RIM faces judicial setback in patent fight with NTP

If Research In Motion Ltd.’s multi-million dollar settlement of NTP Inc.’s infringement suit last May lifted a cloud over BlackBerry’s future, a U.S. federal court’s refusal to rehear its case last week once again casts doubt over the firm’s rights to sell and service the popular device south of the border.

On Friday the U.S. Court of Appeals for the Federal Circuit in Washington turned down RIM’s request to rehear a patent infringement case against the company en banc or before all 12 judges, leaving RIM open to the possibility of an injunction against the sales of its BlackBerry communications products in the U.S. A panel of three of the court’s judges upheld a previous ruling in August that found RIM had infringed on patents held by NTP.

“It’s always a long shot to ask all of the (Federal Circuit) to come and sit in a huge panel to consider a dispute over a particular infringement,” said Simon Chester, partner at Toronto-based law firm Heenan Blaikie LLP.

With the odds stacked against it, RIM Friday said it will ask the U.S. Supreme Court to review the appeal court’s August decision. That, however, won’t be easy given the U.S. Supreme Court turns down four out of every five cases that come to it and it usually takes only one or two patent cases per year, said Chester.

While RIM may be losing the legal battle, the U.S. Patent Trade Office recently rejected all claims of remaining NTP patents, making RIM’s case a little easier to plead to the country’s top court.

“It says the body in the U.S. system that looks at patents has some serious questions about whether NTP has anything worth patenting,” said Chester. “It’s now up to NTP to challenge that and say the Patent Office is getting this wrong, our stuff really is original, our stuff is useful, and our stuff really did represent innovation in wireless technology and we are entitled to the patents.”

James Hurst partner at Winston & Strawn LLP in Chicago, however, points out that the PTO almost always rejects patents in first office actions, which means a future decision could go either way.

“Ultimately whether the PTO is going to reject all the claims that RIM has been judged to infringe it doesn’t seem likely to me,” said Hurst.

In the meantime, both Chester and Hurst expect NTP to ask the federal court to impose an injunction on RIM, which under other circumstances, would be a foregone conclusion.

“(NTP) is entitled to its injunction,” said Hurst. “It would be an abuse of discretion for a district court to not issue an injunction under these circumstances. It would be unfair to keep us (RIM) off the market when there’s this cloud over NTP’s patents.”

Given that the U.S. accounts for the majority of RIM’s total sales and with established and newer entrants into the mobile device market, however, RIM stands to lose a lot, said Yankee Group wireless analyst John Jackson.

“This issue is an albatross for RIM,” said Jackson. “It has had the effect of forestalling significant partnership-oriented initiatives that otherwise might now be in place.”

For example, one of RIM’s currently licenses its software on non-RIM devices in Western Europe but not in the U.S, Jackson added.

In terms of what Canadian companies can take away from this, both lawyers agree that having a plan of action and acquiring legal advice can go a long way to saving companies aggrevation down the road.

“Treat your intellectual property really seriously and recognize that if you get involved in a patent fight, it will be long, complicated and expensive,” warned Chester. “Therefore you should think very seriously about getting all your ducks in line and getting as much intellectual property protection as you can before getting into the U.S. market.”

With that in mind, however, Chester also said there’s nothing universal about this particular case in that both the plaintiff and the defendant are tenacious and will fight to the end.

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