US Patent Office hands NTP a setback in RIM case

The U.S. Patent and Trademark Office (PTO) has now rejected all the claims made by NTP in seven of eight patents for a wireless e-mail system such as Research in Motion's (RIM ) BlackBerry service, throwing a legal settlement between the two companies into further turmoil.

On Wednesday, the patent office issued what it calls "non-final office actions" rejecting all the claims in two of NTP's patents, on the heels of a preliminary rejection notice for the claims in five of the patents earlier this year. Only one of the key patents at issue in the dispute over the BlackBerry service now contains valid claims in the eyes of the patent office, but that patent is under review as well.

NTP's lawyer, James Wallace of Wiley Rein & Fielding LLP in Washington, D.C., said the PTO's decision gives NTP 60 days to respond to the claim rejections, at which point the claim re-examiner would issue a final ruling. That final ruling could then be appealed to the PTO's appellate board, and then to the U.S. Court of Appeals for the Federal Circuit if necessary, a process that could take several years, he said.

RIM operates the popular BlackBerry service, which allows handheld users to access their corporate e-mail behind firewalls. Earlier this year, NTP and RIM agreed to settle their outstanding litigation over whether the BlackBerry service infringes on NTP's patents. Court rulings in favor of NTP that included an injunction against the sales of RIM's BlackBerry devices drove RIM to the settlement table in March, and the companies supposedly agreed to a $450 million licensing deal.

However, that deal has unraveled over the past few weeks, as RIM and NTP have disagreed over the scope and terms of a term sheet that was signed in March. RIM believes that it and NTP made a definitive agreement that RIM's $450 million payment would allow it a perpetual license to NTP's technology, while NTP does not believe the companies ever reached a final agreement on the matter. RIM has filed a motion asking an appeals court to send the case back to a lower court to enforce the terms of the settlement agreement.

"I would say it's a substantial, very material, and highly indicative development" in the ongoing dispute, said Jim Balsillie, chairman and co-executive officer of RIM, in a phone interview Thursday.

RIM believes that the PTO will be inclined to uphold the preliminary ruling given the two years of work put into the re-examination, Balsillie said. But the Waterloo, Ontario, company is now in the strange position of asking an appeals court to uphold a licensing agreement to patents that might not be valid, Balsillie said.

"It is a rather unusual situation that they are refusing to accept a check for $450 million when the validity of their IPR [intellectual property rights] is at issue," Balsillie said.

It would be premature for either company to view the PTO's decision as a tipping point, said John Rabena, a partner with Washington law firm Sughrue Mion PLLC who litigates software and electronics patent disputes.

The IDG News Service is a Network World affiliate.