Ottawa home to robust, controversial patent licensing industry
When the latest iPad or Sony Playstation arrives in stores, Ottawa company Chipworks sends employees to camp out for one of the first devices.
They rush back to the office in the middle of the night not to play with the high-tech device, but to take it apart in their state-of-the-art labs.
As the company reports what it finds online, MacLean says some people visit the site to learn what competitors are doing, while others want to know if the technology inside affects the patents they hold.
Chipworks’ specialty is helping companies figure out which patents they hold are valuable.
They also use their cutting edge microscopes to help companies prove another company’s device is infringing on their technology.
The company is not the only one doing this work in Ottawa. Several other companies are also reverse-engineering and the city has many intellectual property lawyers.
At least three companies — Wi-Lan, Conversant and Rockstar — focus solely on making a profit by licensing the thousands of patents in their portfolios.
“We’re known as the hotbed of reverse-engineering and supporting patents,” MacLean said.
And while the city’s strong technical expertise makes Ottawa a good place for such business, MacLean said, the work they do is mainly focused outside Canada.
Patent holders without products attract critics
Phil Shaer frequently finds himself on a plane as he works to enforce his company’s patents. He’s a senior vice-president and lawyer with Conversant Intellectual Property Management, which recently changed its name from Mosaid.
“All the devices you have at home. The companies that make those devices, we’re talking to them about the fact they infringe our patents,” said Shaer.
Conversant’s portfolio of patents it owns and manages recently grew to 12,500. Patents have been its sole focus since 2007, when Mosaid decided to give up making memory testers and other products.
Shaer admits it was a difficult pill to swallow at the time for the company’s many engineers, who he says have products at their heart.
But high-tech companies are increasingly looking to their patents as a way to make money through licensing fees. Many big name-brand companies do intellectual property as one part of their business.
But it’s the companies that make no products that have attracted critics, particularly companies that have never made products and whose sole business is licensing patents.
Ottawa software developer John Ogilvie thinks companies like Rockstar, Wi-Lan and Conversant stifle innovation and are too often granted patents for technologies that are obvious or too broad.
He and a few colleagues have taken to going on "troll hunts" to protest the companies, dressing up in costumes and firing suction cup arrows at the offices of its targets.
"Everywhere around these industrial parks in Kanata we used to have global leaders," said Ogilvie.
"Once these companies expired, evil smelly trolls inhabited, using intellectual property as weapons to get money from companies around the world."
U.S. cracking down on patent trolls
The U.S. is trying to crack down on so-called patent trolls, which have used weak patents to make frivolous claims and sue innovators.
The Innovation Act, introduced last month, aims to increase transparency and accountability in the patent litigation system.
But companies like Conversant, Wi-Lan and Rockstar don't consider themselves patent trolls, a term they reserve for companies or individuals who apply for or acquire broad patents and launch legal claims against anyone and everyone they think might be using that technology.
"Most of these patent trolls will have a few patents of lower grade. They don't have inventors, they don't have an RE [reverse engineering] lab. They'll plaster prospects... it's completely different," said Rockstar business analyst Peter Lorenz.
"We're not litigious by nature, we don't file lawsuits left and right. We come to see you, you know we're probably right. Typically trolls don't do that kind of work."
Wi-Lan CEO Jim Skippen also argues the sale of patents shouldn’t lessen their value.
“I think at the end of the day if you didn’t have the right to transfer patents or buy inventions, you really have gutted the patent system," said Skippen.
"And you have to think carefully before you do that because that’s been a big impetus to the economic growth that we’ve seen in the U.S. and other western countries.”
Conversant creates guidelines for licensing patents
Phil Shaer at Conversant says his company goes after big multinationals for patent infringement, not small start-ups the way such trolls do.
He said his company has come out with guidelines for licensing patents in an ethical way and that he welcomes legislation that takes on patent trolls.
"We want them gone. It muddies the water for those of us asserting patents for which people are entitled," he said.
Jeremy DeBeer, a law professor at the University of Ottawa who specializes in intellectual property, said while Ottawa has become a hotbed for companies that assert patents rather than produce concrete innovations, the impact of patent litigation on Canadian companies such as Nortel and BlackBerry hasn't been explored.
It's something the University of Ottawa is now looking at.
"There’s a lot of discussion on how to reform the U.S. system and we’re on the cusp of these debates in Canada. We have not had a lot of specifically Canadian analysis so far," he said.