As I said in my previous post, I was allowed to ask quite a few questions of Matthew Small in Blackboard’s patent Q&A webinar tonight. I chose not to ask any regarding the scope or validity of the patent, since I saw no benefit in crossing swords on those issues. Instead, I focused my questions on the potential for broader harm to the industry. Matthew Small took great pains to emphasize that Blackboard’s intentions are narrowly focused on D2L and that this patent is not, in his words, “a game changer.” I wanted to find out if he really believed that, if he can defend it, and if he knows how strong or weak his defense is. My conclusion? My gut is that he believes it. I’m confident that he can’t defend it. And I think on some levels, at least, he knows that his defense is weak.
In fairness, all of what follows is paraphrase. I don’t have a recording or transcript of the conversation. I invite other participants (including Mr. Small) to correct the record if I get anything wrong or out of context.
The first and most obvious question for me came when Mr. Small emphasized that Blackboard had only sued D2L and nobody else. The clear implication was that there was no intention to sue anybody else either. I asked, “Isn’t it a common strategy for patent holders seeking royalties from multiple companies to sue one company first and establish a precedent?” The first sentence out of his mouth in response was, “I don’t know whether it is common practice.” He doesn’t know? I don’t believe that. He then immediately jumped to patent trolls (meaning companies whose main or sole income is suing other companies for patent infringement), saying that the strategy I described may be common practice for trolls while emphasizing that Blackboard does not meet the definition of a troll. That may be true, but it isn’t what I asked. The essence of my question was, “Is the fact that you have only sued D2L so far good evidence that you have no intention of suing anybody else, based on common industry practice?” Mr. Small was unable to answer that question in the affirmative.
The next question I asked was why Blackboard didn’t offer a royalty-free license to those entities (Open Source projects and universities) that it claims it does not intend to sue. I knew what his answer would be, since he has given it before, but I needed the opening it would create for follow-up. He said that it would diminish the monetary value of the patent and, while he acknowledged that some companies do offer royalty-free licenses, this is a tactic mainly employed by large companies with huge IP portfolios that are donating a small percentage of them whose value they have already written off. It’s true that this is a strategy employed mainly by big companies with large IP portfolios, but I suspect it is not necessarily the case that they have written off the value of the patents. Rather, they see more gain than loss in the contribution. For example, I find it hard to believe that web services patents that Microsoft just promised not to assert have a net value lower than the litigation costs. But Microsoft has strategic reasons to want people to use web services. Plus, the monetary value of adoption plus the monetary value of the good will generated by the donation of the patent (and good will is a line item on the balance sheets of many corporations, including Blackboard) was judged to be greater than the net value to the company of patent assertion. Later in the call, I asked what percentage of software patents are actually asserted. Mr. Small got somewhat annoyed, said he didn’t know, and asked that the questions be relevant to Blackboard’s patent. I thought that one was.
At any rate, Mr. Small continued in his defense of patent assertion by making the analogy to the automobile industry. Most automakers have multiple patents and cross-license from each other all the time. Yet this has not damaged the automobile industry, he asserted. I responded by asking what the size of the automobile industry was relative to the LMS industry. He said he didn’t know and acknowledged that the analogy wasn’t perfect. I would be interested in hearing about an industry that has roughly the same revenues and average profit margins as the LMS industry and supports significant patent licensing. Lacking that, the argument carries no weight with me.
The next question I asked was, “If you were the legal counsel for a unversity that was developing software that might infringe on Blackboard’s patent, what advice would you give your client?” My sense is that this question cut the deepest of all the ones that I asked. After a long pause, his initial answer was that he is not the legal counsel for a university, that he couldn’t easily put himself in that position, and that it was hard to answer a hypothetical.
Like I said.
He then said that he would advise them to call Blackboard and try to judge the intentions of the company. He also said he would assess the risk by looking at the Blackboard’s business case for suing a university. And I readily admit that it is true that Blackboard currently doesn’t have a strong business motivation to sue universities. But would this be sufficient to convince Mr Matthew Small, General Counsel to Whatsamatta U, that the liability risk was negligible? Um… The next and last part of his answer was that he would have them consider their own patent portfolios, whatever they may be, and think about the positive as well as the negative aspects of patents. So that’s a big fat NO. This tells me that my article in Campus Technology, which is basically just a list of questions to ask your university’s legal counsel, can be an effective weapon. Please do everything you can to get it in front of your campus executives and to convince them that they should actually ask these questions of their legal counsel.
I then asked for a plain-English explanation of the central claims in Blackboard’s pending patent for portals and content management systems. He said the conference call was about the current patent and that it would be inappropriate for him to respond.
My last question was in some ways the most important question and I’m sorry to say that I bungled it. I wanted to set the terms for negotiating a peace by understanding what strategic value Blackboard places on the patent. Do they primarily see its valuation in terms of royalties? In terms of the company’s valuation and its ability to attract investors? What do they want and how can we help them get it in return for choosing less destructive strategies? The question I actually asked was too vague. Mr. Small first interpreted it as asking him to put a dollar value on the patent. (I would never ask him that in public because I know he would never answer it.) Once I cleared that up, he took the question to be the softball that it sounded like, answering that they are protecting their customers by protecting Blackboard’s investment in innovation and saving fuzzy bunnies for democracy. (OK, I made that last part up.) There’s nothing in that answer that is useful for the purposes of negotation.
That’s about all I can remember. Once again, I have to give Matthew Small and his colleagues credit for having the guts to give me such a large opening to ask pointed questions.
