The federal government has stepped into the middle of a high-stakes patent infringement battle between Research in Motion Inc. and a U.S. company, claiming a recent U.S. court ruling against the creator of the iconic BlackBerry communications device threatens to chill innovation by Canadian firms and give extra-territorial reach to U.S. patent law.
At stake are not only millions of dollars worth of royalty payments on the sale of BlackBerry handhelds in the U.S. every month, but also issues of how old laws for guarding intellectual property are applied in a new era when technology is increasingly blurring national boundaries and economies.
In what legal experts say is an unusual move, the Canadian Department of Justice filed an amicus curiae brief with a U.S. federal appeals court on Jan. 13, urging it to grant RIM's request for a re-hearing before all 15 judges of the federal appeals circuit.
In December, three federal appeals judges upheld a ruling that RIM, of Waterloo, Ont., infringed on the intellectual property of NTP Inc. a patent holding company based in Virginia. But the court also sent the case back to a district court because of a judge's mistake in defining some of the technology involved in the claim.
In August, 2003, the U.S. District Court for the Eastern District of Virginia, awarded NTP $53.7-million in damages as well as a royalty of 8.6 per cent on BlackBerry sales in North America. It also awarded an injunction that would prevent RIM from making, selling or servicing its devices in the United States. That injunction was stayed during the appeal.
The case continues to cast a pall over RIM, with some analysts estimating the suit could cut profit by 18 per cent in 2006.
While the legal wrangling proceeds, RIM is putting aside cash for the day it may have to make a payment. In the nine months ended Nov. 27, RIM said it booked $89.9-million of expenses for damages and estimated costs that it put into an escrow account. It said it expects to add between $24-million and $27-million to that amount in the current quarter.
If the request for the new hearing before the full slate of appeal judges is granted, it would give RIM “a new shot” at its case, with a dozen judges hearing details of the case for the first time getting a chance to weigh in, said a source familiar with the proceedings.
“This is an important case with the potential for far reaching implications,” the source said.
Under U.S. law, the territorial reach of a patent is limited and generally only enforceable if the infringement occurred in the U.S. RIM argued that because parts of the alleged infringement occurred on its relay and routing system that is based in Canada, U.S. patent law should not apply. Both the district court and appeals court rejected this argument.
But in its filing, the Canadian government said the decision could lead to “unfortunate, and unintended consequences, affecting Canada's interests, as well as the interests of Canadian companies carrying on multi-jurisdictional operations.”
The five page brief states: “Canada is especially concerned that the uncertainty resulting from the panel's decision, with its potential for being applied in an inappropriately extraterritorial or discriminatory fashion, may have the further troubling effect of chilling innovation by Canadian companies operating in key industry sectors in Canada, particularly the high technology sector.”
The government also raised concerns that the decision could “negatively impact the integrity of the operations of Canadian intellectual property laws.”
“This is something that we take very seriously. So in so doing we decided that this is definitely a case where we could prepare an amicus curia brief,” said André Lemay, a deputy director of the of the Department of International Trade.
