”Fate, it seems, is not without a sense of irony.” Laurence Fishburne’s mysterious character Morpheus uttered this line in the 1999 movie The Matrix. Fate has certainly been showing off its sense of irony in the notorious litigation over Research in Motion’s BlackBerry smartphone.
NTP, in Virginia, sued the Canadian-based Research in Motion (RIM) for patent infringement in 2001 based on a contention that the BlackBerry service infringed a family of five U.S. patents that NTP held. At trial, a jury determined that NTP’s patents were valid, that the defendant’s BlackBerry service had infringed NTP’s patents, and that RIM’s infringement was willful. The trial judge enhanced the jury’s compensatory damage award because of the jury’s finding of willful infringement and also awarded attorney fees to NTP. The trial judge also ordered a permanent injunction against RIM that would have barred RIM from further manufacture, use, sale, and/or importation of all accused BlackBerry systems, software, and handhelds. The injunction, which would have interrupted BlackBerry service to millions of subscribers in the United States, including members of Congress and senior government officials, was stayed while RIM appealed the verdict. That reprieve was short-lived.
With its interim appeals exhausted and pressure mounting from both the trial judge and adverse publicity, RIM settled the dispute with NTP in March 2006 for a lump sum of US $612.5 million in exchange for a license under the asserted patents. According to RIM, NTP received no promise of future royalties and relinquished all future claims against RIM. In short, RIM sacrificed its short-term profitability to preserve the long-term existence of its U.S. service and the integrity of its customer base. RIM has flourished since the settlement with a market capitalization today of about $30 billion and quarterly sales of around $4 billion.
RIM had also requested reexamination of the NTP patents as early as December 2002, and the reexamination proceedings progressed in parallel with the court proceedings. For the uninitiated, reexamination is an instrument for invalidating the original claims in an already-issued U.S. patent. Reexamination proceedings are conducted at the U.S. Patent and Trademark Office (USPTO) instead of in a courtroom. At the outset, RIM convinced the USPTO that a substantial new question of patentability existed with regard to one or more original claims in each of the asserted U.S. patents. The reexamination proceedings were still in their initial stages when RIM and NTP arrived at their settlement, but there were already indications of patent invalidity, which likely reduced the lump sum paid by RIM to settle NTP’s infringement claims. During the contentious reexamination proceedings, NTP accused RIM of colluding with the U.S. government, tampering with the reexaminations, and improperly receiving inside information.
Despite the private settlement, the reexamination proceedings have continued. In fact, they are now nearing a decisive outcome that is shaping up to be unfavorable to NTP. The USPTO has made final determinations that essentially all of the claims in the five patents (U.S. Patent Nos. 5819172, 6317592, 5436960, 6067451, and 5625670) asserted against RIM are invalid over the prior art. NTP has appealed the adverse decisions to the U.S. Court of Appeals for the Federal Circuit, which hears all patent appeals.
The irony, then, is that the finality of the $612.5 million lump sum payment to NTP now works against RIM’s interests. Because the settlement agreement with NTP contained no contingency for a finding of invalidity during reexamination, the USPTO determinations of invalidity are little consolation for RIM—RIM’s settlement payment to NTP is irreversible. NTP had also sued other wireless e-mail entities, like Palm, AT&T, Verizon, Sprint, and T-Mobile, based on accusations of allegedly infringing the same five patents at issue in the RIM litigation and two additional patents (5438611 and 5479472) in its portfolio. These litigations were stayed pending the conclusion of the reexamination proceedings at the USPTO. The two additional patents were also reexamined by the USPTO and determined to be invalid, which NTP has likewise appealed. If the appeals court leaves the invalidity determinations undisturbed, these other litigation targets of NTP will benefit, but not RIM itself. In other words, not only is RIM out the $612.5 million, but its hard work in pressing the reexamination proceedings may also spare its competitors from similar payments.
In a 2007 patent infringement case, Hitachi v. Translogic, that bears passing similarity to the RIM litigation but with far less acrimony, Translogic convinced a jury that its asserted claims were valid and infringed by Hitachi. However, during a parallel reexamination proceeding, the USPTO determined that the asserted claims in the Translogic patent were invalid. Because Hitachi had moved swiftly to request reexamination when litigation was initiated, the relative timing of the court and USPTO decisions resulted in copending appeals before the Court of Appeals for the Federal Circuit. That court affirmed the reexamination decision invalidating the patent and then proceeded to dismiss the district court appeal in light of the affirmed reexamination decision. In this instance, Hitachi benefited by not settling before the reexamination was decided.
About the Author
William R. Allen is a partner with the Cincinnati law firm Wood, Herron & Evans. He holds a Ph.D. in physics from the University of North Carolina at Chapel Hill and a J.D. degree from the University of Tennessee.