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Battle for Memjet as Silverbrook fires back

Tuesday, 24 April 2012
By Patrick Howard
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“We are devastated that Australia’s best and brightest scientists and engineers have been made to take annual leave from our Australian facilities. We have had to pay the staff on the Memjet project from our own pockets since February, while our US-based Memjet customer has over  $22 million in outstanding invoices owing to Silverbrook Research.” – Kia Silverbrook.

The battle for Memjet moved into full metal jacket mode last week with Australian inventor and entrepreneur, Kia Silverbrook, launching a stirring rebuttal of the allegations of fraud and trickery against he and his partner Janette Lee from Oklahoma-based investor George Kaiser’s tax entity, GKFF. Insisting the UK court has jurisdiction to hear the case, he derided claims that he and Ms Lee were at fault in the breakdown of the Memjet development partnership that has consumed $600 million over eight years.

He insists the claim is designed solely to eliminate him and his company, Silverbrook Research, as minority shareholders prior to Memjet being sold for a price between $2 -$5 billion. “This US-led group is trying any means to gain control of the patent portfolio, which they licence, but have not created and do not own,” he claims.

The court case proceeds against the background of the dissolution of research and development company, Silverbrook RS, in Sydney, where the staff are on enforced leave until next week. There are also allegations that some have been made redundant without receiving their benefits. Silverbrook claims the US backers have frozen badly needed money, refusing to pay an outstanding $22 million in an effort to take over the company’s IP.

In a detailed witness statement lodged with the London court, Silverbrook refutes every one of the claims made against him and Lee. He makes the point that George Kaiser, the leading investor, is not party to the claim against him and that the head of GKFF, Frederick Dorwart, is also head of the firm of lawyers bringing the case.

The protracted commercialisation of the Memjet technology has put increasing strains on the relationship between the Australia and US partners. After nine years the development partnership finally broke down in June 2011 when it was declared the Memjet companies would require an extra investment of between $250 million and $400 million to break even. Ms Lee accused the Memjet management of spending considerable time on issues such as option plans, bonuses and salary increases while they failed to meet sales targets, achieving only 8% of predictions. They also failed to raise $250 million in capital as promised.

All parties have now come to the recognition that the best, possibly only, way forward for Memjet is to sell the company and the technology to a large technology firm, such as HP or Canon. The legal battle is over how it is sold and by whom. The Americans fear that due to the fragmented nature of the original Silverbrook corporate structure, they will not be able to account for all the necessary IP. Silverbrook reckons the Americans just want him and Lee out and be left with liabilities so they can maximise their profit from any sale.

There seems little doubt the memjet technology is a disruptive inkjet printing technology, already successfully integrated into working printing equipment, notably by Nick Mansell of Rapid Machinery in Sydney and sold throughout the world. The cost and difficulty in bringing it to commercialisation – it began in 1997 and has over 5,000 dedicated patents – has cast a pall over its groundbreaking stature.

In his witness statement Silverbrook claims… many companies have attempted to develop what the Memjet technology achieves. Canon has spent at least $1 billion in several attempts to achieve it. Philips made three unsuccessful attempts over a period of around six years, each costing over $200 million. HP has spent several billion dollars in several attempts, and has come the closest to succeeding, although its solution is inferior to the Memjet technology. Many other companies, including Xerox, Sony, Fuji-Xerox, and Samsung, have also tried and failed. It is a technology, which is deceptively simple in concept, but enormously difficult to implement in practice.

The danger is Memjet will become bogged down for years now in court battles across the world.

 

2 Responses to “Battle for Memjet as Silverbrook fires back”

  1. May 01, 2012 at 10:58 am,

    Sean Ethan
    said:

    I have been in the semiconductor industry for over decades and a few of my ex-colleagues are working at Silverbrook because of above-market rate ridiculously high pay there. I was contacted by few recruiters to join Silverbrook in the past with the temptation of high pay and I declined every time as;
    a)I didn’t believe Silverbrook was sustainable with its high R&D spending
    b)I never understood its business model
    c)I didn’t believe its product would commercially succeed
    To me the projects in Silverbrook were always a joke. It is the scam! I do believe Mr Silverbrook misused and mismanaged fund and deceive the investor. How on earth he and other scientists and engineers believe that printing business need super advanced technology and the success of future commercialization when everyone is saying to save printing paper and protecting environment.
    I wonder how many of patents have real technical or commercial value out of so call ~5000 patent owned by Silverbrook.
    Perhaps it is time for some Australian tech firms to grow up and see the real tech world outside Downunder!

  2. January 18, 2013 at 12:01 pm,

    Mr.Bao
    said:

    Yet another case of Australian, small-minded Government not standing with OUR technology and allowing it to go overseas- again.
    And, yet another case of the Yanks doing ‘anything’ to gain their dominant ends!
    No wonder they have been No 1 in the world, trampling on anyone who dares to oppose, or compete with them.
    But, “every dog has their day” and China will no blitz the Yanks once for all. Mark my word!

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