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September 28, 2015

Reflections on Waterloo’s Innovation Summit: Blackberry, Intellectual Property, and Mega-Large Firms

The Waterloo Innovation Summit, held September 16th  to 18th at the University of Waterloo and Communitech, brought together private and public sector decision-makers alongside academics and others to discuss and share best practices on the creation and growth of world-class innovation ecosystems. The DEEP Centre will shortly be releasing a report highlighting the Summit’s key themes and drawing out broader lessons for ecosystems in Canada and around the world. So stay tuned.

Among an impressive roster of speakers, the Summit featured a ‘fireside chat’ with Blackberry CEO John Chen. In addition to some very witty anecdotes and a detailed discussion of secure communications, Chen commented on Blackberry’s innovation strategy and provided insight on the strategic value and use of the company’s large patent portfolio. His remarks are interesting not only for those following the fate of the Waterloo-based technology company, but also as a window into the role that patents and IP play in innovation strategies of large firms, and the broader implications of those strategies for innovation ecosystems.

Blackberry’s Innovation Strategy

According to Chen, Blackberry’s patent portfolio contains around forty four thousand patents globally, either filed or complete. The portfolio is also one of the youngest in the industry, with an average of around fifteen years of patent protection remaining. Though estimates vary, Blackberry’s patents have been valued in the range of $2-5 billion.

While size and value of Blackberry’s patent portfolio could make them attractive as a target for acquisition, Chen maintains that these assets are also crucial to the firm’s plans to return to consistent profits. Noting that the company’s broader innovation strategy was being driven both organically though research and development and through acquisitions focused on secure communications, he emphasized that patent monetization constituted an important element of the firm’s strategy turn-around plan.

Chen also pointed to some of the complications of building and managing a large, globally positioned patent portfolio, noting that Blackberry employs a team of around 70 people in its patents group supporting engineers and the company’s global IP strategy.  If Chen and Blackberry can successfully balance patent monetization within the timeline’s demanded by shareholders, its patent portfolio could form a key plank of the company’s eventual resurgence.

The Bigger Question: Large Firms and their Patent Portfolios

In addition to his comments on Blackberry’s strategy, Chen offered some insights into the challenges faced by large firms in balancing the desire to generate a return from its existing portfolio with the dangers of being too aggressive. “If you go too far and too aggressive you become a troll” he noted, while at the same time acknowledging that licensing your technology in a non-aggressive way takes time.

Chen’s comments highlight a growing tension between large and small companies seeking to monetize and control new ideas and the increasingly blurred line between so-called patent trolls and other organizations – be they companies or non-practicing entities – seeking to extract value from their patent portfolios. Writing in the New York Times, Robert Reich recently argued that that widespread control of IP assets by a small handful of mega-large firms is undermining startup growth and innovation. Reich’s arguments, which point at a central tension not only between large and small companies, but within the broader intellectual property system, are worth quoting at some length:

The patent system is crucial to innovation. The law gives 20 years of patent protection to inventions that are “new and useful,” as decided by the Patent and Trademark Office. But the winners are big enough to game the system. They make small improvements warranting new patents, effectively making their intellectual property semipermanent. They also lay claim to whole terrains of potential innovation including ideas barely on drawing boards and flood the system with so many applications that lone inventors have to wait years. The White House intellectual property adviser Colleen V. Chien noted in 2012 that Google and Apple were spending more money acquiring patents (not to mention litigating them) than on doing research and development.

 

As Reich rightly points out, then, IP creates winners and losers. For many small firms, patents provide only a thin veneer of protection against larger competitors armed with deep pockets and significant legal expertise. As a result, both startups and venture capital groups have begun to question the value of IP for smaller firms. In certain sectors, particularly software, the majority of small firms have chosen to avoid filing for IP protection entirely. In a different but connected vein, the evident need to provide IP expertise and resources to smaller companies has led to the creation of a number of distinct public policy initiatives ranging from pro-bono IP clinics to sovereign patent funds. In this context, Chen’s comments on the need for a balanced approach on this issue are prescient, and point to broader dynamics in the IP system that will continue to challenge firms of all sizes – as well as policymakers – to ensure that systems intended to encourage innovation provide a reasonably level playing field for all.

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