NTP Targets Palm With Patent Suit

Eight months after winning a massive cash settlement from the maker of the BlackBerry, NTP is taking aim at Palm.

On Monday, NTP filed suit in U.S. District Court in the Eastern District of Virginia, claiming that Palm’s “products, services, systems and processes” infringe seven of its patents.

As in the suit against BlackBerry maker Research In Motion (RIM), NTP seeks an injunction to halt the sale of Palm-enabled devices, as well as unspecified monetary damages.

NTP said the claims cover all Palm devices that are primarily used for receiving e-mail through radio frequency communications — or adapted for such use — and the related processing of those messages. The suit appears to target the Palm Treo, which is gaining traction as a BlackBerry alternative.

“We have attempted on numerous occasions to resolve this issue with Palm without resorting to litigation that is both time consuming and costly,” said Donald E. Stout, NTP’s co-founder. “Though we would still prefer to resolve this issue with Palm in a negotiated license agreement that is fair and reasonable to both parties, we are filing action today as a last resort to protect our valuable intellectual property.”

Familiar Refrains

At present, the seven patents are under review by the U.S. Patent and Trademark Office (PTO) and have been preliminarily rejected as part of that reexamination, said Palm. The NTP patents under review appear to focus on e-mail pagers rather than two-way communications devices, Palm noted.

“Palm has been in occasional contact with NTP concerning a license to these patents. When Palm last communicated with NTP many months ago, however, each of the patents already was the subject of reexamination proceedings by the PTO,” the company said. “Palm is disappointed that after many months of silence and repeated rejections of NTP’s claims by the PTO, NTP has chosen to sue on patents of doubtful validity.”

Palm said that it would “defend itself vigorously against the attempted misuse of the patent and judicial systems to extract monetary value for rights to patents that may ultimately have no value at all.”

Five of the seven patents in the Palm suit were at the core of the company’s claim against RIM. That case dragged on for more than two years even after NTP won a jury award. Appeals nearly reached the U.S. Supreme Court twice. A US$612.5 million settlement came down just days before a judge was set to issue an injunction that could have shut down the BlackBerry service.

Bad Timing

Palm shares lost more than 6 percent in late trading on Monday, but rebounded Tuesday after the company responded to the NTP allegations. Its shares were up 2.6 percent in midday trading, to $14.65.

Palm may be eager to avoid the distraction and expense of a drawn-out legal action. Currently, it faces intense competition from RIM, as well as from Nokia and Motorola, which are offering smartphones with much the same functionality as Palm’s devices.

More than three-fourths of Palm’s first-quarter revenue came from sales of its Treo line, in a quarter that saw profits fall more than 9 percent.

“At best, the litigation would be a management distraction,” Citigroup analyst Daryl Armstrong said. “At worst, it could influence carrier decisions around how aggressively to stock and market Palm’s products.”

NTP is derided by many as a “patent troll,” because it does not actually produce technology but instead seeks to license its patents. The company is considered a flashpoint in the intellectual property law community. Its patents were granted and have since been ruled invalid by a PTO staff-level review, casting a complicated shadow over its legal proceedings.

Nonetheless, until the patent review is completed, which could be a lengthy process, the law views the NTP patents as valid.

The size of the NTP settlement was a reminder of how costly patent cases can be — even prior to considering RIM’s four-plus years of lost time and the legal costs, Brinks Hofer Gilson & Lione attorney Michael Stolarski told the E-Commerce Times.

“That settlement reaffirmed the fundamental value of patents in the marketplace,” he said. “It also should have served as a wake-up call about the need for companies to address these issues as part of their overall business plans.”