TCS Daily


Black-and-Blue-berry

By Michael Rosen - January 24, 2006 12:00 AM

If you're naturally incapable of turning off your BlackBerry, rest assured: the federal government may soon do it for you -- permanently.

The ubiquitous handhelds find themselves in the eye of a legal maelstrom between their manufacturer Research-in-Motion (RIM), a Canadian company, and NTP, a Virginia-based patent-holding concern. NTP has won a mega-million-dollar judgment against RIM for patent infringement and, because the parties have been unable to reach agreement, may soon enforce an injunction that would turn the devices off for good in the U.S. On Monday, the Supreme Court rejected an appeal by RIM that has brought the BlackBerry one step closer to the brink.

The prospect of this injunction has prompted both the American and Canadian governments to intervene and poses several serious questions about patent law -- including foreign patent infringement and the sheer power of injunctive relief.

But first, how did we get to the point where millions of people may soon live without their electronic lifelines?

The case began in November 2001 when NTP accused RIM of infringing its patents by manufacturing and enabling others to use the BlackBerry device and network. NTP's patents involve the integration of existing email systems with radio frequency wireless communication networks. Users employ the invention to receive, read, and send email messages on a wireless receiver which could later be synchronized with a "fixed destination processor" -- i.e. a PC with a land line.

The BlackBerry device and network that NTP accused of infringement likewise "merges seamlessly with the user's existing email system." When a BlackBerry user's email account receives a new message in its inbox on the user's PC, the PC copies, encrypts, and routes the message to the user's wireless device. Along the way, all BlackBerry messages take a pit stop at the company's relay tower, which is located in Canada.

NTP charged that, because of these similarities, RIM directly infringed, and caused its customers to infringe, its patents. RIM argued that the BlackBerry system did not infringe, and that even if it did, there could be no infringement because a fundamental component of the system -- the relay server -- was located in Canada, outside the reach of NTP's U.S. patents.

In November 2002, a Virginia jury found these similarities compelling enough to award NTP $23 million in damages and in August 2003, Judge James Spencer increased the verdict to $53.7 million. Judge Spencer also permanently enjoined RIM from manufacturing, using, importing, or selling the BlackBerry products or network.

RIM promptly appealed the case to the Federal Circuit Court of Appeals (the court that hears all patent appeals) and obtained a stay of the injunction. But, like the jury, the Federal Circuit in late 2004 rejected the relay-tower argument, citing the statute requiring that patent infringement take place within the United States.

The court held that "when two domestic users communicate via their BlackBerry devices, their use of the BlackBerry system occurs 'within the United States,' regardless of whether the messages exchanged between them may be transmitted outside of the United States at some point along their wireless journey." Because the "control and beneficial use" of the device and network took place within American territory, even though one component of the system existed outside the U.S., the court found RIM liable for infringement.

The decision has echoed far and wide across the legal, political, and business landscape. First, the decision is important for industry. Any company operating an off-shore facility as part of a production process that is mostly based in the U.S. should pay attention: an extraterritorial component may not insulate the company from patent infringement. Imagine an American software company that hires customer service representatives in Delhi to assist American software users in operating a program that infringes a patent. In such a case, the software company may still be on the hook for infringement. While there may be few American companies that use offshore resources for this reason alone, those who outsource to prevent patent litigation do so at their peril.

Second, the significance of the possible injunction mustn't be understated. This is an instance in patent law where the threat of the injunction outweighs the damages in importance. Indeed, after the Federal Circuit issued its opinion, the parties reached a tentative settlement whereby RIM would pay nearly half a billion dollars to NTP or ten times the amount of damages entered by the court. The U.S. market constitutes such an overwhelming segment of RIM's business that the company could hardly exist if the injunction went forward. Even so, the settlement unraveled.

Third, the BlackBerry's popularity -- along with the possibility that it could be outlawed -- make this a head-turning case. It has been widely reported that the chief administrative officer of the House of Representatives wrote that an injunction could present "a serious risk to the House's critical communications and could jeopardize the public interest." The Canadian government has also filed briefs with the Supreme Court in support of its native son company. Fortunately, NTP has announced that it would not enforce its injunction against BlackBerrys used by federal, state, or local governmental officials. But the case could have a crippling effect on businesses across the country.

RIM, for its part, believes that it may still escape the ugly fate an injunction portends by resorting to the last refuges of patent-infringing scoundrels. For one, RIM has asked the United States Patent Office to "re-examine" -- i.e. invalidate -- NTP's patents. RIM also claims to have re-designed its hardware and network in a manner that no longer infringes the patents. With either tactic, the company faces a steep uphill battle -- and large lawyers' bills. The better solution for all involved would be to revive the dormant settlement talks.

In the end, anyone who's ever spent some time with one of these devices can recognize the hallmarks of a classic love-hate relationship: BlackBerrys offer the blessing -- and the curse -- of constant contact with work, the Web, or whomever; a wireless PDA is as much a leash as a lifeline. But whatever the metaphor, the link may soon be cut if RIM and NTP can't get their acts together. Consider yourselves forewarned.

Michael M. Rosen, a TCS contributor, practices intellectual property law in San Diego.
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1 Comment

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Completely agree with the author. An immediate nationalization of NTR would stop at once this nonsense.

Amicalement,

Leo

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