1. The Parties and the Litigation History - NTP was formed for the sole purpose of licensing and suing on its patents. NTP does not make a product and would be considered a "patent troll" by contemporary standards. They are, however, a local troll and have signed licenses with several reputable companies for development of products that will compete with the Blackberry. One of the inventors named in the patents was a principal of the company until his death last year.

Research in Motion (RIM) is a Canadian company that sells hardware and software while operating an email redirection service for its subscribers. Importantly, the email redirection servers are located in Canada.

NTP sued RIM in 2001 in the Eastern District of Virginia for infringement of five of the NTP patents that it claims cover the hardware, software and email subscription services offered by RIM. Only a limited number of the patent claims were identified in the suit (e.g., 2-3 from each of the patents). In Nov 2002, a jury found that the patents were infringed, not proved to be invalid, and that the infringement was willful. The judge increased the damages for willful infringement to $53 million and ordered a permanent injunction. The Federal Circuit stayed that injunction pending appeal.

A court is required to interpret the patents so as to maintain their validity and that the defendants faced a "clear and convincing" level of proof for invalidity. These two factors become important in the landscape of this case because they do not apply to the parallel reexamination proceedings.

The Federal Circuit heard the appeal and initially ruled that all but one of the claim interpretation issues was correct and that infringement was correctly decided for all patents even though the server was located in Canada. On reconsideration, the decision was vacated as to the claims relating to the Canadian server and remanded the case for a fresh determination of damages without the Canadian server. The Supreme Court denied cert.

2. Reexamination History - After the district court case ended, the five patents involved in the decision became involved in reexamination proceedings as well as three other patents. Four are the conventional "ex parte" reexaminations (in which RIM cannot be involved), and one is the new "inter partes" reexamination (where RIM does have a right to file Comments that counter arguments made by NTP). A huge number of claims was involved (2000 claims among the 8 patents). The decision was 643 pages long and rejected the claims for anticipation over either of two references with a detailed claim analysis and mapping. Both of these references was new to the case and had not been involved with the district court trial.

The PTO assigned three examiners to the cases and was clearly sensitive to the fact that this is a high profile case that will create a number of important policy decisions. Additionally, the fact that two anticipatory references were found that have been determined to describe the same invention as those in the NTP patents represents a very strong case for invalidity.

NTP responded and argued that the claim interpretation adopted by the district court precluded the claim constructions adopted by the examiners and distinguished the claims. NTP also sought to add over a thousand additional claims but withdrew many of them when faced with the cost of adding such a high number of claims. The oldest and basic patent now has over 600 claims.

On Nov. 30, 2005 the PTO issued a 2nd, nonfinal action in three of the cases when a second action in reexamination should normally be a final rejection. This was done to allow citation of the new TelNor reference from Finland (six volume reference manual about sending email on a wireless communication system) against all of the claims, also on the grounds of anticipation. The 2nd action was 73 pages with a claim chart for the TelNor reference.

(NTP was forced to cite the TelNor reference to the PTO after RIM supplied NTP with a copy in June 2005. You may recall that I noted the strategic use of the duty of disclosure against the patent owner in this manner in an Oct 2003 paper that is linked from my bio on our website.)

The Nov 30 Action also (a) expressly rejected the claim interpretation adopted by the district court as inconsistent with the specification, and (b) questioned whether the invention was actually made at and by AT&T rather than by the named inventors and NTP. A shortened response period of one month was set (due date: December 30, 2005).

3. Current Landscape - An initial settlement for $450 million was announced in March '05 in a press release. That settlement fell apart, however, when the parties sought to iron out the details in a written agreement. (Take-home lesson #1 - Don't send out the press release until the deal is in writing.) When the Federal Circuit ruling went adverse to RIM, RIM argued that the settlement was a binding agreement. NTP said it wasn't. Last week, the judge ruled that there was no settlement and ordered briefing for the permanent injunction.

The US government has also filed a Statement of Interest in this case asserting that no injunction can issue that would cut off service to the 300,000 US and state government officials and law enforcement people who rely on Blackberry devices for communications. (There is a federal statute that does not permit the government to be enjoined against their wishes.) Any injunction that might issue would have to make allowances to permit those 300,000 users to continue use of their devices and services.

Judge Spencer wants briefing on the injunction. That will likely go into early January so that no injunction could issue before late January or early February 2006.

The government wants 90 days from mid-November to determine whether an injunction can be crafted to address its concerns. That also suggests a mid-February time frame for any injunction.

The PTO response is due Dec. 30 where the action could be made final. Even expedited, the Board of Appeals isn't going to be able to render a decision before June or July with a Federal Circuit appeal decision no earlier than about Nov. 2006.

4. Likelihood of Settlement -  From the article appearing on today's IP Law Bulletin, it appears that the parties are back in settlement discussions. I am not certain, however, whether the parties are going to get anywhere.

RIM has an overwhelming need to delay the proceedings with a very high likelihood that the patents will be deemed invalid from the reexaminations. NTP has a district court judgment that has been affirmed on appeal and which would otherwise dictate the issuance of a permanent injunction as a matter of course.

In an unrelated case, the Supreme Court has accepted cert. on the MercExchange v. Ebay case that involves the issue of whether a patent troll is entitled to a permanent injunction as a matter of right against an infringer who is practicing the invention and generating revenue that could compensate the patent owner. In MercExchange, the permanent injunction was denied. No decision on the issue is likely before late Spring or early Summer, so it is unlikely to have a controlling impact on Judge Spencer.

My prediction is that RIM will ignore the injunction and use the inherent delays associated with its enforcement to buy time or try to implement the "workaround" it has announced. No details about the workaround have been announced to be able to determine whether this is real or "vaporware", but the implementation details of the TelNor report could be a shining path to noninfringement if it can be implemented within the existing Blackberry communication system.

This is about as exciting as it gets in patent practice: parallel court and PTO proceedings, strong-willed principals on both sides who are skilled in brinksmanship and risk-taking, and a possible Supreme Court decision that could alter the landscape of injunctions against patent infringement. (The injunction issue was a key stumbling block in negotiations on the patent reform bill this year.) Fascinating!