Wireless email patent-holder NTP collected a $612 million settlement on March 3, 2006, after it conceded patent rights to BlackBerry innovator Research in Motion (RIM). The case's effect on market-leading companies' innovation is being debated by academics and businesspeople alike. Most agree big technology players will now pay attention to patent infringement claims filed by small unknowns.
"The RIM case has given attention to patent protection and the importance of taking it seriously," said Robert Scott, national practice leader for PricewaterhouseCoopers, Canada's IT Advisory.
NTP held wireless patents at the U.S. Patent and Trademark Office and sued RIM after the release of the BlackBerry in 2001. Two years later, NTP won an injunction forcing RIM to stop sales of BlackBerry hand-held devices and services in the United States until NTP's patents ran out in 2012. Three million BlackBerry users became panicked: Would their service go dark? Should they continue to invest in this technology? RIM settled the now five-year patent dispute by throwing millions of dollars at NTP. In return, NTP granted RIM the right to keep running its BlackBerry business.
"The settlement is good news for RIM and its customers in that it secures the future of what has become a critical technology," said Carmi Levy, a senior research analyst with Info-Tech Research.
Yet this case has larger implications than just over-the-top payouts to patent holders who failed to market their products. Patent holders have been given the derogatory term of "patent trolls," first coined by Intel lawyers in 2001 after being sued for defamation for calling their foes "patent extortionists." These patent holders refuse to release patents even years after they fail to market a product. As a result, innovations sit on the shelf collecting dust until patents weaken or run out.
Imagine if this trend had started years ago, instead of in the late 1990s. For example, in the 1970s, Xerox turned to the Palo Alto Research Center (PARC) and employed it to innovate in the field of documentation. When Xerox suits saw the graphical user interface with a windows-like application, they said "no thanks." It wasn't long before Apple Corp.'s Steve Jobs paid PARC to see the technology, and then, of course, Bill Gates to successfully improve it, market it, and build a multibillion-dollar company. No one sued. If Xerox, Apple, or even PARC had sued, would Windows be as far along as it is now?
"If RIM had innovated instead of being forced to fight, would the technology be twice as fast today?" said Levy. "We'll never know that."
Big players like IBM and Microsoft might be next on NTP's list. Right now, Microsoft faces a patent infringement suit from Visto, which, ironically, is a licensee of NTP's patents. Visto claims that Microsoft's wireless email platform violates its patents.
"Visto has said that Microsoft should have found its patents and have come to [them]," said Darren Meister, assistant professor and faculty fellow at the Richard Ivey School of Business, University of Western Ontario. "If this precedent is set, companies will perhaps become more cautious in coming to market with new products."
To avoid this, some pundits believe large software companies will settle early to avoid the costs associated with patent suits: legal fees, setbacks in innovation, and loss of customer base. NTP paid D.C. law firm Wiley Rein & Fielding more than $200 million in legal fees alone. Other companies will continue to fight—and win. On March 17, Oracle won a summary judgment saying the company's clustered database software did not infringe on a patent held by small software developer MangoSoft Inc.
"Patent licensing is a great way for inventors without the financial capability to bring their product to market to get to firms that can commercialize it," said Meister. "Like most things, it's not the tool but how it's used."
Patent lawsuits often force companies to redirect R&D funding to pay patent lawyers who secure patent rights or fight off patent trolls. Levy pointed to IBM as an example of a market leader in R&D. The company's growth rests on its ability to innovate, he said. Multiple lawsuits could divert attention away from that innovation.
"The resources to maintain momentum in the event of a lawsuit like [the RIM case] is staggering," said Levy. "IBM would have to hire people to fight it, and then they would have to launch a marketing campaign to tell customers and potential customers that the technology is OK."
Meister anticipates a rise in these types of lawsuits, and companies with deep pockets, like IBM and Microsoft, will be targeted. Whether this will lead to market-players paying considerable legal fees for USPTO patent filings and high-profile court cases or becoming generous with the open-source software community is unknown. Evidence shows small and large companies continue to file a large number of patents as part of their business strategy.
This leads to another trend: loss of faith in the U.S. Patent and Trademark Office. Most agree the USPTO doesn't have the human bandwidth to handle the current patent infringement caseload. In the RIM/NTP case, the settlement was reached as the USPTO re-evaluated the validity of NTP's claimed patents. According to several news reports, the patent office had indicated it would have rejected all of NTP's claims, due to the issue of prior art: the processes, devices, and modes of achieving the end of an alleged invention known by due diligence before and after the date of the invention. If RIM had held on a bit longer, would it have had to pay NTP a dime?
Dennis Crouch, a patent lawyer with McDonnell Boehnen Hulbert & Berghoff, questioned the legitimacy of the USPTO on his Web blog, PatentO. He wondered whether a system that approved a 1977 patent for a comb-over, technically a method of styling hair to cover partial baldness, is working. "[Can the USPTO] keep up with technical innovation?" he wrote.
Companies wonder this as well. Last year, Microsoft and Oracle announced their desire to see patent reform through congressional legislation to control suits by patent trolls, according to a joint company statement. If not, the system may have a damaging effect on American innovation as inventors of technology are forced to look askance whenever they bring a new technology to market.
"American competitiveness will continue to suffer unless the federal government prioritizes and overhauls how the patent system manages intellectual property ownership," said Levy.
The jury is still out on whether these lawsuits affect innovation. Levy said settlements lessen overall doubt about the viability of wireless technologies and allow competitors to devote more resources to innovation. But he does believe long-term growth in the wireless sector will be hampered by continued patent uncertainty.
"I think it is too early to tell," said Scott. "However, the high-profile cases have increased the awareness of intellectual property rights and the importance of thinking about them early in the process."
Mary Rose Roberts is a Chicago-based freelance writer and a masters of science, journalism candidate at Roosevelt University, Chicago. She can be reached at
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