CopyTele is a 'Patent Troll'--With No Apologies
Robert Berman makes no bones about it: the company he runs, CopyTele Inc., is a patent monetization and patent assertion entity. In colloquial parlance, that means its a patent troll.
But Berman is not apologetic. Patent troll is a pejorative term, but companies that assert patents serve a useful purpose, the CopyTele CEO told CorpCounsel.com. We give inventors and small companies the ability to do the same thing large corporations do all the timeassert their patents.
At a time when two separate pieces of anti-troll legislation have been introduced in Washington to combat the increase in the number of lawsuits filed by non-practicing entitiesusually defined as companies that exist solely to acquire and license patents but do not produce anythingBerman doesnt mind being the face of the vilified troll.
His Long Island-based company garnered attention last week when it sued Microsoft Corp. for patent infringement related to its Skype calling and messaging service. CopyTele claims two of its patents cover the encryption methods Skype uses to keep its communications secure. The CEO said other companies that offer web-based peer-to-peer communications services may also be infringing, suggesting that other lawsuits may follow. He did not name names, but there are many web conferencing companies that could be violating the same patents, he says. FaceTime, owned by Apple Inc., and WebEx, owned by Cisco Systems Inc., are two of the big names in the web conferencing industry.
To Berman, asserting Copyteles patents is not only a right but also an obligation to the companys 25 employees and to its shareholders. (The publicly traded company has a market capitalization of about $58 million.) And while he doesnt shun the word troll, he points out that the definition is broad and the disparagement sometimes misguided.
Copytele, for example, once actively produced and developed technology. The patents it asserted against Microsoft were originally developed in-house with the intent of producing and commercializing products, he said. Only recently did patent monetization and assertion become Copyteles business model, Berman explained.
The 30-year-old company also developed patented technologies that can be used in e-readers. (In January, the company sued AU Optronics Corporation, a Taiwanese technology manufacturer who had licensed its technology, and E Ink Holdings, which makes the technology used in some Amazon Kindle and Barnes & Noble Nook e-readers, for breach of contract and fraud, alleging they illegally obtained the Copytele patents.) And over the years it developed more than 100 patents of its own, including the two asserted against Microsoft. Some of those have expired, but it currently has 53 homegrown patents. Berman said.
The problem, according to Berman, was that the small company was not well run. Like many electronics developers, it did not have the know-how to commercialize its products and bring them to market, he said. And in the current business climate, the CEO believes its almost impossible for a consumer electronics developer to succeed on its ownmost need to partner with a larger company, or license or sell their technology to another company if they want to succeed. Today, I dont think even a company like Apple would be able to successfully bring its products to market on its own, he said.
In effect, Berman sees his role as one of helping the little guythe small inventor or company that lacks the wherewithal to develop or commercialize a product by itself. For those companies, it makes sense to license their technology through an entity that knows how to optimize the value of the asset.
Berman comes to the job at Copytele, which he officially joined in September of 2012, with plenty of experience in the patent monetization field. From 2000-2007, he was chief operating officer and general counsel at Acacia Research Corp., a publicly traded intellectual property holding firm. He started Acacias patent assertion business, which grew over the years and involved lawsuits against major companies, including Microsoft, Apple, and Comcast.
Berman was a consultant when he was first brought in by Copyteles board to help rescue the floundering company. He and his team, which included two other Acacia veterans, analyzed Copyteles assets and discovered the 53 patents the company didnt know what to do with. Eventually the companys board decided to make a big management change, fired its 85-year-old CEO, and hired Berman and his team to step in and run the business.
Theyve certainly been busy since then. In addition to filing the lawsuits against AU Optronics and E-Ink in January and against Microsoft last week, the company has acquired two patent portfoliosthe first for covering conversion systems for loyalty points plans such as frequent flier programs, and the second for window-frame technology used in manufactured, prefabricated housing and replacement windows. Unlike the other asserted patents, these latter two fall into the more traditional definition of patent assertion entity, or troll. We will be asserting those patents, too, Berman said.
Studies have shown that patent assertion entities hurt innovation. And one study estimates that in 2011, patent troll suits cost corporate America $29 billion. That has gotten the attention of lawmakers in Washington. In recent months, bills like the one proposing the SHIELD Act have been introduced in Congress in an attempt to stem the number of such lawsuits; the most recent anti-troll bill was introduced by Senator Charles Schumer (D-NY).
Patent trolls, Berman said, come in all shapes and sizes. Indeed, large companies like Microsoft and Apple have been accused of adopting troll-like behavior. And in 2011 a group of companies, including Apple, Microsoft, Research in Motion, and Sony Corp., joined together to create their own patent licensing company Rockstar Bidcoformed with the patent portfolio they jointly acquired from bankrupt Nortel Networks Inc. Today that company, now called Rockstar Consortium, has a collection of more than 4,000 patents that it is free to assert, which critics have said stymies innovation.
When small companies are sued over bad patents, thats not good, Berman conceded. But large companies make money from licensing and no one complains, so why shouldnt small companies have a way to do the same thing? I think every patent case needs to be judged on the merits.
Berman shrugs off the derogatory moniker often attached to his company. Theres no need for him to feel defensive, he said, because he knows that since his team came in and changed Copytele into a patent monetization and assertion entity, the once failing company has been revived. Another company that was left for dead is showing signs of life, he said. I have absolutely no qualms about what we do.