The Communication Research Centre (CRC) has successfully thwarted a legal attack against its most lucrative invention, the first time in history the federal government has defended a patent generated by a government laboratory. The complex three-and-half-year legal battle culminated earlier this month with a decision in CRC’s favour, preserving a royalty and license revenue flow worth up to $3 million annually.

The invention under attack was fiber Bragg gratings (FBGs), a fundamental technology underlying fibre optic networks. It was invented by a CRC research team headed by Dr Ken Hill in the early 1990s, with patent protection extending to 2012. The technology builds on photo sensitivity technology also invented by Hill in the late 1970s and is the basis of a CRC spin-off firm — Innovative Fibres — which was formed in 1995 and purchased by Alcatel in 2000 for US$175 million.

FBGs, along with lasers, low-loss optical fibre and optical fibre amplifiers, comprise the technology set required for today’s optical networks. FBGs are licensed from CRC by more than 25 firms including some of the world’s largest telecommunications equipment manufacturers such as Nortel Networks Corp, 3-M, AT&T and Furakawa, which recently purchased Lucent Technologies’ optical division. FBGs are used to make a wide range of products including lasers, optical amplifiers, sensors and filters.

The challenge to CRC’s patent was launched by a Dr Elias Snitzer, a professor and inventor who claimed he had filed a patent first. Snitzer launched his suit in 1999 then sold his patent application to Corning, raising the stakes of the challenge and expanding its scope to include some of the biggest names in high tech on both sides of the case. Once CRC decided that fighting the challenge was worth pursuing, the case was prepared under the leadership of Jeet Hothi, CRC’s technology transfer manager.

“I told (CRC president) Gerry Turcotte that it could be an uphill battle and was not an assured success. A typical government bureaucrat wouldn’t take such a chance,” says Hothi, who credits Turcotte with unwavering support. “This was a very complex case, made even more complex by Snitzer’s attempts to confuse the issues.”

Hothi says he was confident that CRC had a solid case, but he also realized that the cost of defending FBGs could spiral out of control. He and Turcotte approached United Technologies Corp (UTC), which had bundled the FBG technology with its own technologies, to share the cost of the legal defense – a proposal that resulted in CRC and UTC splitting legal costs which eventually reached $1 million. The case was heard by the US Patent and Trademark Office.

At the beginning of the court hearings, there were 13 years remaining on the FBG patent, meaning that as long as the CRC kept it before the courts it could continue receiving royalties. To date FBG has netted CRC $9 million, with 25% going to the inventor. Last year the patent generated $3 million in royalties, and with the success of the court case, FBG’s patent could bring CRC another $30 million before it expires.

CRC fought the challenge on three points —first to patent, lack of enabling disclosure and derivation by Snitzer, meaning that he had stolen the idea from Dr Hill and made a handwritten change to his patent application.

“In the end, we were taking on Corning and not just Snitzer but we had IP worth protecting and fighting for,” says Turcotte. “Jeet (Hothi) wasn’t sure if management would stand in the breach but I don’t like to lose. I was ticked with Snitzer. He steals and then lies in the bush and thinks we’re going to cut and run. We needed a US partner because if we didn’t have one, we would have been the bad Canadian company taking on the little guy.”

With UTC on board, CRC hired a legal team — Antonelli, Terry, Stout & Kraus LLP, Arlington VA — filing 10 preliminary motions that resulted in a preliminary decision in its favour in early 2001. Snitzer then assigned his patent application to Corning, which brought out the heavy legal guns. It was at this point that the CRC decided to fight on regardless of the outcome, recognizing the value of holding a valid patent while the case wound it way towards a conclusion.

With CRC’s victory all but assured (Corning has two months starting from August 7 to appeal), Hothi asserts that the case should be a warning to private companies who may be considering challenging government patents.

“It certainly sends a strong signal. Companies usually don’t worry about government or university patents because those organizations don’t have an appetite for fighting,” says Hothi, who has worked in government for 30 years and the CRC since 1990. “Turcotte helped and took a keen interest. A typical government bureaucrat wouldn’t take such a chance.”

Turcotte says CRC’s success doesn’t necessary mean government departments and agencies should become more aggressive in defending patents. He contends that the decision to fight should be based on a case-by-case basis.

“I’m still wrestling with the implications. I didn’t do it from a federal, public policy point-of-view. I did it from a CEO’s point-of-view,” he says. “My organization was under attack and I had to protect the integrity of the organization.”

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