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Vol. 23 No. 5 — May 2006

This lawsuit stemmed from a number of underlying issues. A core question emerged in the final stages of the suit when a shutdown was considered imminent: Were NTP’s patents valid? Even though in 2002 a federal court established that RIM had infringed on the patents, a review of the patents by the U.S. Patent and Trademark Office (USPTO) in 2005 and 2006 declared at least some of the patents to be invalid. While RIM and NTP were in court dealing with a possible shutdown and conducting behind-the-scenes settlement negotiations, a possibility existed that the entire exercise might be irrelevant.

Patent-Holding Company

NTP is a patent-holding company based in McLean, Va., that exists primarily to administer several patents developed by Thomas Campana Jr., NTP’s founder. Campana was a communications engineer who developed a system to deliver electronic mail through paging networks. He patented this in 1991—first with three patents, then with five more. NPT’s sole purpose was to administer and economically exploit the Campana patents.

The BlackBerry was created after a long series of developments dating to the late 1980s and early 1990s, when palmtop computers were used experimentally as wire­less e-mail devices. RIM went public in 1997 largely because of BlackBerry’s popularity. More than 3 million subscribers now use BlackBerries.

Patent Claims

The RIM-NTP patent battle centered around the exact reach of the NTP patents. To obtain a patent, the inventor must not only describe what the particular invention is, but what the invention does. These pieces of the patent, which are called patent claims, are intended to outline the scope of activities, tasks, or processes included within the patent. If something is included within a valid patent claim, then another invention that does the same thing would be infringing. A given patent may have a number of claims—some may be very narrow, while others are quite broad. One of NTP’s patents (No. 5,438,611) for an “Electronic mail system with RF communications to mobile processors” had 80 patent claims, for example.

In that light, similar technologies are likely to potentially infringe on existing patent claims. The interpretation of pa­tent claims and the comparison of patent claims to new and allegedly infringing devices are among the most complex and controversial components of patent law.

But the extensive use of patent claims can also lead to the invalidation of pa­tents. In the RIM-NTP lawsuit, RIM based most of its defense on the grounds that patents and patent claims were not valid. RIM specifically argued that the patents and some or all of the claims were not novel enough or were too obvious to be considered patentable. A federal court, which did not agree, found that the BlackBerry infringed on NTPs patent claims and awarded damages to NTP. RIM was then ordered to stop infringing on the patents. This order is what threatened the shutdown of the BlackBerry network.

BlackBerry Shutdown Order

The shutdown order was stayed while RIM appealed the verdict. For 3 years, RIM appealed the court decision to the appellate and Supreme Courts without success. As its court options dwindled, RIM faced a growing risk of a shutdown. However, 2 weeks after a final court hearing on the shutdown order, RIM agreed to settle the lawsuit for more than $600 million. That amount, which was far higher than the damages awarded on the infringement claim, was probably based on what the two companies might consider reasonable licensing fees for past, present, and future use of the NTP technology by the BlackBerry. More importantly, RIM was assured the BlackBerry would remain available to consumers.

While the lawsuit was working its way through the appeals process, a separate investigation of the NTP patents was underway at the USPTO. In 2003, the USPTO began reviewing the patents in question to determine whether they were valid.

Post-Patent Review

While fairly common, this post-patent review process has become one of the more controversial parts of U.S. patent law in the Internet age. The post-patent review process takes place after the patent has been granted, often in response to an infringement claim. In some circumstances, the alleged infringer asks the USPTO to review the patent; in others, the USPTO initiates the review. In the RIM-NTP case, the USPTO initiated a review of seven of the eight patents, later adding the eighth patent at RIM’s request.

The review process essentially explores whether the patented invention or process meets the legal requirements for a patent. While the patent-granting pro­cess is arduous (often taking 1 year or more), often only limited information is available to the patent reviewer. After the patented technology has been in the marketplace, more information becomes available, which can often establish that the invention or process was not novel enough or was too obvious to be patented. The identification of “prior art” (to use the patent lawyer’s lingo) may be enough to show that the invention wasn’t an invention at all.

The post-patent review process can also be very lengthy. The review of the NTP patents, which began in 2003, was still going on as the potential BlackBerry shut­down loomed in 2006. Even as the USPTO issued orders in late 2005 and early 2006 declaring the patents invalid, appeals of those orders would have served to keep the patents intact for years.

This became one of the central controversies arising from the BlackBerry settlement: From RIM’s perspective, the firm paid more than $600 million to use a technology that the government said was not valid­ly patented. From NTP’s perspective, however, the patents remained valid unless (and until) a final court determination, and RIM was rightfully paying for its use of NTP’s technology.

Criticisms of Post-Patent Review

Critics of the post-patent review process also argued that the USPTO office has been granting pa­tents too readily, relying on the post-patent review process to separate the wheat from the chaff. The patent office, they argued, should be more critical when investigating patent and patent claims prior to issuing the patents. Technology patents, in particular, have been criticized for being issued too readily.

As in the BlackBerry litigation, costs can be considerable. A developer who allegedly infringes on a questionable patent must initiate and then wait out an expensive post-patent review, quit or be forced to quit using the patent, or pay a licensing fee to the patent owner. These licensing fees have produced “patent trolls” (i.e., individuals or groups that buy up patents from individual inventors who were not exploiting them). Patent trolls then attempt to obtain licensing revenue from others who use similar technology under the threat that they may be infringing on the patents. (This was not the case in the RIM-NTP lawsuit, however, because NTP was established by the original inventor.)

But patents, like copyrights, may or may not be used, bought, and sold just like any other property. A pa­tent holder can sell his patent to someone else in a better position to exploit that patent, through actual use or licensing to others. Patent owners argue that they are often up against major corporations that are using their patented technology without their permission.

Calls for Patent Reform

The BlackBerry lawsuit has renewed calls for reform of the U.S. patent laws. In a letter to its customers published in several national newspapers, RIM called for renewed attention to the patent system to “close the loopholes” that led to its battle.

A bill to reform U.S. patent law substantially is now before Congress, which addresses a number of these controversies: First, the amount of information available to patent examiners would be increased, potentially reducing the number of invalid patents being issued. Second, the threat of a shutdown to obtain licensing fees would be harder to use by requiring the court to evaluate additional information about the use of the technology before an automatic shutdown order is issued. Finally, a new, more expeditious post-patent review process would be created. The bill was introduced last summer, but it has been stalled in committee since September.

Questionable technology patents create problems for technology developers that can enhance technology costs. RIM’s problems have not been entirely resolved because it is being sued for patent infringement in the U.K. and Germany. Microsoft’s recent entrance into the mobile e-mail business resulted in a patent infringement lawsuit by Visto, a fellow competitor and licensor of NTP’s technology. eBay and IBM are also battling patent infringement suits, one of which is before the U.S. Supreme Court.

Whether through the courts or before Congress, the BlackBerry experience suggests that some modification of patent law is not only likely, it’s necessary.