Wilmington, Delaware — In a significant legal victory for IBM, a Delaware jury ordered Zynga, the creator of FarmVille, and its subsidiary Chartboost, to pay $45 million for infringing on two of IBM’s patents. The decision, reached last week, highlighted ongoing issues surrounding patent rights in the technology sector, particularly regarding foundational online networking and advertising technologies that have become ubiquitous on the modern internet.
IBM argued in court that its patents are vital to the architecture of today’s digital ads and networking. Notably, these include innovations dating back to the 1980s with Prodigy, an early online service pioneer, and others that developed throughout the 2000s. These technologies, IBM contended, are instrumental for companies like Zynga, which rely heavily on sophisticated data analytics and online advertising for their operational success.
The patents at the heart of the court case were first filed over decades, with the earliest being the ‘849’ patent from 1989, which relates to delivering advertising over interactive services. Another, the ‘719’ patent filed in 2000, involves technology designed to improve server-client interactions to minimize delays—both crucial for Zynga’s operations.
The jury found that Zynga had specifically violated the ‘849’ and ‘719’ patents, awarding $40 million for the infringement of the first and $4.9 million for the latter. Despite arguing these patents were invalid during the trial, Zynga did not succeed in convincing the jury, reflecting the challenge defendants face in overcoming established patent claims.
Following the verdict, IBM expressed satisfaction with the jury’s decision which underscored the validity of its intellectual property. Zynga, on the other hand, voiced disappointment and hinted at plans to appeal the decision. Alan Lewis, a spokesperson for Zynga’s parent company Take-Two Games, stated, “We are disappointed in the verdict; however, believe we will prevail on appeal.”
This legal battle is not an isolated instance; IBM has a storied history of defending its extensive patent portfolio, which includes over 80,000 patents globally. The company has successfully negotiated settlements or won judgments in various disputes, asserting its patents against other tech companies, including Priceline, Airbnb, Rakuten, and Groupon.
IBM’s aggressive protection of its intellectual property highlights a broader strategy not just of innovation but also of capitalizing on these innovations through licensing and legal actions. This approach is reinforced by IBM’s earlier suits, where settlements and licensing deals have been reached with major companies across the technology landscape including Amazon, Apple, Google, and Facebook.
The outcome of this case could resonate through the tech industry, potentially encouraging more stringent compliance with existing patent laws and influencing how companies approach innovation and the use of existing technologies.
As Zynga contemplates an appeal, the financial stakes are considerable. According to the most recent quarterly earnings report from Take-Two, Zynga’s parent company, while they have around $1.5 billion on hand, a recent quarterly loss of $212 million means that the $45 million judgment could significantly impact its reserves.
This legal decision underscores the continuing importance of patents in the tech industry, serving both as a cornerstone of innovation and a potent tool for corporate strategy. As companies navigate the intricate landscape of intellectual property rights, the repercussions of this case will likely influence strategies around technology development and the use of legacy innovations in new digital environments.