Apple and Google recently agreed to a ceasefire in their ongoing patent battle, with the two technology giants issuing a statement saying that they intend to drop any ongoing litigation directly between one another. The disputes that have been settled between the companies relate to Google’s Motorola Mobility handset unit. Crucially, this does not signify the end of Apple’s ongoing dispute with Samsung.

In their joint statement, the companies said that “Apple and Google have agreed to dismiss all the current lawsuits that exist directly between the two companies. Apple and Google have also agreed to work together in some areas of patent reform. The agreement does not include a cross license.

Does this agreement mean that litigation is ineffective and companies do not need to invest in patent portfolios? No. On the contrary, this example of cooperation suggests patents are as important as ever. It is only with the strength of a patent portfolio behind it that a company has the clout to negotiate such a commercial ceasefire as an alternative to litigation. This option can allow a company to focus its budget on other matters, or on litigation against other companies which are seen as more of a threat or where there is not a commercial interest in an agreement.

Therefore this case highlights the advantages of considering reaching an agreement with a competitor rather than inevitably feeling there is a need to sue. This can avoid expensive litigation that could otherwise damage both parties in relation to the rest of the field, not only in terms of financial cost, but also in terms of human resources, and in terms of potentially highlighting any weaknesses in the patents. The sooner such a settlement can be reached the better. This agreement between the parties could only be reached because of the bargaining positions their patents had given them.

These general principles apply across the board, including to companies holding much smaller numbers of patents. Even a single patent can be a useful bargaining chip if it covers the relevant technology in the relevant geographical territory.

Apple and Google do appear to agree on the need to reform patent law to reduce the impact of patent licensing companies (commonly known as ‘patent trolls’). These are companies that do not produce products themselves, but rely on extracting IP royalties from other companies to make a profit. Last year Apple and Google were amongst the most sued companies for patent litigation. This latest agreement perhaps suggests that large technology companies, such as Google and Apple, see themselves more at risk from patent licensing companies than they are from each other.

It is noteworthy that this latest development follows other similar agreements, such as that between Samsung and LG in 2013 to end their patent dispute over display technology and to work together to strengthen their position over the rest of the market. Is this the future, at least in this field where the main players hold so many patents?