Canada: NTP Inc Vs. Research In Motion Ltd.: Is The Blackberry™ Outside Of The Reach Of US Patent Laws?

Virginia based NTP inc. brought suit against Canadian Research in Motion Ltd (RIM) for patent infringement and injunctive relief. Both the US District Court for the Eastern District of Virginia and the jury found in favour of NTP with respect to several claims of a string of related US patents alleged to be infringed by RIM's world famous BlackBerry™ wireless system. The 5 NTP patents at issue relate to an electronic mailing system. RIM has sold more than 2 million BlackBerry™ units with most subscribers being located and registered in the US. The District Court awarded damages in excess of 53 million dollars to NTP Inc. and issued a permanent injunction against RIM enjoining it from any further sale of the infringing BlackBerry™ devices in the US (this injunction was stayed pending the appeal). Needless to say this was a major setback for the best known and successful Canadian publicly traded high technology company.

On appeal to the US Court of Appeals for the Federal Circuit, (decided on December 14, 2004) RIM was unsuccessful in obtaining a favourable ruling of non infringement with respect to all but one litigious claims. While the matter was remanded to the District Court for further action in line with the Court of Appeals' decision and opinion, observers consider it unlikely that RIM could avoid another finding of infringement.

RIM has found support from the Government of Canada which, on January 13, 2005, filed an amicus curiae brief before the US Court of Appeals, along with internet service provider EarthLink. The Government of Canada is joining RIM in asking the Court of Appeals to reconsider en banc one particular aspect of its decision, namely the interpretation and application of 35 USC. sec.271(a) which, in the RIM case, played a central role.

Sec. 271(a) provides that "...whoever without authority makes, uses, offers to sell, or sells any patented invention, within the US or imports into the US any patented invention...infringes the patent". In the RIM case, the invention claimed is not a single device but rather a system comprising multiple distinct components and the very nature of those components permits their function and use to be separated from their physical location. One of those components was a Relay and RIM unsuccessfully argued that it could not infringe the US patents under section 271(a)since the Relay component of the BlackBerry™ systems is not located in the US. While it is not our purpose to explain the functionality of the BlackBerry™ wireless system, it is proven that a component, considered to be fundamental and important by RIM, is operated in Canada. Can the BlackBerry™ device infringe a US patent when an important component of its operating system, without which the BlackBerry™ could not function, is located outside of the US? The Court of Appeals, applying Decca Ltd. v. United States, decided by the Court of Claims in 1976, found that because all of the other components of RIM's accused system are located in the US, and the control and beneficial use occur in the US, the situs of the use of the RIM system under section 271 (a) is the US despite the Relay being in Canada.

The Government of Canada argues in its brief that the unique and important trade relationship between Canada and the US requires clarification of US patent law since many businesses that engage in activities across the Canada-US border may be affected by the Court of Appeals' decision. Canada argues that the court has rendered a novel and far-reaching precedent which gives US patent law an extraterritorial effect which it is difficult to comprehend. Many companies, in particular those using networks and telecommunications, shall not be in a position to evaluate when their cross-border activities may or may not infringe US patent laws. The complaint of NTP had been drafted carefully to allege infringement by "making, using, selling, offering to sell and importing into the US products and services (emphasis added), thus making the "beneficial use" finding more aligned with the offering of services.

In England, one may compare the RIM decision to the case of Menashe Business Mercantile Ltd. v. W. Hill Org Ltd (2002) E.W.J. 5413 which held that locating the host computer in Antigua was no defense to patent infringement in the United Kingdom since the beneficial use of the host computer, even if abroad, took place in the UK. The definition of infringement under the UK statute does however differ from that in the US

The RIM saga will continue and it is possible that the US Court of Appeals will accept to rehear en banc the December 2004 decision. While the reasoning is sound in law, the text of US patent law should be clarified by Congress to avoid the uncertainty associated with its present text. Needless to say, many companies and States shall keep a close eye on the outcome of this case which could have far reaching consequences for many cross-border operations which may infringe only partially a valid US patent. On the other hand, the adoption of the rationale of the Courts decision may avoid the need for multiple sets of claims, and often multiple patents, to different aspects of a distributed system, as is presently necessary to ensure a finding of infringement. As for me, I simply cannot begin to imagine life without my BlackBerry™!

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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