Monday , November 21, 2005
RICHMOND, Va. —U.S. District Judge James R. Spencer wasn't exactly exuding Southern hospitality when he greeted attorneys in the long-running BlackBerry patent battle.
Three years ago, a jury decided against the maker of the wireless e-mail device, Research In Motion Ltd., but Spencer held off on an injunction that threatened to shut down BlackBerry service in this country.
Now the suit — along with its 40-page docket — is back in his courtroom after a round of appeals.
This time, the judge is clearly running low on patience.
During a Nov. 9 hearing, he indicated he was inclined to rule quickly on the validity of a $450 million settlement negotiated earlier this year by Canada's RIM and NTP Inc., a tiny patent holding firm. That decision could come as early as this week.
If Spencer decides the deal is invalid, he could re-issue the injunction — a threat that could force RIM into a high-dollar settlement.
"I have spent enough of my time and life involved with NTP and RIM," Spencer said. "So we are going to deal with this swiftly, get it out of the way, and then you all can go wherever you go when you leave me."
If Spencer is frustrated, few people would blame him. Patent challenges are proliferating. And this case has been especially time-consuming, even in a court that prides itself on its speed in dealing with litigation.
Even worse, there's a side show: the U.S. Patent and Trademark Office, which operates in its own world. It has preliminarily rejected the same patents at the core of the lawsuit. Despite RIM's optimism about the office's deliberations, the nearer-term prospect of the court injunction could force the company into a settlement as costly as $1 billion.
Robert Kerton, an economics professor at University of Waterloo in Canada, says the case demonstrates the need to reform the patent system, allowing real producers to get down to business.
"But don't hold your breath," he said, "because thousands of attorneys really love the tangled system."
The Canadian government, too, is incredulous. Earlier this year, it filed a brief in a U.S. appeals court, claiming that the lower court's decision could have a "chilling" effect on innovation by Canadian companies.
RIM, which has said it developed the technology behind the BlackBerry independently, has aggressively fought NTP in court. "We do not want to create a precedent that opens up other companies to this type of strong-arm tactics," attorney Henry Bunsow told The Associated Press for a story earlier this year.
NTP is often portrayed as a so-called "patent troll," a company with no products and little infrastructure. These predatory companies amass patent portfolios with the intent of filing suits against legitimate businesses. They have become many corporations' nightmares.
The trouble is that NTP, based in Arlington, Va., doesn't exactly fit the mold. It was co-founded by Thomas J. Campana Jr., a Chicago-area engineer who in 1990 created a system to send e-mails between computers and wireless devices. His wireless e-mail innovations were shown at the well-known Comdex computer show in Las Vegas.
Campana was working for his own company, but his primary customer, a wireless carrier called Telefind, was unraveling. To protect his work, he formed NTP along with a northern Virginia attorney, Don Stout.
"The guy did make a good-faith effort of starting his own company; It didn't pan out for him," said Charles F. Wieland III, an intellectual-property attorney in Alexandria, Va. "He actually tried."
In the late '90s, the BlackBerry hit the market, allowing people to check their e-mails away from their office and home computers. It developed a following among attorneys and business travelers. A spokeswoman for RIM said the company does not break out its U.S. sales. But court documents show that in its last fiscal year alone, RIM had more than $850 million in U.S. sales of BlackBerry products and services considered to infringe upon the patents.
Stout and Campana began noticing the similarities between the BlackBerry and NTP's technology. In January 2000, NTP sent a letter pointing out the infringement and offering to license the technology for a fee. NTP claims it never heard back from RIM.
In November 2001, NTP filed suit. The case was assigned to federal court in Richmond, where things quickly spiraled downward for RIM.
A jury agreed a year later that RIM had infringed on NTP's patents, awarding the smaller company 5.7 percent of U.S. BlackBerry sales. Spencer later increased that rate to 8.55 percent. At last count, the tally of damages and fees had reached $210 million, and it keeps growing.
"RIM's infringement was clear," Spencer wrote in one opinion. "Indeed, it offered no real defense to NTP's infringement case at trial."
Spencer also had harsh words for RIM's behavior in court. He accused the company of dragging its feet during the discovery process, making filings that were "wasteful of judicial resources" and attempting to confuse and mislead the jury about its technology.
Still, Spencer stayed his injunction in anticipation of appeals. But here, too, RIM lost out. A U.S. appeals court agreed with most of the lower court's findings.
In March, RIM announced that the companies had agreed to settle the suit for $450 million. The case was over — or so it seemed. The agreement had disintegrated by the summer. And now, NTP appears to have the advantage.
During this month's hearing, Spencer said he was unlikely to delay the case while awaiting word from the U.S. patent office, which is re-examining NTP's patents. "I don't run their business and they don't run mine," he said.
So what happens next?
For RIM, the most favorable outcome would be a ruling that there is, in fact, a settlement. If Spencer decides otherwise and begins weighing an injunction, many analysts and industry observers are betting that RIM will settle the case.
If Spencer issues an injunction and there's no settlement, RIM might be able to introduce a "workaround" technology that doesn't infringe on NTP's patents. Analysts are leery, however, about the effectiveness of any workaround.
In the worst-case scenario for users, U.S. BlackBerry service would be shut down. Such an outcome would likely be unappealing for both sides, unless NTP believes it can do well with the stashed-away $210 million along with its licensing agreement with one of RIM's competitors.
Already, NTP has promised that the injunction wouldn't apply to government and emergency employees in the United States. An attorney for RIM did not respond to telephone and e-mail messages.
But the U.S. government, which easily has thousands of employees using BlackBerries, isn't convinced. In a recent court filing, it said RIM may have a tough time pinpointing devices used by government employees.
NTP says this won't be the case. Kevin Anderson, an attorney for the small firm, says carriers "certainly know who the government users are."
The odds that your BlackBerry will stop beeping are pretty low. But considering five years of legal bickering and heel-digging, don't rule it out.