Legal maneuvering ratchets up in BlackBerry patent case

Feds give RIM another win on patent validity; court filings argue merits of NTP's injunction request

Research In Motion Ltd., which is facing a possible shutdown of its BlackBerry service in the U.S. as part of a patent infringement case, today said it had received a ruling from the U.S. Patent and Trademark Office (PTO) that preliminarily invalidates another of the wireless e-mail patents held by NTP Inc.

The latest preliminary ruling issued by the PTO, which is re-examining all of NTP's patents, came amidst a flurry of legal filings in the case between RIM and the Arlington, Va.-based patent-holding firm. The two companies both filed memoranda in advance of a scheduled Feb. 24 hearing in U.S. District Court in Richmond, Va., on NTP's request for an injunction against continued operation of the BlackBerry service. The U.S. Department of Justice also submitted a legal brief arguing against a possible injunction. The patent office ruling followed similar decisions on several other NTP patents. But Todd Kort, a Gartner Inc. analyst, said it could take a year or so for the PTO to formally invalidate all of the patents, should it decide to do so. Because the federal judge overseeing NTP's lawsuit against RIM has said he won't hold up the legal case while the patents are re-examined, Kort expects the PTO's preliminary rulings to prompt NTP to bargain harder for an up-front financial settlement.

James Wallace, an attorney for NTP, said the patent office's review process, including appeals, likely will stretch out for at least another six months. He added that NTP has 30 days to respond to the latest preliminary ruling by the PTO, after which it could go before a patent appeals board for further proceedings.

The question of filing an appeal is premature at this point, Wallace said. But he contended that the PTO's latest ruling "is based on faulty claim construction in defiance of the court rulings" handed down in the patent infringement case. "Of course, the court rulings will trump the PTO," he said.

In the 44-page memorandum that NTP filed today in U.S. District Court, the company demanded immediate payment of nearly $126 million by RIM to cover lost licensing fees. NTP said the amount it is seeking could go higher depending on whether RIM releases a software work-around designed to avoid the patent-infringement problems or purchases a license for the patents. In addition, it called on Judge James Spencer to consider further raising the damages, citing "RIM's ongoing defiance of the legal system."

RIM's 25-page brief asked Spencer to grant a new trial on the question of damages. The Waterloo, Ontario-based vendor claimed that damages calculated at a royalty rate of 5.7% would amount to about $45 million, based on a smaller revenue base that NTP used in its calculations.

A major portion of RIM's memorandum criticized NTP for supporting exemptions from an injunction against BlackBerry usage for government and emergency workers. RIM pointed out that many doctors and hospital staffers who use BlackBerry devices would be subject to an injunction. "The public interest and consideration of other equities here compel denial of an injunction," the company said. "RIM has demonstrated that it is ready, willing and able to compensate NTP through payment of reasonable royalties for the fair value of its infringement. There is no basis for exacting any other relief."

The DOJ, weighing in on the injunction request, said that a court-ordered shutdown of the BlackBerry service could hamper communications during emergencies and that it might not be technically feasible to keep government users connected to the service while cutting off others. No injunction should be issued until the latter problem has been solved, the DOJ said, adding that the only workable solution could be to issue an injunction that blocked only new sales of BlackBerry devices and service contracts.

"We believe that there are still a number of serious questions to be answered as to how an injunction can be implemented so as to continue BlackBerry service for governmental and other excepted groups," the DOJ said.

Of intense interest to many of the nearly 4 million BlackBerry users in the U.S. is when RIM will release the software work-around that the company says it has developed for IT managers to install on BlackBerry systems if Spencer issues an injunction. Kort said he talked today with RIM officials, who told him that details of the work-around will be disclosed within a week.

"I just hope it works well and is not too intrusive," Kort said, echoing the sentiments of Gartner clients who use the popular service.

The CIO at a Fortune 100 company with about 500 BlackBerry users said he would prefer having to install a work-around to a shutdown of RIM's service, noting that updating devices would involve less "short-term pain." The CIO, who asked not to be identified, said converting to another wireless technology would pose "a terrible burden" with setup and user training.

The question of whether patent holdings should have an affect on federal-court injunction hearings in infringement cases is being weighed by the U.S. Supreme Court in a case pitting eBay Inc. vs. MercExchange LLC in Great Falls, Va. RIM has filed an amicus brief in that case, supporting eBay and voicing concerns that MercExchange and other "patent assertion companies" can use the threat of sales injunctions as "drastic remedies" to try to obtain licensing payments that "far exceed the value of the patented invention."

The IDG News Service and Reuters contributed to this story.

Copyright © 2006 IDG Communications, Inc.

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