bio. The Motley Fool owns shares of Apple and Microsoft. Motley Fool newsletter services have recommended buying shares of Amazon.com, Apple, and Microsoft, as well as creating bull call spread positions in Apple and Microsoft. Try any of our Foolish newsletter services free for 30 days. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment icon found on every comment.

Report this Comment On October 11, 2011, at 9:51 PM, xmmj wrote:

The question is... Why is Amazon willing to lose money on the Fire? What is so strategically important for it to do so?
See:
http://jmmxkindlepage.wordpress.com/analysis-kindle-fire/

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