NTP v. RIM, 2005

Though not a typical software case, this case is significant because there have been calls for “patent reform” to reduce the impact of so-called “patent trolls” in view of this case. There were allegations of impropriety and lobbying which will be discussed later. A number of members of Congress use Research-In-Motion’s Blackberry devices and were concerned that an injunction could disrupt use of their devices.

The patents involved included U.S. Patent Nos. 6,317,592; 6,272,190; 6,198,783; 6,067,451; 5,819,172; 5,751,773; 5,745,532; 5,631,946; 5,625,670; and 5,438,611.

The technology at issue related to systems for integrating existing electronic mail systems (“wireline” systems) with radio frequency (“RF”) wireless communication networks, to enable a mobile user to receive email over a wireless network. RIM’s system utilized the following components: (1) the BlackBerry handheld unit (also referred to as the “BlackBerry Pager”); (2) email redirector software (such as the BlackBerry Enterprise Server (“BES”), the Desktop Redirector, or the Internet redirector); and (3) access to a nationwide wireless network (such as Mobitex, DataTAC, or GPRS).

As RIM is in Canada, certain steps of the alleged infringing activity occurred in Canada. RIM tried to argue that it could therefore not infringe a U.S. patent. The relevant statute is 35 U.S.C. 271.

NTP originally filed suit against RIM in the U.S. District Court for the Eastern District of Virginia. NTP alleged that over forty system and method claims from its several patents-in-suit had been infringed by various configurations of the BlackBerry system.

In an Order dated August 14, 2002, the district court listed the claim terms in contention and their corresponding constructions without additional reasoning or analysis. A series of summary judgment motions followed the court’s Markman decision. Setting forth several alternate theories, RIM asked for summary judgment of both non-infringement and invalidity. RIM argued (1) that the asserted claims, properly construed, did not read on the accused RIM systems, and (2) that the physical location of the “Relay” component of the BlackBerry system put RIM’s allegedly infringing conduct outside the reach of 35 U.S.C. § 271. The district court denied all of RIM’s summary judgment motions.

NTP asked the district court to grant partial summary judgment of infringement on four claims of the patents-in-suit. The district court agreed with NTP, holding that “no genuine issue of material fact” existed as to infringement of the four claims. Accordingly, the district court granted summary judgment, except as to the issue of infringement of certain claims by the BlackBerry series 5810 handheld device. That issue was reserved for the jury.

The case proceeded to trial on fourteen claims. A verdict was rendered on November 21, 2002. On every issue presented, the jury found in favor of the plaintiff, NTP. The jury found direct, induced, and contributory infringement by RIM on all asserted claims of the patents-in-suit. The jury also found that the infringement was willful. It rejected every defense proposed by RIM. Adopting a reasonable royalty rate of 5.7%, the jury awarded damages to NTP in the amount of approximately $23 million.

Following the jury verdict, RIM moved the court for JMOL or, in the alternative, for a new trial. The court denied these motions. On August 5, 2003, the district court entered final judgment in favor of NTP. The court awarded monetary damages totaling $53,704,322.69 The court also entered a permanent injunction against RIM enjoining it from further manufacture, use, importation, and/or sale of all accused BlackBerry systems, software, and handhelds. The injunction was stayed pending appeal.

The Federal Circuit stated that use of a claimed system under section 271(a) is the place at which the system as a whole is put into service, i.e., the place where control of the system is exercised and beneficial use of the system obtained. Based on this interpretation of section 271(a), it was proper for the jury to have found that use of NTP’s asserted system claims occurred within the United States. RIM’s customers located within the United States controlled the transmission of the originated information and also benefited from such an exchange of information. Thus, the location of the Relay in Canada did not, as a matter of law, preclude infringement of the asserted system claims in this case.

The Federal Circuit reached a different conclusion as to NTP’s asserted method claims. Under section 271(a), the concept of “use” of a patented method or process is fundamentally different from the use of a patented system or device. Because a process is nothing more than the sequence of actions of which it is comprised, the use of a process necessarily involves doing or performing each of the steps recited. This is unlike use of a system as a whole, in which the components are used collectively, not individually. The Federal Circuit then held that a process cannot be used “within” the United States as required by section 271(a) unless each of the steps is performed within this country. Asserted method claims of NTP’s patents recited a step that utilizes an “interface” or “interface switch,” which is only satisfied by the use of RIM’s Relay located in Canada. Therefore, as a matter of law, these claimed methods could not be infringed by use of RIM’s system.

Thus, RIM was able to avoid the method claims of NTP’s patent, but not the apparatus claims.

RIM requested rehearing and Microsoft and the Government of Canada filed Amicus briefs supporting RIM. The Government of Canada argued that the holding in RIM upset the business and legal climate in Canada.

During the course of the litigation, RIM requested reexamination of the patents in 2002-2005. The Patent Office began reexamining the NTP patents. The cases were granted special status and reexamination proceeded far more rapidly than normal. In November 30, 2005, The U.S. Patent and Trademark Office informed both NTP & RIM that a reexamination final rejection of NTP’s patents was pending. NTP accused PTO officials of holding improper covert meetings with RIM officials, including RIM’s CEO and Canadian counsel. After an ex parte reexamination is started, no participation of third parties is permitted. One NTP patent was given a 121 page rejection 5 days after receipt of incoming papers. RIM is alleged to have also lobbied Capitol Hill and engaged in a PR campaign claiming to be the victim of a “patent troll.”

In November, 2005, the Department of Justice filed a brief requesting that RIM’s service continue in view of the large number of users in the U.S. Federal Government.

On January 27, 2006, RIM and NTP filed briefs on the injunction issue. RIM argued that there was an exceptional public interest in continued and uninterrupted availability of RIM’s BlackBerry system and argued the fact that NTP can be more than adequately compensated by royalty payments.

In March 2006, RIM paid NTP $612.5 million in full and final settlement of all claims against RIM, as well as for a perpetual, fully-paid up license going forward.