"Judge hears injunction arguments"
Judge hears injunction arguments in BlackBerry court case
Last Updated Fri, 24 Feb 2006 11:52:23 EST
CBC News
A high-stakes court hearing is underway in Richmond, Va., that could lead to a shutdown of Research in Motion's popular BlackBerry e-mail device that millions of Americans have come to rely on.
The hearing pits RIM (as the Waterloo, Ont.-based company is known) against NTP Inc., a Virginia-based patent holding company that has been pursuing RIM (TSX:RIM) through the courts for years for alleged patent infringements.
3-month trading
NTP began the court hearing Friday by asking the judge to grant an injunction that would shut down BlackBerry service in the U.S. after a 30-day grace period. It also asked that the judge immediately award it $126 million US in damages.
The dispute has attracted enormous attention because many of RIM's 4.3 million business and government users consider the BlackBerry to be such an essential communications tool that some have called it a "CrackBerry."
At one point, the U.S. government even went to court to argue that 138 federal agencies, including the CIA and the U.S. army, be exempted from any shutdown injunction on national security grounds.
NTP said, if it ultimately prevails, it would exempt government and emergency services users. But RIM and the U.S. Justice Department have expressed doubt that a partial shutdown could be accomplished.
As for Canadian BlackBerry users, any injunction would not directly affect them. But it isn't clear if they would still be able to send or receive e-mails if they travelled to the U.S.
Whatever the outcome of Friday's hearing – and it's not clear if the judge will issue a decision Friday on NTP's injunction request – the long-running dispute has tested the patience of Judge James Spencer and given new prominence to the increasingly litigious field of U.S. patent laws.
History of the dispute
The revolutionary features of RIM's BlackBerry technology were apparent from the moment it was introduced in 1999 – users could send and receive e-mails any time and anyplace on a completely portable device. It quickly became a Canadian technology success story.
But in 2001, privately-held New Technology Products (NTP), a small patent holding company from Arlington, Va., accused the Canadian company of infringing on several of its U.S. patents relating to wireless e-mail. It launched a lawsuit.
In 2003, a jury awarded NTP damages of $53.7 million US. RIM was also ordered to pay NTP an 8.55 per cent royalty and hit with an injunction that would prevent it from selling its BlackBerry e-mail technology in the United States. The injunction was stayed pending an appeal. In the meantime, the royalty clock would continue to run.
In December 2004, a three-member U.S. federal appeals court affirmed that RIM had infringed on patents it didn't hold.
In early 2005, it looked as if the dispute had been resolved. RIM announced an out-of-court settlement with NTP which would see it pay $450 million US to the Virginia company.
As part of the settlement agreement, RIM and its customers would get "an unfettered right to continue its BlackBerry-related wireless business without further interference from NTP or its patents."
But a few months later, the tentative agreement fell apart. U.S. courts refused a RIM request to enforce the settlement. And the U.S. Supreme Court declined to get involved.
RIM's strategic responses
RIM faced a potential disaster. The dispute would head back to court for a hearing on a possible injunction that could cripple its business, most of it from the United States.
So the Canadian company embarked on a number of strategic counter-moves.
RIM launched a series of challenges in the U.S. Patent and Trademark Office challenging the validity of NTP's patents. On this front, RIM has claimed big victories.
Just this week, the patent office issued a final rejection of one of the five patents involved in the dispute. All of NTP's claims have been rejected in preliminary rulings from the patent office. It's widely expected that the patent office will eventually rule all five NTP patents are invalid.
What isn't clear, however, is whether the patent office rulings will sway Spencer. Those "final rulings" can still be appealed. Will the judge wait?
RIM, for its part, says it has also developed a software "work-around" solution that would keep its e-mail service working in the event of an injunction. That puts pressure on NTP to settle.
Watch for out-of-court settlement: analysts
Many observers expected that the two companies will come to a last-minute settlement rather than risk losing everything in a final court ruling.
NTP, after all, wouldn't benefit from an injunction which would result in RIM not paying any royalties.
A day before the scheduled court hearing, RIM co-chief executive Jim Balsillie said his company was willing to boost its payment to NTP to settle the dispute. During a webcast at a securities conference in Whistler, B.C, Balsillie said RIM would only do a deal that would guarantee long-term protection for his business.
RIM needs a definitive end to a dispute that has distracted its management, cost it millions in legal fees, worried its users and prompted potential customers to look at competing products – like Palm Inc.'s Treo.
Recent figures show the Treo has been attracting almost as many new subscribers as the BlackBerry and it's getting many positive reviews.
Spencer has not indicated when he'll issue his ruling. He could issue an injunction right away, but most observers say if he opts for an injunction, he would likely stay it for a month or two. That would allow the two companies at the heart of the dispute one last chance to work out a settlement.
Judge Spencer could also put off any decision until the patent office issues the rest of its final rulings. Or he could simply order the two sides back to the negotiating table.
Most analysts expect we'll know something definitive by the end of nextFriday.