Fred Amoroso: Is this the man behind Yahoo's patent offensive?
Before joining Yahoo's board, Fred Amoroso was known for waging aggressive patent litigation at Rovi. Now Yahoo has adopted similar tactics against Facebook.
Fred Amoroso joined Yahoo's board of directors in February. About a month later, Yahoo unleashed a massive.
Coincidence? Probably not, since Amoroso is one of Silicon Valley's most enthusiastic proponents of patent warfare.
Until three months ago, Amoroso was president and CEO of Santa Clara, Calif.-based Rovi. The publicly traded company--previously known as Macrovision--licenses TV show metadata and bills itself as a "global leader in digital entertainment technology solutions." But the company has also shown some skill in deriving revenue by suing other companies for alleged infringement of its substantial patent portfolio.
Amoroso's enthusiasm for weaponizing patents was well-known when he was named a Yahoo director last month. Rob Majteles of Treehouse Capital, who served on Rovi's board for years, noted at the time that Amoroso is "very patent savvy."
Rovi is no giant, having posted just $691 million in 2011 revenue. But it claims to have amassed over 5,100 patents granted and pending internationally--more than two per employee--and has demonstrated its willingness to use them offensively. In 2011, Rovi said patent licensing made an important contribution to a 47% increase in revenue from consumer-electronics makers. In a recent annual report, Rovi boasted that "our patents underpin our strong competitive position and financial model."
Amoroso, the patent pugilist
"I wouldn't call him personally a patent troll," Julie Samuels, a patent litigator who's now an attorney at the Electronic Frontier Foundation, says of Amoroso. "But Yahoo brought him on board knowing his history. When certain businesses stop making money doing their core business, they attempt to monetize whatever they've got left. In Yahoo's case, it's patents."
Rovi declined to comment. Yahoo said that it has "invested substantial resources in research and development through the years, which has resulted in numerous patented inventions of technology." It added that its dispute with Facebook has compelled the company "to seek redress in federal court."
Amoroso has plenty of experience taking on large targets like Facebook. During the last two years of his tenure at Rovi, the company filed six patent lawsuits against the likes of Amazon.com, Toshiba, Sharp, and China-based consumer electronics maker Haier. That's not counting patent complaints to the U.S. International Trade Commission or overseas lawsuits, including Rovi's unsuccessful U.K. suit against Virgin Media. Amoroso remains a Rovi "senior advisor," according to his LinkedIn profile.
Under Amoroso, Rovi demonstrated a knack for timing a lawsuit to maximum effect. Last June, for instance, news leaked that Hulu was putting itself up for sale, with Yahoo as one of the possible bidders.
Rovi promptly sued Hulu, claiming that the video site's alleged patent infringement "presents significant and ongoing damages to Rovi's business."
Rovi had licensed its program guide patents to Apple, Microsoft, Comcast, and DirecTV. The company claimed that it had initiated discussions with Hulu regarding the patents in 2008 but had been unable to sign Hulu to a patent license.
Yahoo: No innocent when it comes to patent strife
To be sure, Amoroso's board appointment may be only one factor behind Yahoo's Facebook lawsuit. AllThingsD reported that the two Yahoo officials "largely working on" the suit were CEO Scott Thompson and legal chief Michael Callahan. Yahoo also has some history here, having sued Google over patents in 2004, just prior to the search giant's IPO. Yahoo received 2.7 million shares in a settlement then valued at as much as $290 million. Google also agreed to license several Yahoo patents.
But there were a couple of differences between the lawsuits. Yahoo gave Google a heads up before taking any action. It also held patents that were very specific to paid advertising methods on the Internet.
"We communicated with Google well in advance that we thought they were in violation of our patents," recalled one participant in the negotiations. Those involved a face-to-face meeting in which Eric Schmidt, Google's CEO at the time, warned Yahoo's then-CEO Terry Semel that he risked "thermonuclear war between the companies if a lawsuit got filed," this person recalled.
The former participant continued:
Terry said that's not fair. You guys violated our patents and you've put us in a situation where this is our best time for leverage. Ultimately, we were able to settle but with Facebook, Yahoo has had no communication about any of this. You have to ask why this is in Yahoo's best interest. They need Facebook but they've put Facebook in a position where it's cheaper to fight it and the hell with you.Yahoo may hold enough ammunition to carry on its battle against Facebook for quite some time. The 2011 IEEE Spectrum Patent Power Scorecard (PDF) ranks Yahoo #1 in "communication/Internet services," with more offensive patent power than Google, Verizon, or AT&T. For 2010, the IEEE growth index report indicated that Yahoo was ramping up its patent portfolio quickly, with patents granted an average of 2.34 times the company's five-year annual average.
By fits and starts, a new, still uncertain chapter in Yahoo's tumultuous history is getting written. In his most recent memo to employees, CEO Thompson wrote: "We are moving as fast with real urgency to move back to Yahoo playing offense once again."
Yahoo's chairman of the board, Roy Bostockthat along with fellow board members Vyomesh Joshi, Arthur Kern, and Gary Wilson, he would not seek re-election this year. With the vacancies on its board yet to be filled, Amoroso may be joined by other intellectual-property hardliners as Yahoo doubles down on a patent enforcement strategy that has won it few friends in Silicon Valley.