By directly compensating inventors Spherix could be setting a new NPE trend 08 Nov 13
Publicly held patent monetisation company Spherix announced this week that it has appointed a number of inventors – including an ex-Nortel employee – to its Technology Advisory Board.
According to a press release, the Board has been set up “to help provide compensation to inventors of patent portfolios acquired by Spherix so that the inventors can share in proceeds related to the commercialisation of their ideas and to provide advice, support, theories, techniques and improvements to the company's technologies and business model by leading IP professionals”.
The two most recent appointees to the Board are Frank Reiner, currently vice president of global licensing at Kudelski Group and formerly senior director of licensing at InterDigital; and Bruce Tsuji, a professor at Carleton University in Ottawa, who previously worked in R&D at Nortel. Tsuji is named as lead inventor on one of the patents that Spherix acquired from Rockstar last summer and is now asserting against Uniden and VTech.
Spherix CEO Anthony Hayes tells me that “it is no coincidence that Professor Tsuji is an ex-Nortel employee”, though it is not clear if Tsuji has any current or previous working relationship with Rockstar. “Spherix contends that VTech and Uniden are using Professor Tsuji's patented ideas and not paying any compensation,” says Hayes. “As laid out in our complaint,” he continues, “Nortel was a thriving company, employing thousands of people in North America, including Professor Tsuji. Nortel is now gone and those same thousands of people were put out of work. But thankfully the patent system is available to us and allows for recovery of compensation to individuals for their ideas and that is why Spherix has a technology advisory committee, to help return compensation to inventors. We believe that’s what the patent system was set up to do in the first place.” Spherix is extending offers to all located named inventors on the patents acquired from Rockstar to sit on the committee. “ I anticipate many others joining,” Hayes states.
As payment for its patents, Rockstar received shares in Spherix in addition to $2 million in cash and an entitlement to a percentage of any proceeds derived from monetisation. Hayes confirms that cash payments and stock awards will be made to Tsuji and any other ex-Nortel inventors who join the Board. These will be separate from and unrelated to any payments made to Rockstar: “The cash payments go directly to them and the stock is issued to them in their names… Spherix provides hourly compensation and stock in Spherix for their involvement in its commercialisation efforts.” The payments to the inventors are not contingent on the outcome of litigation involving the patents they are named on.
One of the arguments we most often hear in support of the NPE business model is that it helps to reward inventors who wouldn’t otherwise have had the opportunity to be properly compensated for their investments in innovation. But in their widely-circulated and oft-quoted 2012 working paper ‘The direct costs from NPE disputes’, James Bessen and Michael Meurer of Boston University argue that “publicly-traded NPEs likely cost small and medium sized firms more money than these NPEs transfer to inventors” and that only 5% of the proceeds of patent assertions carried out by NPEs ends up in the pockets of original inventors.
However, through its Technology Advisory Committee, Spherix will be directly compensating individual inventors for the use of their patented inventions by third parties – a benefit that they may not have previously enjoyed as employees of operating companies. “To my knowledge, no other publicly traded patent commercialisation company has a technology advisory committee made up of inventors,” says Hayes. “There is a lot of conversation about ‘trolls’ and this is part of Spherix's response. I feel an obligation to the inventors of the IP we acquire. The IP is often their ‘brain child’; they created it and brought it to life. So when Spherix acquires the IP, I want those inventors to work with us in our commercialisation efforts because the inventors should be rewarded for their ideas. The inventors deserve compensation and they deserve to have their ideas protected.”
IAM has previously reported on the partnership between Intellectual Ventures and Finnish agribusiness Raisio to leverage IP that could be instrumental in improving global food security. Working with operating companies and other organisations to find solutions to social issues could help NPEs to counter claims that they are anti-innovation ‘trolls’. Working directly with – and rewarding – the inventors behind the patents they assert, provides another way for NPEs to blunt the attacks of their critics. The Spherix move is a good one. As with what IV is doing, other NPEs should take note.
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