Appeals court denies RIM a rehearing of NTP case

NTP plans to seek injunction against U.S. sales of the BlackBerry

SAN FRANCISCO - A U.S. appeals court has denied Research in Motion Ltd.'s (RIM's) petition for a rehearing of its long-running patent dispute with NTP Inc., once again raising the possibility of an injunction on sales of RIM's popular Blackberry devices in the U.S. But the court Tuesday also reversed one of the more controversial aspects of its December 2004 decision that upheld NTP's claims of infringement.

Barring additional appeals, the case now appears headed back to a lower court in Virginia, where NTP will seek an injunction against sales of the BlackBerry devices in the U.S., said James Wallace, a partner with Wiley Rein & Fielding LLP and NTP's lead attorney. NTP was previously granted an injunction by the same court, but that injunction was stayed pending RIM's appeal of a 2002 jury verdict that found the BlackBerry devices violated NTP's patents.

A spokeswoman for RIM said the company was still reviewing the decision, and had no immediate comment.

NTP and RIM have fought one of the more confusing, dramatic and high-profile patent cases in the technology industry over the past few years. At issue are shipments of the BlackBerry devices, which are surging as corporations issue the devices to workers so they can access their corporate e-mail on the go. NTP believes that the BlackBerry device and software used to send e-mails to the devices infringe upon patents granted to Thomas Campana in the early 1990s. NTP was formed to capitalize on patents issued to Campana, who died in June 2004.

In 2002, a jury agreed with NTP, but RIM sought an appeal of that decision on the grounds that the courts incorrectly interpreted the scope of NTP's patents. In December 2004, the U.S. Court of Appeals for the Federal Circuit upheld the decision, finding that RIM's BlackBerry devices, software, and methods of implementing the system infringed on NTP's patents. It did find an issue with one of the claims in NTP's patents, and asked the lower court to review that claim.

In January, RIM asked the appeals court to reconsider certain issues related to the December 2004 decision, but the court denied that request Tuesday. In a partial victory for RIM, it has removed its finding of infringement related to what NTP called "method claims". The method claims refer to the way in which RIM runs its wireless e-mail system, and sparked controversy when they were first announced because RIM is based in Waterloo, Ontario, outside the reach of U.S. patent law.

However, the appeals court upheld its finding of infringement on NTP's "system and apparatus claims," which refer to the BlackBerry devices and software, Wallace said. Since those are sold within the U.S., the patent law applies, he said.

"All we need is one claim on one patent to shut them down," Wallace said. "We get a lot of bargaining power [if an injunction is awarded]."

If RIM is prevented from selling the BlackBerry devices in the U.S., other companies will likely step up to fill the void after signing licensing agreements with NTP, Wallace said. Or, RIM will be forced to hammer out a licensing agreement with NTP or risk losing out on its largest market, he said.

"We can make money from other licensees or we can make money from RIM," Wallace said.

But several issues remain before money changes hands.

In between Tuesday's decision and RIM's January request for the rehearing, the two companies agreed to settle their dispute with a licensing agreement that was announced in a press release in March. RIM thought that was a final and binding agreement, while NTP says that a definitive agreement was never reached.

The settlement completely fell apart about three months later after RIM asked the lower court to enforce the terms of the settlement, in which RIM would pay NTP $450 million for a perpetual license to NTP's patents. RIM is expected to argue against an injunction by claiming that this licensing agreement was a final agreement, Wallace said.

And to top it all off, the U.S. Patent Office has waded into the dispute by issuing so-called "office actions" that invalidated all of the claims within seven of NTP's eight patents, the most recent office action coming in June. NTP is appealing that decision, which could take years, Wallace said.

Therefore, RIM is expected to ask the lower court to uphold a licensing agreement to patents that the U.S. Patent Office believes are invalid.

Tuesday's decision buys RIM additional time to stave off an injunction, but the company is up against the wall after another decision that found it infringed on NTP's patents, said John Rabena, a partner with Washington law firm Sughrue Mion PLLC who litigates software and electronics patent disputes and has followed the NTP-RIM case closely.

"I don't think it's a major change in the negotiations standpoint from either company's standpoint. It reduces RIM's exposure somewhat, but they are still exposed," Rabena said.

US Patent Office hands NTP a setback in RIM case, Jun. 23, 2005
Proposed RIM, NTP settlement not a done deal, Jun. 10, 2005
RIM and NTP resolve patent litigation, Mar. 16, 2005
Court lifts RIM injunction, finds infringement, Dec. 14, 2004

Copyright © 2005 IDG Communications, Inc.