vnunet.com analysis: BlackBerry settlement could speed up patent reform

BlackBerry's cloud may have a silver lining for patent reform

The $612.5m settlement paid by Research in Motion to patent holding company NTP last week has highlighted a fundamental problem with the patent system in the US. 

The BlackBerry maker has essentially wasted money on a licence fee for patents that are likely to be invalidated in a few years because they should not have been awarded in the first place.

But the threatened closure of the BlackBerry service in the US meant that settling the patent claim was RIM's only option if it was to save its business.

Ira Rothken, a Silicon Valley lawyer specialising in high tech law who often defends clients in patent cases, told vnunet.com: "I'm seeing this happen a lot. Unlike many other types of administrative notices, patents are very powerful.

"Once those patents are issued, there is so much downside for the defendant from the cost of litigation to the impact on business, that the defendant will often settle even though the patent is completely bogus."

The debate on patent reform has been raging for some time. While the European Commission is currently reconsidering software patents, it is common practice in the US to file for patents which cover the way software works.

Critics lobbying for patent reform often point to the fact that over 90 per cent of the disputed patents end up being invalidated because of 'prior art', a legal term indicating that somebody else invented a technology before the patent owner filed the patent.

This demonstrates that most patent applications are not properly researched, according to the critics, and that the US Patent and Trademark Office is overburdened and lacking resources.

The patent debate is also relevant to the open source movement. Under the current rules individual developers and end users could be held accountable if a software title is found to violate a patent. This could hold back the adoption and development of open source software.

While the BlackBerry case is not the only high tech patent lawsuit, it became highly visible because the presiding judge was about to order RIM to shut off the service in North America which would have directly affected end users.

"The US Patent and Trademark Office has been somewhat embarrassed by how this thing transpired," Kevin Burden, programme manager for mobile devices and services at analyst firm IDC, told vnunet.com.

As a silver lining for patent reform, the RIM case has been visibly pushed in the face of US legislators. BlackBerry devices are very popular with politicians, and the outage threatened to hit senators and members of Congress.

The potential court-ordered blackout highlighted one of the major problems in today's patent legislation, argued Jason Schultz, a staff attorney with the Electronic Frontier Foundation (EFF).

Current legislation requires a judge to immediately issue a permanent injunction once an infringement of a valid patent has been determined.

In the BlackBerry case, the pending injunction allowed NTP to collect a $612.5m fee that included a licence on the disputed patents. A jury in 2002 awarded the company only about $100m in damages for the actual patent violation.

"NTP was awarded $500m more than the jury thought it should get," Schultz told vnunet.com. "This is a clear example of what is wrong with the patent system." 

The issue of automatic injunctions will soon come before the Supreme Court in another case in which MercExchange filed suit against auction website eBay.

MercExchange owns a patent covering a 'buy it now' technology that allows a seller to set a price at which he or she would be willing to sell the item immediately.

EBay argues that an injunction would have too great an impact on its business, and asked the Supreme Court to reconsider the injunction. The court is scheduled to hear arguments in the case on 29 March and a ruling is expected later this year.

A Supreme Court ruling in eBay's favour would alleviate some of the problems in today's patent system because it would grant the company time to have the disputed patent re-examined and invalidated if needed.

Rothken argued that the BlackBerry suit has strengthened the case for patent reform. But the EFF's Schultz was quick to point out that current reform efforts are stuck because the proposed changes fail to protect the pharmaceutical industry.

Schultz pleaded for a law that allows for a separate treatment of pharmaceutical and software patents.

"The whole system needs reform, but you see the crisis occur in software and the internet. In terms of triage, that's where we need to go quickly," he said.