In baseball, “taking one for the team” means you lean out over the plate and let the pitch hit you, earning a free trip to first base. To a guy out with his friends, it has an entirely different meaning. For Canadian company Research In Motion, the maker of the BlackBerry wireless email device, it means writing a $612.5 million check for a lifetime, perpetual license to use an invalid patent. That’s a hard fastball to have to “take for the team.”
The team, consisting of some 5 million BlackBerry users, is grateful. The $612.5 million dollar check was written to settle a patent infringement lawsuit filed against RIM by patent holding company NTP. The lawsuit stems from a series of patents registered in 1992 by Thomas Campana. Chief among these is Patent No. 5,436,960, “Electronic mail system with RF communications to mobile processors and method of operation thereof.” NTP, a company formed in 1992 to manage Campana’s patents, claimed that RIM’s BlackBerry devices infringed these patents. The lawsuit was filed in November of 2001, and in November of 2002 a jury found that RIM was infringing NTP’s patents and awarded $23.1 million in damages.
The damages awarded were not the painful part of the loss suffered by RIM. The judge also issued an injunction preventing RIM from any further infringement of NTP’s patents. This effectively would put RIM out of business, and millions of BlackBerry users would be left with useless devices and no service to connect them. RIM appealed, and the court stayed the judgment and the injunction. BlackBerry users were safe for the moment.
The current settlement is the second settlement to be announced in this case. Last March, RIM announced that it had reached a $450 million settlement with NTP, and even deposited the money in escrow. However, last November the judge declared the settlement invalid after NTP had claimed the settlement had never been finalized. The judge also indicated his patience was nearing an end, and appeared ready to re-issue the injunction. During the hearing, Judge Spencer stated that he “had spent enough of his time and life involved with NTP and RIM.”
The current settlement, well below the $1 billion figure many were anticipating, appears to final, and the judge has dismissed the lawsuit. The terms of the settlement call for a one-time payment by RIM of $612.5 million. In exchange for this payment, NTP grants RIM a perpetual license to use the patents in question.
In the weeks prior to the settlement, Judge Spencer denied RIM’s efforts to delay the case further, as did the appellate and U.S. Supreme Court. RIM seemed to have a good argument for delay: The U.S. Patent and Trademark Office was in the process of invalidating the very patents at issue in this case. In fact, on February 24, 2006, the PTO issued a “final rejection” of the central patent at issue, agreeing with RIM that the patent should never have been issued. The PTO was troubled by recently discovered “prior art” which means that there was already a similar invention described at least a year prior to the patent application.
Judge Spencer, however, was not going to wait for the PTO actions to become truly final. While the PTO has now issued a final rejection over one of the patents, the others have not yet been finally rejected. NTP also has the option to appeal the PTO’s rejection of the patent to the USPTO’s Board of Patent Appeals and Interferences. The Board’s decisions can be further appealed to the federal Court of Appeals. The real final resolution of this patent could be years away. During the February 24, 2006, court hearing, Judge Spencer indicated he was close to lifting the stay on the injunction, pushing RIM to work out a settlement.
So, according to RIM Chairman Jim Balsille, RIM “took one for the team,” and paid $612.5 million for a lifetime license in NTP’s patents, which he said was “a lot of money for patents that won’t survive for sure.” His investors appreciate the sacrifice, however, and RIM stocks shot up 14% to over $84 a share after the settlement was reached. The millions of BlackBerry users on the team can all breathe a little easier knowing that the threat of service interruption is over.
Scott Cameron is an associate in Weintraub Genshlea Chediak Tobin & Tobin’s Litigation section. He represents clients in both state and federal court in various contract-based disputes, fraud and unjust enrichment claims, and tax-related contests. For more interesting articles on intellectual property, visit Weintraub’s law blog at: www.theiplawblog.com