I have been hearing more and more rumblings in the VoIP industry regarding Jerry Weinberger of Rates Technology Inc. (RTI). I don't get too many people coming to me about patent issues so when I heard about this company, I decided to delve into this potential story a bit more. What intrigued me is that apparently RTI has no products... They exist to collect revenue from other companies.

I did some research and found that Rates Technologies has sued Nortel, Sharp Electronics and others. Apparently in 1998 the Wall Street Journal quoted Mr. Weinberger in an article titled "Payoff Pending," on December 7, 1998:

In the end, Mr. Marshall might have to sue some company for patent infringement -- and do so successfully -- before the industry takes his rights seriously. Mr. Marshall "had better be prepared to spend more than $1 million on prosecution, because that's what would be required," says Gerald J. Weinberger, president of Rates technology Inc., a Hauppauge, N.Y., company that says it has gone to court six times to prosecute patents in the telecommunications field. Mr. Weinberger says an aggressive stance in court is crucial to any enterprise based on patent licensing. "You don't get any licensees unless the parties become convinced that you will litigate," he says

So I decided to call Jerry Weinberger and get his side to the story. In my discussion I told him that a few of the smaller companies had spoken with me about him. According to Weinberger, RTI, a Delaware company owns all right title and interest in the patents. Jerry Weinberger is RTI's President and is one of the Patents' inventors. According to Wenberger, the telecommunications patents are very broad and well established.

He tells me that his company is not generally targeting small companies. He has agreements in place with 76 large companies such as Huawei Technologies, Lucent, and Cisco at this time. He says the larger companies understand how intellectual property rights work in the US while the smaller ones usually don't.

The Patents at issue are the '085 and '769 patents and their foreign counterparts in Canada, Mexico, and the '769 in Japan counterpart.

The following are statements from an e-mail from Jerry Weinburger:

When an infringer will not discuss their alleged patent infringement with RTI, there is little else that RTI can do except to pursue its remedies for the (willful) infringements in a court of competent jurisdiction. The remedies which RTI then seeks include damages, treble damages, a permanent injunction against further making, using, selling, offering for sale, and importing of the infringing products and services for the remaining lives of the Patents, payment of RTI's legal fees, and a product recall of all examples of those infringing items.

Although infringement is based upon a specific evaluation of a company's product(s) the '085 and '769 patents generally apply to hybrid cellphones, gateways, IP Phones, IP PBX's, edge routers, core routers, PC computers, ITSPs, and VoIP products, services and technologies, among several other telecommunications products, services and technologies.

Companies who decide to be covered under RTI Covenant Not Sue ("CNS") agreements are making a combined business and patent determination. The larger companies are easier to deal with, because they have many in house patent attorneys, and they do not feel that they are being roughed- they are making an informed business decision. Smaller companies tend to not respect the intellectual property of others. All makers, users, sellers, and importers are responsible for an infringement, and infringement is determined based upon direct, induced and contributory infringement; all allowing for interpretation of the Patents claims under the Doctrine of Equivalents.

After it became impossible to get them covered, RTI recently filed suit for willful patent infringement against Centrepoint Technologies, Inc. for much less money than Mitel and Alcatel (they certainly are a smaller company).

Mitel Networks was sued for $945 Million; Alcatel was sued for $1.155 Billion; and their default is pending in USDC EDNY. Hello Direct, GN Netcom and GN had been sued by RTI for patent infringement, and they recently settled with RTI; the terms are being kept confidential.

I spoke with Jerry Weinberger for about two hours and was fascinated by the legal side of the VoIP business. This is an area I don't get a chance to write about too often so I was fascinated to learn what companies in the VoIP market have to deal with in the course of becoming a successful company. Of course, RTI is only one company with patents you need to negotiate with. Here are some other salient points worth noting:

In total they have agreements in place with 700-800 companies and have litigated 25 times in 15 years.

Occasionally he tells me smaller companies want to negotiate and/or sue. Litigation he says costs about 2 million dollars.

I asked Mr.Weinberger how he got involved in this business and he told me he invented least cost routing in the late 1970's. This technology seems to apply to most VoIP technology. Having been in the call center business since birth or so I recall when least cost routing was about the most complicated technology telecom and certainly call centers had to deal with in the 1980 timeframe.

I also told him that I have heard complaints that his company doesn't produce anything... They just collect revenue from others. He mentioned that if they made products, they would have the right to tell competitors to cease and desist. Besides he says, his company does do other things besides sue for patents. He just doesn't compete with companies he gives coverage to.

He went on to say that he doesn't extract royalties for the lifetime sales of a product... He only asks for a one-time fee. He says that it may actually benefit smaller companies to pay quickly as they can become a large company and not have to pay a much larger fee when they get bigger.

So how does it work? Generally his company contacts your company and shows you their patents. Your company then checks with its patent attorneys to see what infringes and what doesn't. If you want to be covered, you pay a one-time fee based on five tiers -- according to highest parent companies' worldwide sales... They do not deviate from these tiers. In exchange you get a covenant protecting you from a lawsuit.

My correspondence with Jerry Weinberger ended like this. I leave it to you to determine how to take it:

Please feel free to give a contact number for RTI (631-360-0157), for companies who would like to get to RTI, before we get to them.