Meet the Free-Range Chicken of Technology Stocks

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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 (NAS: 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 (NYS: PPG) .

Universal Display is by no means the only wheeler and dealer in OLED patents. LG Display (NYS: LPL) bought outEastman 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.

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The article Meet the Free-Range Chicken of Technology Stocks originally appeared on Fool.com.

Fool contributorAnders Bylundowns shares in Universal Display but holds no other position in any of the companies mentioned. Check outAnders' holdings and bio, or follow him onTwitterandGoogle+. The Motley Fool owns shares of Universal Display.Motley Fool newsletter serviceshave recommended buying shares of Universal Display. The Motley Fool has adisclosure 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 servicesfree for 30 days.

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