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Some patents were born to live a sad, stale life. Today, these former badges of inventive honor and creativity often serve as ammo in mindless legal battles. Patents are bought and sold by the thousands, for the sole purpose of attacking would-be infringers in court -- or for defending against such assaults. Some gunslingers are worse than others, but by and large we're far away from the constitutional ideal, "to encourage, by proper premiums & Provisions, the advancement of useful knowledge and discoveries."

So in this day and age, it's refreshing to see a large patent deal that is very unlikely to follow that trend: OLED specialist Universal Display (Nasdaq: PANL  ) is paying $105 million to Fujifilm for a cache of 1,200 OLED patents, and management has no intention of starting lawsuits over this intellectual property.

Nope, this agreement was signed with further research in mind. "This transaction will almost double Universal Display's patent portfolio enabling us to deepen, broaden and extend the technologies and materials that we offer to our customers," said Universal Display CEO Steven Abramson in a statement. It's the old "standing on the shoulders of giants" strategy, allowing Universal to build future advances atop the combination of Fujifilm's technologies and its own in-house research.

It's not a one-way, single-shot transaction, either. The deal also creates a partnership and opens the door for Fujifilm to bundle films and other materials with Universal's OLED chemicals. Fujifilm CEO Shigetaka Komori holds out hope of "further possible strategic relationship between the two companies," perhaps cutting in on the exclusive materials supply currently provided by PPG Industries (NYSE: PPG  ) .

Universal Display is by no means the only wheeler and dealer in OLED patents. LG Display (NYSE: LPL  ) bought out Eastman Kodak's (OTC: EKDKQ) OLED assets three years ago to create a portfolio of 2,000 patents. Sumitomo Chemical holds another major stake in this market through its purchase of Cambridge Display, adding nearly 600 important patents to the mix.

So OLED technologies come from a number of separate sources, much like the mix of technologies in today's smartphones. But unlike the smartphone industry, these guys largely get along. LG and Samsung are the two largest manufacturers of OLED screens, and both rely on patents from Universal Display and Sumitomo to get the job done. The OLED screen on your Samsung Galaxy phone contains red and green pixels from Universal Display but blue ones from Sumitomo's fluorescent idea lab. And that's OK.

Fujifilm's OLED patents will promote further innovation rather than stifling competition and progress like many phone-related patents would. In my eyes, that makes them the techy equivalent of free-range chickens raised on organic corn and kale -- healthy, happy, and doing what they're supposed to.

Universal Display's shares jumped 3.1% in pre-market action on this news, but lost it all in a matter of minutes. The stock has traded largely sideways over the past year. The company reports earnings on Aug. 8, so there's another opportunity for a big move.

Foolish analysts have found another surprising stock to stash in your portfolio for the back half of 2012. Learn all about The Motley Fool's Top Stock for 2012 in a special report -- free for a limited time. Click here to claim your copy.

Fool contributor Anders Bylund owns shares in Universal Display but holds no other position in any of the companies mentioned. Check out Anders' holdings and bio, or follow him on Twitter and Google+. The Motley Fool owns shares of Universal Display. Motley Fool newsletter services have recommended buying shares of Universal Display. The Motley Fool has a disclosure policy.

We Fools may not all hold the same opinion, but we all believe that considering a diverse range of insights makes us better investors. Try any of our Foolish newsletter services free for 30 days.

Read/Post Comments (2) | Recommend This Article (11)

Comments from our Foolish Readers

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 Report this Comment icon found on every comment.

  • Report this Comment On July 24, 2012, at 1:22 PM, coveman100 wrote:

    Anyone wanting to ivest in the latest display technology should be looking at EMAN.

  • Report this Comment On July 24, 2012, at 2:31 PM, TMFZahrim wrote:

    That's an interesting play, @coveman100, and we Fools have covered that stock before:

    Just keep in mind that it's a thinly traded microcap with tiny revenues, which exposes investors to a whole new world of risks. Moreover, the company appears to take licenses from either Universal or Global (aka LG) to make its OLED microdisplays, and lists other Universal and Global licensees as potential competition.

    It's an onnovative little company but I'm pretty happy with the more established PANL opportunity.

    And now for something completely different: QCOM just announced that it's pretty much giving up on its Mirasol display tech because it's just too hard to manufacture. Another presumed competitor bites the dust (though I'd still love to see a Mirasol smartphone screen...)


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