Articles

NTP, Inc. v. Research in Motion, Inc.

Brad Bowling

The BlackBerry wireless e-mail system, supplied by Canadian company Research In Motion (“RIM”), is one of the most beloved and ubiquitous electronic utilities used by professionals today. The recent decision of the United States Court of Appeals for the Federal Circuit (“Federal Circuit”) in an appeal involving assertions that the BlackBerry platform infringed several patents of NTP, Inc., is accordingly of considerable significance because the litigation threatened the very existence of RIM’s BlackBerry network. In NTP, Inc. v. Research in Motion, Ltd., 392 F.3d 1336, (Fed. Cir. Dec. 14, 2004), the Federal Circuit affirmed a district court’s judgment that found that RIM infringed five of NTP’s U.S. patents under 35 U.S.C. § 271(a), even though some of the allegedly-infringing portions of RIM’s system were located in Canada. NTP, 392 F.3d at 1370. The Federal Circuit’s decision arguably has expanded the territorial reach of United States patents by finding that a patent may be infringed even when one or more elements of the patented method or system are located outside of the United States.

Technical Background

Broadly speaking, the RIM BlackBerry e-mail redirector system intercepts a message to an e-mail user, and then routes the message to a “Relay” component that in turn routes the message to a wireless network. NTP, 392 F.3d at 1342. The user then receives the re-routed e-mail message on a handheld device. Id. The BlackBerry system is particularly popular because users receive e-mail messages wirelessly and without having to manually poll a server. Id.

The location of the BlackBerry “Relay” component was particularly important in NTP litigation. This is because the RIM BlackBerry “Relay” is physically located in Canada. Based on this fact, RIM argued that it did not infringe some claims of NTP’s patents, because the system component or method step was not “within the United States,” as required to establish infringement under 35 U.S.C. § 271(a).

Lower Court Disposition

NTP sued RIM for infringement of claims of several of its patents1 in the Eastern District of Virginia, alleging that these patents provided broad coverage over systems and methods for remote e-mail delivery. The District Court granted summary judgment of infringement of some claims to NTP, and submitted others to the jury. The jury found infringement of all claims submitted, found that the infringement was willful, and awarded NTP approximately $23 million in damages. NTP, 392 F.3d at 1333-34. The District Court entered a judgment on the verdict, including $14 million in enhanced damages and a permanent injunction against RIM, which was stayed pending the appeal. Id. at 1334. If the injunction had not been stayed, all BlackBerry service within the United States would have been disabled. RIM appealed to the Federal Circuit, challenging the District Court’s claim interpretation, as well as disputing the applicability of § 271(a) to its extraterritorial operations.

Federal Circuit Decision

35 U.S.C. § 271(a), often referred to as the “direct” patent infringement portion of the statute, states that “whoever without authority makes, uses, offers to sell, or sells any patented invention, within the United States or imports into the United States any patented invention . . . infringes the patent.” RIM argued that section § 271(a) was inapplicable when a portion of the claimed system or method was outside of the United States. In particular, RIM argued that because the “Relay” component of the BlackBerry system was located in Canada, § 271(a) was inapplicable.

RIM argued that its position was supported by the Supreme Court’s decision in Deepsouth Packing Co. v. Laitram Corp., 406 U.S. 518 (1972). In Deepsouth, the Supreme Court found that the export of an unassembled machine was not an act of infringement under § 271(a), even when the assembled machine would infringe a U.S. patent. 406 U.S. at 527. Although the specific holding of Deepsouth was obviated by the creation of 35 U.S.C. § 271(f) (which strengthened protection for patentees in such situations), RIM argued that Deepsouth was still applicable to absolve its e-mail system of infringement of NTP’s patents under § 271(a). NTP, 392 F.3d at 1367.

The Federal Circuit disagreed, stating that “[e]ven though one of the accused components in RIM’s BlackBerry system may not be physically located in the United States, it is beyond dispute that the location of the beneficial use and function of the whole operable system assembly is the United States.” NTP, 392 F.3d at 1369.

The Federal Circuit did not provide any specific guidance for how to determine where “the beneficial use and function of the whole operable system assembly” would be deemed to reside, but said that “the location of RIM’s customers and their purchase of the Blackberry devices establish[es] control and beneficial use of the BlackBerry system within the United States satisfactor[y] [to] establish territoriality under section 271(a).” NTP, 392 F.3d at 1370.

After the issuance of the Federal Circuit’s opinion last December, RIM faced the renewed possibility of the injunction being reinstated, with the catastrophic implications this would have for its provision of BlackBerry service. Perhaps not surprisingly, RIM and NTP announced this March that they had settled their dispute, with RIM paying $450 million in exchange for a license to all of NTP’s patents.

Implications Of The Federal Circuit’s Decision

From a practical point of view, the Federal Circuit’s decision makes sense: If a claim cannot be infringed in a jurisdiction if simply because one element of the accused system or one step of the accused method are located outside of the State, then a putative infringer could avoid infringement in any jurisdiction by distributing his otherwise-infringing conduct between jurisdictions. This sort of gamesmanship would be particularly easy to practice as regards modern electronic and computer-based systems and methods, given the relative ease of implementing computerized or electronic operations on a remotely-distributed basis.

The Federal Circuit’s decision closes this arguable loophole, but also raises some interesting questions. For example, under the Federal Circuit’s “location of the beneficial use” standard, do any portions of an accused system or method need to be physically located in the United States in order for infringement liability to attach, or are sales into the United States enough to establish territoriality under § 271(a)? Presently, there is no solid answer to this question, or to the other ambiguities raised by the Federal Circuit’s enunciation of “beneficial use” as the touchstone for “localizing” alleged infringement in the United States. Those parties offering electronic or other services that may implicate a U.S. Patent, should, therefore, be cautious, even when part or all of the services are implemented in or through a non-U.S. jurisdiction, particularly when the end users for the services are located in the United States.

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1The patents-in-suit included U.S. Patent Nos. 5,436,960, 5,625,670, 5,819,172, 6,067,451, and 6,317,592. NTP, 392 F.3d at 1339.

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