More and more, the price of innovation is litigation

I’m getting my BlackBerry this morning. It’s part of the age-old ritual of starting a new job in the District. You get half a dozen keys, cards, secret handshakes and other means of gaining access to your office, your building, your block and your lifestyle in general. You get your business cards, albeit only after a lengthy negotiation over the precise wording and, in some cases, spelling of your job title.

And you get your new BlackBerry.

Mine comes in this morning. It was ordered last week, back in the day when it was uncertain whether BlackBerries would even continue to exist this morning, whether they would be rendered outrageously expensive paper weights.

You see, in 2001, the company that invented the BlackBerry, the uncomfortably named Research in Motion or RIM, was sued by NTP, a Virginia-based company that holds a number of patents that they claimed defined, or at least alluded to, the technology that powers the ubiquitous wireless e-mail appliances that you see being used everywhere from trains to airports to grocery stores to the bedrooms of married couples who long ago lost whatever feeble spark of passion once colored their lives.

In 2001, the court in which NTP sued RIM — there are going to be a lot of three-letter acronyms here, so just get used to it — found that RIM had infringed on NTP’s patents and ordered RIM to pay $23 million in damages.

Now here’s the fun part.

RIM appealed the decision on a jurisdictional argument. The Court of Appeals laughed and laughed, and in 2005 RIM offered NTP a settlement for $450 million. Yeah. Nearly twenty times the value of the court-ordered damages.

The case bounced back and forth in the courts for another year, until finally, last Friday, RIM announced that the dispute had finally been settled in full. The terms? RIM cut a check to NTP for $612 million, twenty-six times what the trial court had ordered the company to pay in restitution.

BlackBerries and BlackBerry users are held in a certain disdain by the public at large. The devices are seen as elitist and unnecessary and the people who use them are seen as self-obsessed and oblivious. And all of that is true, at least to a certain extent. But no one can argue that the BlackBerry wasn’t a major innovation in the white-collar world. It allowed people in information jobs — everything from the law to government to marketing to sales — to be more nimble, more responsive, more effective all around. And that’s a good thing, both for them and for the economy as a whole.

So when a company comes along and says, “Wait a minute. We own that technology, and we’re not going to let you continue to use it. Shut it down,” that’s obviously a gross abuse of the patent system in this country.

According to the Constitution, the government of the United States is empowered to grant patents in order to “promote science and the useful arts.” The patent system was originally intended to encourage innovation, not to give small men with small minds the ability to stifle it. But like any other government program, certain unscrupulous souls have figured out how to game the system. Because sometimes it can be far more lucrative to come up with an idea, patent it and wait for somebody to infringe upon that patent. Sue them, reach a settlement, cash a big, fat check. Money for nothing.

In fact, some companies like Virginia-based NTP exist for no purpose other than to hold patents. These corporations — little more than shell companies; in the case of NTP, the company employs no one and holds no assets other than the patents — contribute nothing, existing only to license intellectual property to companies that have the resources and the vision to capitalize on the ideas.

Yes, the patent system is necessary. It doesn’t just promote science and the useful arts; in an age when it seems like all the easy inventions have been invented already, the progress of life and industry is dependent on the willingness of investors and companies to spend millions, sometimes billions, on basic research. Without that investment, we’d all just be waiting around for brilliant people to think of things nobody’s ever thought of before, just idly in their spare time. We’d all be gathered around the apple tree, waiting for the next Newton to get hit on the head.

But surely there’s some middle ground. Congress should open the debate on proposals to refine — not reform, and certainly not remake, but refine — the patent system in this country so disputes like the RIM/NTP case don’t continue to slow the pace of innovation. Maybe patents that go unimplemented for a period of time — twelve months, five years, whatever — should be seized by the government and auctioned off to the highest bidder. Maybe companies should be required to license their intellectual property to all comers if they’re not using it themselves.

And maybe we should all just move to Russia and hoist the hammer-and-sickle while we’re at it, because that’s where that train of thought is heading.

Yes, the patent system in this country stinks. But for all the complaining by armchair lawyers and technocrat elites, the system works. This country is driving innovation at a pace unseen since the Renaissance. And if the price we pay for that is the occasional lawsuit that makes the front pages, so be it.

Because at least I’ve got my BlackBerry.

Jeff Harrell blogs at The Shape of Days.

Mr. Taliban Goes to Yale
As ye sow, so shall ye reap

15 Comments

  1. Dave March 6, 2006
  2. jpm100 March 6, 2006
  3. steve sturm March 6, 2006
  4. Mac Lorry March 6, 2006
  5. jpm100 March 6, 2006
  6. George March 6, 2006
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  8. Just a Patent Attorney March 6, 2006
  9. Just a Patent Attorney March 6, 2006
  10. eLarson March 6, 2006
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  13. jpm100 March 6, 2006
  14. Wayne March 6, 2006
  15. Just A Patent Attorney March 6, 2006