BlackBerry case: No shutoff, for now

Judge James Spencer scolds patent holder NTP and device maker Research In Motion for not coming to a settlement.

RICHMOND, Va.--More than 3 million U.S. BlackBerry users won't lose their service--at least for now.

In a hearing on Friday, U.S. District Judge James Spencer decided against issuing an immediate ruling on whether to impose an injunction that would shut down sales and service of the popular mobile e-mail devices in the U.S. But what remains clear, he said, is that the jury verdict in NTP's case against Research In Motion for patent infringement, nearly four years ago, "has not changed in any substantial or substantive way."

During the hearing, lawyers for NTP asked Spencer to issue an updated $126 million judgment against the BlackBerry manufacturer, calculating that figure based on methodology used by the jury, which initially awarded it $23 million in damages. NTP also called for an injunction against RIM's U.S. service for violating patents.

Lawyers for RIM argued fervently against any injunction, basing their defense largely on the idea that doing so would undermine the public interest. They noted that the company was willing to hand over damages if the validity of NTP's patents was upheld but argued for a new trial to calculate the appropriate amount.

After nearly four hours of arguments from each company and the U.S. Justice Department, Spencer said he would take the matter under advisement and reveal his decision "as soon as reasonably possible."

Spencer said he expects to release an order related to the damages before releasing one related to the injunction. He wants "to make sure the government and its needs are met" before making the latter decision, he said.

The judge, who has been vocal about his desire to conclude the proceedings, scolded the companies for not coming to a settlement on their own.

"In plain words, the case should have been settled, but it hasn't, so I have to deal with that reality," Spencer said, adding that he thought the matter was a "business decision" and was surprised the companies opted to leave the decision with the courts.

"Settlement has never been an option for us," RIM's co-chief executive officer, Jim Balsillie, said in an interview with CNET after Friday's hearing. On Thursday, Balsillie told attendees at the RBC Capital Markets conference that NTP's licensing terms were far too prohibitive to accept, which NTP has denied.

Friday's hearing came as RIM has been fighting to limit the damage from a 2002 jury verdict that found that it infringed on several of NTP's patents related to mobile e-mail communications.

In 2003, Spencer imposed an injunction on the sale and support of BlackBerry devices in the United States, but he stayed that injunction, pending the appeals process. Spencer also increased the damages awarded by a jury as a result of misconduct by RIM's lawyers during the trial and ordered the company to put 8.55 percent of its quarterly revenue into an escrow account, pending the appeals process.

A federal appeals court lifted the injunction and sent the case back to a lower court in 2004, though it agreed that most of NTP's patent claims are infringed by the BlackBerry system. With that basic question of infringement appearing to be settled, the debate has turned to two other areas: the patent re-examination process and RIM's "work-around."

RIM has been playing a waiting game, hoping to convince Spencer to avoid entering an injunction until the patent review process is complete. Spencer denied a similar request to stay the trial, pending the review process in November, but RIM believes the uncertainty around the patents should prevent a new injunction.

During their arguments on Friday, RIM attorneys repeatedly said that the U.S. Patent and Trademark Office has declared NTP's patents invalid. The Patent Office as of Friday had issued a "final office action" for two of the five patents at issue in the trial. The other three have only received nonfinal decisions, but they are expected to get the final rejection sometime soon.

A "final" decision isn't completely final, as NTP has the right to appeal those actions to a three-judge panel at the Patent Office, as well as to a federal appeals court, before the patents are struck down.

But NTP will still be entitled to any damages awarded as part of Friday's hearing. Damages awarded for patent infringement through a trial are still valid, even if the patents are later struck down. NTP would lose the right to seek future damages, but it could collect the almost $250 million currently sitting in escrow without having to pay it back later.

The morning opened with arguments from two NTP lawyers, who split their time arguing in favor of an extended damage award and an injunction on BlackBerry service.

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