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NTP, the sequel

Imagine a world where a two-person company holds an entire industry hostage. From the lawyers who brought you BlackBerry Panic comes NTP II; this time, it's about even more money.

Tom Krazit Former Staff writer, CNET News
Tom Krazit writes about the ever-expanding world of Google, as the most prominent company on the Internet defends its search juggernaut while expanding into nearly anything it thinks possible. He has previously written about Apple, the traditional PC industry, and chip companies. E-mail Tom.
Tom Krazit
4 min read

The famous quote "there are no second acts in American lives" is attributed to F. Scott Fitzgerald. According to BrainyQuote.com, he also said, "his was a great sin who first invented consciousness. Let us lose it for a few hours."

The convoluted story of NTP and evolution of the American patent system is enough to drive a man to drink. Having beaten the literary metaphors well into the ground, let's ponder NTP's second act on the tech industry stage.

As you may have heard, NTP is once again feeling litigious. Last week it sued the four largest wireless carriers in the U.S. (no love for you, MetroPCS) alleging that without a license to NTP's patents, they really shouldn't be allowing us all to use smart phones that can send and receive wireless e-mail.

NTP owns patents for a wireless e-mail system that it never developed. The company managed to extract $612.5 million from Research In Motion by successfully convincing a jury that RIM infringed on the patents, and then playing defense for four years while the appeals process ran its course. Now it's coming after the carriers, arguing in its complaint that the services those carriers offer violate NTP's patents, and it deserves damages, royalties, and the right to bring wireless e-mail service in this country to a halt unless the carriers license its patents.

Craig Merritt, a lawyer with Christian & Barton in Richmond, Va., who is representing NTP this time around, did not return multiple calls requesting more details on NTP's thinking.

For several reasons, I think the sequel is going to be a little harder to produce than the original.

The Holy Grail of a patent case is an injunction. If you're a company that makes a product that someone has infringed, you want the court to force the other company to stop selling that product. If you don't make a product, you want the injunction to force the infringer to the bargaining table, to pay up in order to keep their business alive. That was the crux of the NTP-RIM case; Judge James Spencer stayed the injunction pending the appeals process, and after exhausting all avenues RIM had no choice but to settle to avoid the messy aftermath had it been imposed.

But the guidelines for imposing injunctions have changed, after a successful challenge by eBay. Two months after RIM settled with NTP, the Supreme Court ruled that courts should no longer impose injunctions as a matter of course following patent infringement trials. Before that ruling, if you were found to have infringed on someone's patent, in order to avoid the injunction you needed to prove that it would cause some sort of disaster that would harm the public. The ruling now allows the courts more leeway on whether to grant the injunction or just award damages.

Also, in good part because of NTP, the winds are changing on patent law. This year has seen two important developments in an easier interpretation of the "obviousness" test and the passage of the Patent Reform Act by the House of Representatives. This case could drag on for years, and patent law could be very different by the time it reaches a conclusion.

That brings me to the third point: time is no longer on NTP's side. It is currently appealing the preliminary ruling of the Patent Office that its patents--and all the claims within them--are invalid. In the mid-1980s, before Campana received his patents, Norwegian telecom company Telenor published documentation describing a wireless e-mail system. And the Patent Office thinks that is prior art that invalidates the Campana patents.

NTP's appeal of that decision could drag on for years, and it's free to assert its patents during that appeals process. But if it wants to make one last score with the Campana patents, it has to do so soon unless it can convince the Patent Office and the appeals courts that the Telenor publications were somehow unrelated to the Campana patents.

If NTP can convince a jury to rule in its favor, it will still be entitled to damages even if the patents are later struck down. That's probably why Spencer has stayed NTP's patent-infringement lawsuit against Palm pending the resolution of the Patent Office process, and might likely do the same with these cases.

So in the end, as usual, it all comes down to money. A long time ago, this stopped being about the little guy, the independent inventor steamrollered by an evil corporation bent on stealing his hard work and laughing all the way to the bank. The Campana family and its partners scored around $400 million off RIM, if the lawyers involved took a third of the proceeds. That's still probably enough to settle in Gatsby's East Egg, even at today's prices.

This will be a very interesting case to watch. Are the patents valid? Will the carriers blink? Can NTP once again convince a jury that it deserves royalties for having (supposedly) invented the concept of wireless e-mail? Can I really write 85 more stories about patent law without my head exploding?