Bloomberg News

U.S. Has `Questions' on Possible BlackBerry Shutdown

February 01, 2006

The Justice Department sought to delay a possible court-ordered shutdown of the BlackBerry e-mail system in the U.S. until a separate hearing can be held on how to implement it without affecting government services.

The government didn't take a position on whether a judge should shut down Research In Motion Ltd. (RIM)'s BlackBerry in a patent dispute. Instead, its filing today centered on how any such order, called an injunction, may be carried out, suggesting one option may be to halt only future sales of the product.

``There are still a number of serious questions to be answered as to how an injunction can be implemented so as to continue Blackberry service for governmental and other excepted groups,'' the Justice Department wrote in a court filing today.

Research In Motion, based in Waterloo, Canada, could be ordered to stop sales and service after an appeals court upheld part of a jury's finding that the company infringed patents owned by a Virginia patent-licensing company. Research In Motion, which has 4.3 million users, including about 3.2 million in the U.S., added 645,000 new subscribers in the third quarter.

`Vital Communications Tool'

Also today, the U.S. Patent and Trademark Office rejected one of the two patents found to be infringed in the case. NTP Inc., the patent owner, has the right to file a response to the action and an appeal. Research In Motion contends that questions about the validity of the patents are one reason why the judge shouldn't shut down sales and service.

Research In Motion, in a separate filing today, said the BlackBerry ``has become a vital communications tool for national defense, homeland security, public health and safety, and economic productivity.'' It argued that there are no viable alternatives, and said more than 1 million of its customers should be exempt from any injunction.

A hearing on a possible injunction is scheduled for Feb. 24 in Richmond, Virginia. U.S. District Judge James R. Spencer also must consider how much Research In Motion should pay NTP for past infringement. Research In Motion contends that NTP should accept money compensation instead of a halt to services.

By law, the federal government is exempt from any injunction. NTP has said exemptions should be granted for state and local governments, emergency workers such as the Red Cross, and the 12 regional Federal Reserve Banks.

New Sales

The government said that if any injunction is ordered, a second hearing should be held to determine how to implement it without affecting the exempt users. The Justice Department suggested that one alternative would be to block new sales of BlackBerry devices to private users who don't fall within an exemption.

``While we are mindful of the court's desire to conclude this litigation, nevertheless in our view the record so far does not reflect a sound basis for concluding that the exceptions will be feasible to implement,'' the Justice Department wrote.

NTP, in its own filing today, said that any problem in segregating users is Research In Motion's own fault. Judge Spencer first ordered a shutdown in 2003. That was put on hold while the appeals were heard, and then sent back for review after an appeals court upheld only part of the jury verdict.

Government Users

``For the last three years, RIM could have readily required each of the 3 million new subscribers to verify whether they are government users or not,'' NTP said. There is ``no reason to delay'' an order prohibiting new sales, especially by ``identified major commercial accounts.''

Visto Corp. and Good Technology Inc., companies that make software to allow e-mails to be sent to cell phones, are possible alternatives, NTP said. Both companies license NTP's patents, and NTP owns stakes in the two.

NTP, a patent licensing firm founded by late inventor Thomas Campana, maintains that it's entitled to the court order because Research In Motion has refused to sign a licensing agreement.

Research In Motion is asking the patent office to cancel the patents, saying they don't cover a new invention. Spencer has said he's not going to delay any rulings in the civil case because of the patent office review, which could take at least another year.

The patent office has issued non-final rejections for all of NTP's patents, including the two found to be infringed. NTP can appeal any final rejection to a board within the patent office and then to an appeals court.

The civil case is NTP Inc. v. Research In Motion Ltd., 01cv767, U.S. District Court, Eastern District of Virginia (Richmond).

To contact the reporter on this story: Susan Decker in Washington at sdecker1@bloomberg.net.

To contact the editor responsible for this story: Patrick Oster at poster@bloomberg.net.


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