Patent Article by William S. Ramsey, P.C.

PROFOUND AND UNEXPECTED EFFECTS OF THE BLACKBERRY CASE ON INTERNET PATENTS

William S. Ramsey
Attorney at Law

Not Legal Advice

Introduction.

An otherwise obscure patent infringement case involving the BLACKBERRY personal digital assistant became the subject of headlines in 2005 because of the size of the eventual settlement ($612.5 million) and because of the threat of an injunction which would deprive the 3 million BLACKBERRY users in the U.S. of their ubiquitous access to email. A lesser noticed implication of the appeal court’s holding threatens the value of many patents which protect software, especially software used on the internet.
          This paper discusses the nature of software patents, the requirements for infringement, and the effects of the BLACKBERRY case which unfortunately suggests a practical course for avoidance of infringement of many such patents.

PATENTING SOFTWARE

The scope of patent coverage is established by statute at 35 U.S.C. § 101:
“Any new and useful process, machine, manufacture, or composition
of matter, or any new and useful improvement thereof…”

The Supreme Court in Diamond v. Chakrabarty 447 U.S. 303 (1980) made the point that patents can cover “…anything under the sun that is made by man.” Software may be thought of as a series of steps which lead to a useful result and therefore falls in the category of a process.

A patent application comes in three parts:

          1. The Specification must be written and must disclose one embodiment (example) of the invention in enough detail to enable a person skilled in the art to make and use the invention at the time the invention was made. In the case of software such a person would be an experienced programmer or system designer. An example of the source code is sometimes filed at the Patent and Trademark Office (PTO) as part of the application file, the idea being that an example of working code certainly meets the disclosure requirement. This exception to the “never release” rule for software is based on the fact that an early pre-release version differs so much from a useful release that little code worth copying would be revealed to a competitor. The best method of making the invention known to the inventor at the time of filing the application also must be included.
          2. Drawings must be included when necessary for the understanding of the invention. In software patents the practice is to include flow chart drawings with each step numbered. Each step is described in detail in the written part of the specification.
          3. One or more claims must be included. Software may be claimed in three related but distinct ways: Software may be claimed as a process for doing something. This is the foundation of all software claims. The steps are described using gerunds. For example:

Claim 1. I claim the process of transferring electronic mail comprising the steps:
                  a. receiving electronic mail.... etc.,
                  b. transmitting information contained....etc.,
                  c. adding the identification of the device....etc. and
                  d. transmitting the information.... etc.

The breakthrough in patenting software came in 1981 when the Supreme Court at Diamond v. Diehr, 450 U.S. 175 (1981) approved a patent for the computerized application of a well-known equation involving heat and time to rubber curing. The use of the process in a the physical transformation of rubber, rather than simply deriving information, was an important factor in the decision.
Software also may be claimed as an apparatus or system for doing something. The claim is for the computer plus the software. For example:

Claim 2. I claim the system for transferring electronic mail comprising:
                  a computer which performs the steps,
                  a. receiving electronic mail....etc.,
                  b. transmitting information contained....etc.,
                  c. adding the identification of the device....etc. and
                  d. a transmitter which conveys the information....etc.

The basis of this apparatus or system type of claim is the seemingly common sense conclusion of the Court of Appeals for the Federal Circuit (CAFC) at In re Alappat 33F.3d 1526 (Fed. Cir. 1994). that a computer with software is different (and therefore patentable) from a similar computer lacking the software.
          Finally, software also can be claimed as an article of manufacture bearing the software, in this context some physical embodiment of the software. For example:

Claim 3. I claim the compact disk electronically coded for the process of transferring electronic mail comprising the steps :
                  a. receiving electronic mail....etc.,
                  b. transmitting information contained....etc.,
                  c. adding the identification of the device....etc. and
                  d. transmitting the information....etc.

This approach is based on the finding by the CAFC in In re Lowry, 32 F.3d 1579 (Fed. Cir. 1994) that electronic media encoded with software is different from such media without software.
          The rule of thumb is to claim the invention in every way the patent attorney or agent can think of. In the case of software it is good form to include both apparatus or system claims and method or process claims.
          This strategy is complicated by restriction procedures. The first communication a patent applicant receives from the PTO often is a restriction requirement. Here the patent examiner assigned to the case divides the claims into more than one group, on the grounds that each group is a separate invention. The applicant is required to elect one group for further examination and to withdraw the other claims. For example, the examiner might require choice between Invention I. (claims 1-5, covering a system), and Invention II. (claims 6-12, covering a process). (A new application with the withdrawn claims only can be filed later). The practical effect of restriction is to create some patents with system claims only and others with process claims only. As will be seen below, the BLACKBERRY case significantly weakens the value of some patents with only process claims.

PATENT INFRINGEMENT

A slight digression into the Federal Court System is appropriate at this point. 

Federal District Courts try patent cases.  Appeals from patent cases are not heard in the 13 federal Circuit Courts but only in the Court of Appeals for the Federal Circuit (CAFC).  The CAFC was created in 1982 by combining the Court of Claims and the Court of Customs and Patent Appeals.   Decisions of these “parent” courts are precedent to the CAFC.  Appeal from decisions of the CAFC is to the Supreme Court.

          The patent statute provides at 35 U.S.C. § 271(a):
                  “…whoever without authority makes, uses, offers to sell, or sells
                  any patented invention within the United States or imports into
                  the United States any patented invention during the term of the patent
                  therefore, infringes the patent.” (emphasis added).

          Patent infringement occurs when the accused item or process includes all elements or the equivalents of all elements of a claim of the patented item or process. Infringement is a civil action based on strict liability principles. Actual damages in infringement are not less than a reasonable royalty. Infringement with actual knowledge of the existence of a patent is willful infringement and may involve the award of triple damages and attorney fees. A injunction against further infringement may be awarded by the court according to principles of equity.
          Several statutory defenses are available to a defendant. The defendant may be licensed to perform the infringing actions. The defendant’s actions may be noninfringing. Finally, the patent may be invalid or unenforceable. Invalidity must be shown by clear and convincing evidence, as a patent is presumed valid by statute.

The BLACKBERRY Case.

NTP, Inc. (NTP), is a Virginia firm with a business in obtaining and licensing patents on wireless technology. The company had widely licensed patents involved in this case. The defendant was Research In Motion, Ltd. (RIM), a Canadian firm which manufactures and sells the BLACKBERRY trade marked personal digital assistant. These handheld battery powered devices extend access to email and the internet from the user’s desk-top computer to the user’s pocket. At the time of the case there were 3 million BLACKBERRY users in U.S., comprising approximately 60% of the market for such wireless systems.
          A BLACKBERRY user first installs software provided by RIM in the user’s desktop computer. When email is received at that computer the message is sent via the internet to a single RIM relay site located in Canada. The relay transmitter then sends the email via the internet to the specific wireless network which is subscribed to by the user. The wireless network then sends the email by wireless to the user’s BLACKBERRY device. Email from the BLACKBERRY user is sent by the wireless network to the relay transmitter where it is sent to addressee. The location of the relay transmitter in Canada is coincidental to the operation of the system. The relay transmitter could as well be located anywhere with internet access.

TRIAL IN THE EASTERN DISTRICT OF VIRGINIA

          RIM was accused of infringement of 5 patents assigned to NTP. In 2005 the Eastern District of Virginia at NTP, Inc. v. Research in Motion, Ltd.., 397 F.Supp.2d 785 awarded summary judgment of infringement of four claims. The jury further found RIM willfully infringed an additional 14 claims and set actual damages at $23 million. The court awarded damages of $53 million and an injunction against RIM. The injunction was stayed pending appeal.

APPEAL TO THE CAFC.

          The CAFC considered the appeal by RIM and in 2005 at NTP, Inc. v. Research in Motion, Ltd., 418 F.3d 1282 affirmed the willful infringement by RIM of the apparatus or system claims of NTP’s patents. The court reversed the trial court and found the process claims were valid but non-infringed.
          A number of equitable arguments had been raised by RIM against imposition of an injunction. These included: 1. The widespread dependence on BLACKBERRY by users in private and government sectors would create economic disruption if interrupted. 2. The PTO was concurrently reexamining the patents (although, of course, any decision of the PTO, an administrative agency, would presumably be appealed to the courts). 3. The fact that NTP never manufactured products but merely owned patents. 4. Finally, the Canadian Minister of International Trade argued against an injunction.
          The case was remanded to the trial court to determine the effect of the CAFC’s actions on the damages awarded and the issue of imposing an injunction by the trial court.

APPEAL TO THE SUPREME COURT

          Certiorari was denied by the Supreme Court in 2006 at 126 S.Ct. 1174.

SETTLEMENT

          The case settled with the grant of licenses by NTP to RIM and payment of $612.5 million by RIM to NTP. The apparent impetus for this seemingly large settlement was the threat of an injunction which would have inactivated BLACKBERRY devices in the US. Although RIM claimed to have a plan B in the form of new noninfringing software in the wings, this issue was made moot by the settlement.

SYSTEM VS. PROCESS CLAIMS

          In its holding, the CAFC made a new distinction between system and process claims.

          The CAFC concluded it is not necessary that all elements of an apparatus claim be in the United States for infringement of an apparatus claim. This holding was based on a 1976 Court of Claims case at Decca Limited v. United States, 544 F.2d, 1070 in which a U.S. patent protected a direction locating system which included a radio transmitter located in Norway. All other elements of the invention were located in the United States. The system was deemed used “within the United States” because control and beneficial effect of the system was in the United States.
          The CAFC also concluded it is necessary that every step of a method claim be performed in the United States, and therefore the method claims in the BLACKBERRY care were not infringed. This opinion was based on a Court of Claims finding, also in 1976, at Roberts Dairy v. United States, 530 F.2d 1342 which considered an accused process of pasturizing shelled eggs. One step in the patented process claims called for “pre-heating the egg product to a temperature within the range of approximately 90° F. to 130° F. until the fats therein are free flowing.” Since the plaintiff did not prove the defendant did that step, the Court of Claims concluded the claim was not infringed.
          The CAFC combined the Court of Claims requirement that infringement requires every step of a process claim be performed with the statutory requirement that infringement take place in the United States in its decision of process claims. It concluded that since one step of the BLACKBERRY process claims took place in Canada, the process claims were not infringed by RIM.
          This distinction between system and process claims was academic to the BLACKBERRY case, as infringement requires only that one claim be infringed, and the CAFC affirmed infringement of some system claims. It is important, however, to software patents with only process claims.

IMPLICATIONS OF BLACKBERRY

          The BLACKBERRY case has been widely criticized in its treatment of system and method claims.

          In 2006 Jennifer Lane at NTP, Inc. v. Research in Motion, Ltd.: Inventions Are Global, But Politics Are Still Local – an Examination of the BlackBerry Case, 21 Berkeley Tech. L.J. 59, concluded that RIM’s system should have been considered a wholly Canadian system but “used” within the US, and therefore infringing 35 USC § 271(a). She would make no distinction between system and method claims in this respect and feels domestic uses of global systems infringe US patents.
          John W. Osborne at A Rational Analytical Boundary for Determination of Infringement by Extraterritorially-Distributed Systems, 46 IDEA 587 (2006)
believes the location of the “patentably distinctive aspect” of a claimed invention should be determinative in infringement questions. He would have found the NTP claimed system as well as NTP claimed methods to be non-infringed by RIM’s BLACKBERRY system and methods.
          At the American Intellectual Property Law Association Annual Meeting in 2006 in his paper Form Over Substance: The Importance of Claim Language In Patent Enforcement, Method vs. System Claims, James H. Wallace Jr. emphasized the practical effect of BLACKBERRY on patent owners. When considering internet patents having only method claims he asks the question “Can any step be done in Bangaladesh?” An affirmative answer throws the value of the patent in question. Wallace suggested a method of claiming process steps which might avoid the BLACKBERRY problem, but
but admits his method would be impractical for internet patents with several process steps, any one of which can be performed over the border.

A METHOD CLAIMS ONLY INTERNET PATENT

          In a unscientific survey the PTO website (www.uspto.gov) was searched for published patent applications with titles including the keywords INTERNET and BUSINESS. Of the 50 hits, 13 applications contained only method claims. A similar search of issued patents gave 15 hits, 4 patents with only method claims.
One example is U.S. Patent No. 7,072,892, titled BUSINESS MODEL FOR RECOVERY OF MISSING GOODS, PERSON, OF FUGITIVES OR DISBURSEMENTS OF UNCLAIMED GOODS USING THE INTERNET, issued July 4, 2006.
          This patent has10 claims, all method claims. For example:
          “Claim 10. A replacement process for stolen goods, said replacement process comprising:
                  creating an electronic database of stolen items;
                  entering information into the electronic database;
                  a step of at least one of searching, sorting and indexing
                       the electronicdatabase;
                  storing the electronic database;
                  providing replacement items to a claimant of the stolen items; and
                  automatically requesting an e-commerce transaction including at least
                      one of completive bid process and reverse auction process.”

          It appears that any one or more of the above steps “creating….”, entering….”
“a step of at least one of searching….”, “storing….”, “providing….” and “automatically requesting….” could be accomplished in a foreign country using the internet. Performing any one of these steps in a foreign country presumably would avoid infringement, although all the other steps were performed in this country.

CONCLUSIONS

          What can be done to clear up this “loophole” and restore usefulness to many patents covering internet businesses? Solutions are few and difficult. In a future case the CAFC or the Supreme Court might reverse the BLACKBERRY holding.. Of course, the best solution might be the statutory extension of the reasoning of the CAFC on system claims to include method claims. That would locate either a process or method within the United States if that is where the system or process as a whole is put into service, i.e., the place where control of the system or process is exercised and beneficial use of the system or process is obtained.


William S. Ramsey

William S. Ramsey, Esq. is a Registered Patent Attorney with
a solo practice in Columbia, Maryland.
billramsey1@comcast.net