The agreement will thus allow the two companies to focus on delivering a wide range of products and services to customers while also reducing the risk of frivolous patent lawsuits in the future.
The deal is designed to serve as a hedge against patent trolls. Thus, by uniting their patent portfolios, Verizon and Google aim to reduce the possibility of trolls using patents against them. This should result in fewer patent infringement issues and consequently, lower monetary expenditure.
The arrangement will effectively prohibit the companies from filing a suit against each other over any of the thousands of patents they presently hold or will gain hold of in the next five years. Moreover, it also shields the companies against unwanted situations like either of them selling a patent to another entity; and eventually, that third company going on to file a lawsuit.
Interestingly, Google has been forming patent deals with a number of other network providers as well. The search giant has already signed wide-ranging patent cross licensing deals with Cisco Systems, Inc. (CSCO), Samsung Electronics and LG Electronics this year, in an effort to fend off potential patent lawsuits in the future.
Notably, Verizon has also always been supportive of patent developments and industry measures that encourage innovation and reduce expensive and prolonged lawsuits. Moreover, the company is looking forward to strike similar deals with other high-tech companies who are also troubled with the innovation tax that patent trolls often charge from them.
Currently, Verizon has a Zacks Rank #3 (Hold). A better-ranked stock worth considering in this industry over the near term is Vonage Holdings Corporation (VG) with a Zacks Rank #2 (Buy).