Update: Court lifts RIM injunction, but finds infringement

Federal judge upholds a decision that patents of NTP were infringed

A U.S. appeals court issued a mixed ruling Tuesday in a patent dispute between Research in Motion (RIM) and NTP, upholding a decision that RIM infringed upon patents held by NTP, but vacating an injunction ordered by a lower court and sending the case back for further deliberations.

NTP owns patents for a wireless communications system that it believes cover wireless e-mail systems such as RIM's BlackBerry. In 2002 a jury in the U.S. District Court for the Eastern District of Virginia agreed, awarding NTP $23.7 million in damages. The court later slapped an injunction on sales of the popular BlackBerry wireless e-mail device and server software within the U.S. that was stayed pending this appeal. Corporations use the devices and software to allow employees to access corporate e-mail.

The U.S. Court of Appeals for the Federal Circuit ruled Tuesday that a lower court correctly interpreted several infringement claims made by NTP against the BlackBerry device and software, according to court documents posted on the Web site of the appeals court.

However, the appeals court ruled that the lower court incorrectly interpreted the scope of one key claim. It said that since a different ruling on that particular claim might change the outcome of the case, it remanded the case to the lower court to decide if the jury verdict should be overturned and lifted the injunction.

Despite this ruling, NTP is pleased with the appeals court decision because the claims that were upheld cover all of RIM's products, said company attorney Jim Wallace, with Wiley, Rein & Fielding in Washington, D.C. NTP believes the lower court will not change the damage award or the injunction, he said.

RIM issued a statement that confirmed the judgment and injunction were vacated on Tuesday, but it declined to comment further on any aspect of the case.

Patent disputes tend to center on how courts interpret claims made in the original patent. When a company or individual submits a patent application, they write the claims as broadly as possible in hopes of applying the patent to as many areas as possible.

When disputes arise, the courts must interpret the meaning of the claims in the patent, and decide whether those claims cover the device or concept that is allegedly infringing on the patent. In this case, the appeals court agreed with the lower court that 11 of the 16 claims in NTP's patents cover products such as the BlackBerry, NTP said in a statement.

But the lower court incorrectly interpreted one claim concerning the term "originating processor," which might have an impact on five other claims, according to the appeals court's ruling. The lower court had ruled that NTP's patents covered a device called an "originating processor," a term it defined as any processor in a system like the BlackBerry that helps pass a written electronic message along to a recipient.

On appeal, RIM argued that the definition of an "originating processor" should stick closely to the dictionary definition of the term "originating," in that such a processor would have to initiate the transmission of a message, according to the appeals court ruling. In the original case, NTP argued that several processors along the path of the message can introduce new information, such as destination routing addresses, and the lower court agreed with this interpretation. But the appeals court agreed with RIM, and asked the district court to re-examine the judgment and injunction in light of the new claim construction.

This is a key claim construction because the appeals court's ruling would mean that NTP's patent only covers the processor on which the e-mail message was written, not the chain of processors that transmit e-mail messages in the system enabled by the BlackBerry software.

The case will now head back to the Virginia court, which must decide if the new definition of "originating processor" will have any impact on the judgment against RIM and the injunction.

However, the claims that are affected by the ruling on this term are surplus to NTP's case, Wallace said. In any event, NTP will still argue that the claims related to the definition of the "originating processor" are valid and enforceable when the case heads back to the lower court in February or March, he said.

Trading was halted on RIM's stock (RIMM) pending the release of the decision. The stock price rose almost $9 from its opening price on the Nasdaq market following the release of the decision, but fell back after investors realized the full scope of the decision. Trading was halted just before 1 p.m Eastern time Tuesday, and had not resumed as of 3 p.m.

When trading was reopened around 3:30 p.m. ET, RIM's stock price fell precipitously to close at $85.44, a drop of 5 percent from its opening price on Tuesday.

Copyright © 2004 IDG Communications, Inc.