Same Patent Fight, New Patent Challenges

Patent holder NTP is back in the patent spotlight again, having filed a set of lawsuits against the nation’s four largest wireless carriers.

The lawsuits, filed the same day the U.S. House of Representatives passed the most sweeping patent reform legislation in 55 years, charge AT&T, Verizon Wireless, Sprint Nextel and T-Mobile USA with infringing patents relating to e-mail transmitted over mobile devices.

The suits hearken back to NTP’s $612.5 million settlement from Research in Motion in March 2006. But whether NTP will enjoy the same success this time around isn’t clear yet, given several developments that have taken place.

Five of the patents cited in the suits against the wireless carriers were at issue in the case against BlackBerry maker RIM, but NTP could face a considerably steeper climb this time around, patent law experts say.

For one thing, it may be easier for the wireless carriers to have the case delayed than it would have been for RIM. The U.S. Patent and Trademark Office has taken a second look at the validity of patents at issue in the RIM case, ruling that some of them are invalid.

NTP is appealing the ruling, but when it sued PDA maker Palm last November, the judge granted a stay pending the PTO review.

Now that the PTO’s review is further along, it is somewhat more likely that the case against the wireless carriers could be stayed, said Mark Lemley, a Stanford Law School professor. “Here the patent office has already been acting on this matter, so it might be reasonable for a trial judge to say, ‘I’ll wait and see.'”

Additionally, the standard under which NTP could win an injunction against the wireless carriers has changed since the RIM settlement.

In the eBay-MercExchange patent fight, the U.S. Supreme Court established a new approach for determining whether infringed patent holders should be awarded an injunction — which had historically been almost automatic — or monetary damages instead.

The Supreme Court held that a four-part test be used to determine whether to award an injunction, requiring the patent holder to show, among other things, that damages are inadequate compensation. The ruling makes it less certain that NTP would receive an injunction against the wireless carriers, giving the carriers an advantage that RIM did not have.

“It’s going to be very hard for [NTP] to meet the eBay test,” Lemley said. “I think a lot of the reason that RIM ended up paying so much in the case was to avoid the threat of injunctive relief.”

In the meantime, proponents of patent reform point to the kind of patent “trolling” done by NTP — in which a company makes money not by putting its patents to use but by suing other companies for infringement — as more reason to revise the way in which monetary damages are determined.

The House-passed Patent Reform Act of 2007 would allow judges to determine the award based on the value of the portion of a product that was infringed, rather than the value of the entire product. It is one of the most controversial provisions in the bill.

Some patent attorneys are worried that the envisioned changes to the way damages are determined will artificially devalue patents.

“The damages provision cause me quite a bit of concern. That’s why patents have had teeth,” said Andrew Lahser, a patent attorney in Fountain Hills, Ariz. “It may become more expensive to prove damages than the damages are worth. Then what’s left for the inventor?”

Other patent experts caution that creating more flexibility in the patent system could leave patent holders at a disadvantage compared to large companies.

“The Achilles heel of flexibility and discretion are exactly what the companies with the bigger litigation budgets and bigger lobbying budgets want,” said F. Scott Kieff, associate professor at Washington University School of Law. “We’ve found that the more flexibility there is, the more you start to see the big guys lining up on one side and the little guys lining up on the other.”

The damages provision in the legislation remains a subject of ongoing negotiation as the bill moves through the Senate. In the meantime, sponsors of the House bill are continuing to talk with various parties on issues of ongoing disagreement, according to a staffer close to the bill.

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