Sunday, February 19, 2006

Stephanie Stoughton on RIM, NTP and the Blackberry saga

James R. Spencer, a no-nonsense U.S. district judge widely respected in the legal community, now finds himself in the unusual position of weighing an injunction against RIM even as the U.S. Patent and Trademark Office is expected to finally rescind NTP's patents. [The scheduled date for decision is February 24, 2006]

“These patents are ... guaranteed to go in the garbage,” James Balsillie, co-chief executive of Canada's RIM, said in December. “At the end of the day, our position is real simple: Let the system work.” [IPBiz note: Even if the USPTO finally rejected all claims of all patents, NTP would have two levels of review, first before the Board (BPAI) and then at the Court of Appeals for the Federal Circuit (CAFC)].

Unfortunately for Balsillie, the system doesn't necessarily work in a timely fashion. Spencer has signaled that he is unwilling to delay his proceedings while awaiting final word from the patent office, which lags far behind the court system. A case that could change the practice of granting injunctions in patent cases, eBay Inc. v. MercExchange, will be taken up by the Supreme Court, but no decision is expected until the spring at the earliest. Spencer, meanwhile, has scheduled a hearing for Feb. 24 on the injunction and damages. [IPBiz note: In theory, Spencer could delay the impact of the injunction until eBay v. MercExchange is decided. It's not clear that the issues in the eBay will help RIM. For one thing, NTP, unlike MercExchange, is in the commercial arena, so that the Continental Paper issue, even if decided adversely to MercExchange (which is doubtful in any event) would not impact NTP. Further, the "public interest" component of injunctions in the eBay case is less of a factor in eBay/MercExchange case than it is in NTP/RIM, where the saga of Sept. 11 gets better traction than does an auction network.]

Because patent infringement cases don't often rise to this level of importance and even fewer make it this far in the courts, it's hard to tell how Spencer will rule. An injunction he once issued on a sediment-control device, for instance, interested few people outside the construction industry. RIM v. NTP, on the other hand, could affect many of the more than 3 million BlackBerry users in the United States. [IPBiz note: until recently, patent injunctions were not a big deal. An injunction only issues after the patent is found valid and infringement established. Generally, most people would understand that an injunction should issue at that point.]

“His bottom line is that he wants this case off his docket,” said Susan Dadio, a patent attorney in Alexandria, Va. “And if the two sides can't reach a settlement or resolve this, he will not be afraid to act himself.”

Arlington, Va.-based NTP was co-founded by the late Thomas Campana Jr., an engineer who in 1990 created a system to send e-mails between computers and wireless devices. He is survived by his wife, who owns a large stake in NTP.

The BlackBerry hit the market in the late 1990s, becoming popular with lawyers, consultants and others who wanted to check e-mails away from their office and home computers.

In 2001, NTP filed suit. A year later, a federal jury in Richmond agreed that RIM had infringed on NTP's patents. The jury awarded the small firm 5.7 percent of U.S. BlackBerry sales, a rate that Spencer later increased to 8.55 percent.

Spencer issued an injunction in 2003 but held off on its enforcement during RIM's appeals. Those efforts largely failed and the case returned to his court last year.

Government and emergency workers would be exempted from any BlackBerry blackout, but the Justice Department has asked Spencer to hold off on an injunction until the details can be sorted out.

If granted, that delay would also permit corporate and individual BlackBerry users to switch to other devices or to download new software that RIM claims would work around NTP's patents.

RIM executives say the new software will prevent any service disruptions, but they have released few details. Some analysts are questioning the viability of the workaround and whether it might inconvenience users or degrade service.

The unanswered questions in the case have led thousands of companies to contact consultants in recent weeks for advice on alternative technologies, though few have actually made the switch.

At United Parcel Service Inc., as many as 3,000 managers, executives and technical support employees use BlackBerries. In the worst-case scenario, the company would switch those users over to Palm Treo handhelds, which are used by other employees, said Donna Barrett, a UPS spokeswoman.

David Johnson, infrastructure technology director for Grant Thornton LLP, said the Chicago-based accounting firm has been moving away from BlackBerries to a variety of devices supporting Microsoft Corp.'s Windows Mobile operating system.

That move has been due to personal preferences rather than the RIM litigation, but now the firm has asked two wireless providers to be prepared to supply backup devices for some of its 550 remaining BlackBerry users.

Even so, Johnson hopes RIM and NTP will work out their differences.

“If they want to kill each other and put each other out of business, all they're going to do is drive people to Windows Mobile faster,” Johnson said. “This is stupid is as stupid does.”

Analysts and others say both sides should settle. RIM would be able to avoid the headaches of the injunction and focus more on its business, especially with Microsoft posing a greater threat.

And NTP, they say, would fare better with a fat settlement (perhaps beyond the $250 million RIM has deposited in escrow) while continuing to reap royalties from licensing agreements with RIM competitors Nokia Corp., Good Technology Inc. and Visto Corp.

Those companies have only small pieces of the wireless e-mail market dominated by RIM. And eventually, some analysts say, the patent office would catch up to NTP, eliminating its leverage.

“Their days of milking these patents are nearing their end,” Gartner analyst Ken Dulaney said, referring to NTP. “If they are indeed worried about the poor widow Campana, they should take the money.”

(Stephanie Stoughton, from

[IPBiz post 1253]


Post a Comment

<< Home