March 2006

Intellectual Property Bulletin

The Intellectual Property Bulletin is published by the Intellectual Property Practice Group at Arthur, Chapman, Kettering, Smetak & Pikala, P.A. to keep our clients informed of the ever-changing complexities of intellectual property and business law.

The long-running legal saga involving the BlackBerry email device ended this month. Canadian based BlackBerry manufacturer Research in Motion Ltd. and NTP Inc., the Virginia based patent holding company who sued RIM several years ago, recently reached a full and final settlement for $612.5 million. This settlement comes as a relief to the millions of BlackBerry's loyal American customers who feared U.S. District Court Judge James Spencer was on the verge of enjoining the manufacture, sale, and service of BlackBerrys. Many observers of the lawsuit expected a settlement after Judge Spencer appeared ready during a February 24 hearing to grant NTP’s request for an injunction. RIM is not required to pay NTP future royalties under the settlement which was for substantially less than the $1 billion NTP reportedly was seeking.

The BlackBerry litigation was complicated and began nearly four and a half years ago when NTP sued RIM for patent infringement in November 2001. The case was tried in 2002 and a jury awarded NTP damages and royalties based on the number of sold BlackBerrys after concluding RIM willfully infringed NTP’s patents. The judge increased the jury award and enjoined BlackBerry’s U.S. sales but stayed the injunction pending the appeal. RIM’s appeal was unsuccessful and RIM and NTP publicly announced in late 2004 they had reached a $450 million settlement. The settlement fell through however and RIM resumed appealing the case. The U.S. Court of Appeals affirmed in 2005 that RIM had infringed on NTP’s patents but ordered the trial court to review parts of the case. The United States Supreme Court refused to hear the case so the trial judge’s review was ongoing until the recent settlement. The judge’s comments at the February 24, 2006, hearing indicated that, it was not a matter of if he would reinstate his initial decision to enjoin RIM, but a rather a matter of when he would reissue an injunction.

While NTP and RIM fought in court, the United States Patent and Trademark Office reviewed the validity of NTP’s patents. The USPTO had previously issued "non-final rejections" on all five of the patents at the center of the lawsuit and issued "final rejections" in February for two of the five patents. The USPTO’s review of the remaining three patents was ongoing at the time of settlement. Its review was independent of the lawsuit and Judge Spencer had said he viewed the patent reexamination as a separate process and would not wait for the agency to issue its final rulings. NTP, as pressure to encourage settlement, had intended to appeal all final rejections to the agency’s appeals board. Rejections deny the validity of the patents and potentially discredit NTP’s claims against RIM. Appeals often take 12 months or longer to resolve. Some observers, like RIM’s CEO, felt the USPTO’s actions meant the basis for NTP’s infringement claims had been disallowed.

Most legal observers and business analysts thought a BlackBerry shutdown was unlikely and that the two companies would reach a second, this time successful, settlement. This view was shaped in part by the judge’s February 24 criticism of RIM for not settling with NTP coupled with the growing market share RIM’s competitors are seizing in the wireless email market. RIM has claimed for many months it had viable backup software that would allow BlackBerrys to run uninterrupted even after an injunction. Details, such as how this new software works, were always sparse however causing many users to doubt its viability. NTP repeatedly claimed its patents applied even to the workaround software.

The revised edition of our Intellectual Property Law Reference Guide will be available in April 2006.  If you would like a complementary copy, answers to any of your intellectual property questions or to schedule an intellectual property law seminar at your business, please contact Thomas A. Forker or Christopher D. Newkirk of our Intellectual Property Practice Group .