For months -- going on years -- Research In Motion co-chief executive officer Jim Balsillie has said very little about the legal battle his company his been waging with patent-holder NTP, perhaps because he didn't want to legitimize the U.S. company's claims by commenting on them. With a possible injunction and $1-billion at stake, however, the silent treatment obviously isn't an option any more, so Mr. Balsillie has finally shared his thoughts -- almost 1,500 words worth, in fact, on the opinion pages of a recent issue of the prestigious Wall Street Journal.
In his piece, the RIM executive did his best to convince readers that his fine company is being held hostage (he didn't use the words “ransom” or “extortion,” but you could tell he really wanted to) by a company whose patents he said were “bogus” and “invalid,” and by a patent system in the United States that is broken and ineffective.
So did Mr. Balsillie prove his case? That depends on how you look at it. When it comes to the flaws of the U.S. Patent and Trademark Office, there are many who agree with the RIM co-CEO that the system is broken. Among other things, the office is understaffed and overworked, with millions of patents piling up in the “to do” pile and not enough trained examiners to sort the wheat from the chaff. The USPTO also gets its funding based on the number of patents it approves, which is a bizarre way of financing such a process. It makes you wonder what kind of health care the U.S. would have if the Food and Drug Administration was financed based on how many new drugs it approved. (a nice discussion of the USPTO's problems is here).
When it comes to RIM's case in particular, however, Mr. Balsillie's piece paints the picture as being black and white when in reality it is anything but. In this view (not surprisingly), RIM is pure good -- a simple Canadian company walking through the woods, minding its own business -- and NTP is pure evil, a ne'er-do-well using the patent system as a club with which to beat the poor, innocent handheld maker. In trying to make this case, however, Mr. Balsillie twists the facts of the situation to the point of distortion, and by leaving out the role that he and his company played in letting things get to where they are now, he undermines his own credibility.
Throughout the piece, for example, the RIM CEO writes as though the U.S. patent office has already thrown out all of NTP's patents. He says he has witnessed a "flagrant abuse" of the U.S. patent system, involving threatening behaviour and "dishonorable" attempts to "exploit" the overworked patent office, and baldly states that the USPTO now says NTP's patents "should never have been issued in the first place."And yet, in the very next sentence, Mr. Balsillie says RIM's position is to "Let the system work. Let the USPTO do its job and determine whether NTP's claims are sound or not." But didn't he just finish saying that the USPTO believes the patents shouldn't have been issued?
What Mr. Balsillie knows, but doesn't say, is that the decisions the USPTO has made on NTP's eight patents are what the agency calls "non-final." That is, they are interim steps, and are open to appeal on a number of levels, particularly when the process has been altered in what appears to be RIM's benefit, including cutting in half the amount of time that NTP has to respond. It's true that the USPTO has now said that it expects to reject NTP's patents completely once the process is finished, but that too is open to appeal. (The five patents are here: one, two, three, four and five).
Mr. Balsillie also criticizes NTP for obstructing both the settlement process and the process of re-examining the patents, saying the USPTO has called the company's responses "unpersuasive." That's more than a little ironic, considering the U.S. Court of Appeals -- which decided in 2003 that RIM had infringed on several of NTP's patents -- used similar words to describe the testimony of several RIM executives in that case. The judge called their responses "implausible" and "inadequate," and referred to a courtroom demonstration of a wireless email device that RIM claimed was around before Thomas Campana filed for his patents (which NTP now holds) as "fraudulent."
The judge also said that based on the evidence provided by RIM about its attempts to research the Campana patents (after the inventor sent a letter in 2000 indicating there might be infringement), he found it difficult to believe RIM had conducted any research at all. And yet, Mr. Balsillie says in his piece that the company "has licensed thousands of patents and fully respects intellectual property rights." While Mr. Balsillie would like to portray NTP as a patent "troll" taking advantage of the system, the facts accepted by the judge are that Mr. Campana developed wireless mobile e-mail technology, which he then licensed to NTP. What is so wrong about that? Thomas Edison invented plenty of things that he never made, but he is still revered as a genius (ironically, Edison was also the subject of a patent lawsuit involving the lightbulb).
There are other things Mr. Balsillie leaves out. For example, he doesn't mention that part of the process RIM used to try and delay the U.S. judgment was to argue that the company shouldn't have to abide by U.S. patent laws because its wireless e-mail network is based in Canada. Is that the kind of argument a company makes when it "fully respects intellectual property rights?" The RIM CEO also says the royalty rate proposed by NTP (5.7 per cent of revenue) is "10 to 20 times higher than industry norms." And yet, the evidence RIM presented in court was that a reasonable rate would be between 1 and 6 per cent, and the jury came up with 5.7 per cent. At one point, before the appeal, that amount was raised even higher because the judge agreed that RIM was guilty of "willful infringement" for not investigating the claims made by Thomas Campana sooner.
Is the U.S. patent system flawed? Yes. Is that the only reason that RIM finds itself facing a potential injunction or billion-dollar settlement? No. As much as Mr. Balsillie would like us to believe differently, there is a lot more to it than that.
Mathew Ingram is the Globe and Mail's on-line business columnist. Feel free to post a comment or e-mail Mathew at mingram@globeandmail.ca
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