The Story Behind the BlackBerry Case

A single filing with the U.S. Patent and Trademark Office in 1991 has caused one of the largest patent disputes in recent memory, threatening to sever more than 3 million BlackBerry subscribers from their wireless e-mail service

In 1991, 164 306 patent applications were filed with the U.S. Patent and Trademark Office (PTO). One was filed by Thomas Campana Jr. It, and the additional patents he ultimately received, would threaten the wireless e-mail industry 11 years later, when the BlackBerry system would be found to infringe Campana's patents. The ensuing tumult got so bad that at one point the U.S. Department of Justice intervened in court. The DOJ warned that disabling the service would harm the public, particularly since federal employees and even members of congress regularly use the wireless e-mailers, especially in emergencies.

Along the way were false reports of settlement, a second look at the Campana patents by the PTO, court decisions regarding whether that reexamination should have an effect on the pending litigation and the threat of an injunction, a first take on how certain aspects of U.S. patents affect activities conducted outside the United States, a decision regarding an important difference between patents for methods or processes and apparatuses or systems, and a hard lesson in the consequences of not adequately investigating a patent threat.

Let's take a closer look at what really happened in the infringement litigation, and learn how, in one possible scenario, a court could permanently shut down the BlackBerry system even if the Patent Office holds Campana's patents invalid.

The story begins on 20 May 1991. Campana filed a patent application for his idea to merge existing e-mail systems with radio-frequency wireless communication networks. Without the need for a computer connected to a landline, you'd be able to receive e-mail outside the office. The PTO granted the first patent on 25 July 1995, and that one ultimately spawned eight more.

In 1995, Research In Motion Ltd. (RIM) of Waterloo, Ont., Canada, was a pager company. But in the next few years, it would introduce its BlackBerry line of handheld wireless e-mail appliances and strike successful deals with various wireless carriers, quickly becoming a market leader. Campana was an electrical engineer, inventor, and entrepreneur. Interestingly, his first company, ESA Telecon Systems was a contract engineering concern supplying gear to pager companies. In 1992, he and his patent attorney formed Arlington, Va. firm NTP to patent and license Campana's inventions, then put the patents in NTP's name and brought in investors to cover litigation expenses.

Taking It to Court

NTP knew what it had in the patents: in a lawsuit, if even only a single infringement claim would withstand a validity challenge, the company would win. Combined, the Campana patents had over 2000 such claims. On 27 January 2000, NTP placed RIM on notice regarding six of the patents and offered a license. Charles Meyer, RIM's in-house attorney, talked with his staff and quickly (too quickly it later turned out) concluded there was no infringement.

When RIM refused to take a license, NTP filed suit during November of 2001 in Richmond, home of Virginia's Federal District Court. On this court's "rocket docket" things move fast: despite numerous RIM motions (most failed), a jury was impaneled within a year. After a 13-day trial, it found RIM guilty on 14 infringement claims represented in five NTP patents. Presiding Judge James Spencer said the case was not even close. Even before the verdict, he had summarily ruled that RIM infringed four claims across three patents.

Apart from the monetary damages, ultimately totaling $53.7 million, the biggest threat to RIM was an injunction, which could essentially shut down the BlackBerry system. To stave off that possibility, the company filed requests with the PTO for reexamination of the patents, moved for a new trial, filed an appeal, and moved to stay all court proceedings pending the reexamination. The odds were good (90 percent) that the Patent Office would take a second look but poor (12 percent) that it would strike all the claims.

Apart from the monetary damages, ultimately totaling U.S. $53.7 million, the biggest threat to RIM was an injunction, which could essentially shut down the BlackBerry system.

The motion for a new trial didn't work and neither did the request to stay pending reexamination; but luckily for RIM, the appeal was reason enough to hold off on implementing the injunction until the Court of Appeals for the Federal Circuit in Washington, D.C. could review the rulings and verdict. That wouldn't be decided for some time. Meanwhile, RIM went to work on damage control. A finding of willful infringement could triple the jury's $34.4 million damage award and force RIM to pay NTP's attorney fees.

First RIM attempted to convince Judge Spencer that it had a good faith belief it hadn't infringed the patents. Citing the noninfringement conclusions of in-house attorney Meyer, RIM argued the infringement couldn't have been willful and thus enhanced damages weren't appropriate. Judge Spencer, however, found Meyer's opinions incompetent because they were based on insufficient information and lacking in objectivity, given that he worked for RIM. Spencer also found RIM's behavior during litigation to be egregious. Still, treble damages weren't warranted in his view since RIM didn't know about the patents when it developed the BlackBerry system. As a result, he enhanced the $33.4 million award by a factor of just 0.5 to $47 million.

For Spencer to award NTP the $5.25 million it spent on attorneys during litigation, he had to find the case exceptional (which he did given RIM's litigation behavior and limited investigation after receiving NTP's notice) and the fees reasonable. He held the fees were justified when shown that RIM's attorney bill in a single quarter amounted to $4.9 million. But because NTP filed suit claiming infringement of eight patents having a combined total of over 2400 claims, then later asserted only five patents and sixteen claims at trial, the judge cut 20 percent from the $5.25 million, for a total of $4.2 million.

Appealing the Decision

Now the only remaining procedures were the appeal and perhaps settlement. Although there was a chance the PTO might invalidate all the claims (it's happened before), RIM enjoined anyway, because the best it could hope for was a new trial--which might not be granted. And, remember, the judge had held the injunction against RIM in abeyance pending the appeal.

RIM filed its appeal on 29 August 2003, and on 14 December 2004 the Federal Circuit issued its first decision. Two months earlier, Campana had died of cancer, so he would never enjoy the damage award should the Federal Circuit side with NTP--which, indeed, the three judge panel largely did.

RIM moved for a rehearing but also pursued mediated settlement negotiations in front of a magistrate judge under Judge Spencer. In March of 2005, the company boldly announced a settlement whereby RIM would pay NTP $450 million. RIM's stock purportedly jumped $14 a share. NTP, however, declared there was no settlement. In response, RIM asked the Federal Circuit to stay the appeal and to have Judge Spencer decide this latest dispute. In a briefing on that issue, NTP asserted that RIM, once again, was simply attempting to avoid the consequences of infringement. The Federal Circuit refused RIM's request. Ultimately, in November of 2005, Spencer ruled there had been no settlement.

Interestingly, though, the Federal Circuit did agree to a rehearing of its earlier decision and issued a second decision in August of 2005. In that decision lies a fairly complex effect resulting from the confluence of U.S. patents and international law. The problem is that although BlackBerry devices are sold in the United States, RIM and its relay station for sending e-mail wirelessly are both located in Canada. In general, U.S. patents like NTP's do not extend to most activities conducted outside the United States. Moreover, the patents only covered complete systems and methods for wireless e-mail; not the BlackBerry device itself, which is only a component of the system.

NTP had made the problem even more complex by phrasing some of its patent claims as "system" type, covering the various components of a wireless e-mail structure (such as gateway switches and radio frequency transmission networks), while others were of the "method" type. Rather than listing components, method claims list steps associated with running a system, reciting action verbs like "transmitting."

The Federal Circuit held that RIM put the patented system into use in the United States (even though the relay is in Canada), but not the method, since the relay utilization doesn't occur in the States. In the United States, patent infringement takes place when the product in question is imported into, or sold in the country. But what if the invention is a method? How do you import or sell it? Difficult question. When a method is applied outside U.S. borders to make a product that is shipped into the country, there can be patent infringement--but data and information don't really constitute products under U.S. patent laws.

The result was that RIM didn't infringe NTP's six method-type claims but did infringe seven system-type claims. And because of Spencer's incorrect interpretation of system-type claims, the Federal Circuit remanded the case back to him to determine if RIM infringed three other NTP claims of that type.

No bonus points if you guess what RIM did next: it appealed this decision to the United States Supreme Court. That court rarely decides patent cases, though, and even RIM admitted, "review by the Supreme Court is generally uncommon". Once the case came back before Judge Spencer, RIM again moved to stay it. The company asked Spencer to place the litigation on hold since, by this point, the Patent Office had initially rejected some of NTP's claims. RIM asked the Supreme Court for a stay pending that body's decision on whether it would hear the appeal of the Federal Circuit's stand. The Justice Department was on RIM's side here: it asked Spencer to hold off on a final ruling because an injunction against the BlackBerry service could adversely impact public safety. These motions for stays were again denied. And on 23 January 2006, the Supreme Court turned down RIM's appeal.

Many possibilities remain, though: RIM and NTP could settle. Judge Spencer could grant a new trial given the Federal Circuit's remand concerning three of the system-type patent claims, but that's unlikely. The Patent Office could strike down all of NTP's claims and its decision could be upheld after the inevitable appeals. Or if NTP sues someone else, say one of RIM's competitors, that trial could invalidate the patent claims.

Quirks of Law

The last two results could produce an interesting outcome which, on first blush, might not seem too fair. Suppose there's no settlement and no retrial. The injunction issues. RIM pays the damages it owes to NTP, then appeals again and loses. The BlackBerry system is shut down. Later, the patents are eradicated either in court or by the Patent Office, and NTP loses all appeals regarding those decisions. The injunction against RIM still might not be lifted, and the company might not get its money back. Or RIM might settle and pay NTP to avoid the injunction but still not get its money back if the patents are later stricken.

How can a product be found to infringe a patent, sales be prohibited, and the company be ordered to pay damages, then not allowed to sell the product later when the patent is cancelled? The answer doesn't really concern a patent law quirk so much as one in civil law in general: trial courts do not determine if a patent claim is really valid. Instead, the other side must prove with clear and convincing evidence that the claim, presumed by law to be valid, is in fact not. If the challenger cannot satisfy that evidentiary standard, the court simply finds that the opposing party failed to meet its burden. The patent claim isn't found valid, it's found not invalid, which is what happened in RIM's case: the company attempted to convince both Judge Spencer and the Federal Circuit that NTP's patent claims were invalid, but failed.

Later, in another court, someone else can challenge a patent previously found not invalid and get a different result. Or a company can challenge the patent at the Patent Office (as did RIM) via the reexamination procedure. The Office makes no presumption of validity and either allows a claim to stand as is, with some modification, or not at all.

In a case where a patent is reexamined out of existence by the PTO (a fairly rare occurrence), a company previously found to have infringed that patent would have to go back to court and ask for a new trial to determine if the infringing product--previously enjoined--could now be sold. But courts have fairly wide latitude in deciding whether or not to grant a new trial on that basis.

Imagine then that RIM's BlackBerry system is shut down per an injunction granted by Judge Spencer, but the patent claims are all later stricken. Now anyone but RIM could offer a BlackBerry-type service without fear of infringing NTP's patents. Or suppose RIM and NTP settle, and the patents are later invalidated. RIM would likely not get its money back, yet no competitors would have lost anything.

Fair? Probably not. But we all take our chances with the system, and rarely is life fair. It is also probably a little unfair that Thomas Campana will never see the rewards of his intellectual labor.

The full BlackBerry litigation story is, of course, not over. It might end with a settlement soon or continue with appeals for years to come. Along the way an inventor died, millions have been spent on attorneys, and probably more than a few trees have fallen in the numerous motions filed by both parties. Judge Spencer keeps a docket report in his court, and in the BlackBerry litigation there are 426 separate entries as of this writing. In late 2005, he reportedly said, "I intend to move swiftly on this [case]. I've spend enough of my life and my time on NTP and RIM". Perhaps the only certainty is that no matter how swiftly he continues to move, he won't see the end of these combatants for some time.

About the Author

Kirk Teska is a partner in the Waltham, Mass. law firm of Iandiorio and Teska, which specializes in intellectual property law. He was a cochairman of the IEEE Entrepreneurs' Network and is a columnist for Mass High Tech and Lawyers Weekly. He has published articles in Trial Magazine, Journal of the Patent and Trademark Office Society, Mechanical Engineering, and IEEE Spectrum, among others. Prior to law school, he worked as an engineer for the U.S. Department of Defense Naval Weapons Station in Seal Beach, Calif.

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