BlackBerry users unite! Expanding the consumer class action to include a class defense.

• Author: Johnson, Nicole L.

On March 3, 2006, Research in Motion, Ltd. ("RIM") and NTP, Inc. announced a $613 million settlement, avoiding a permanent injunction that would have prevented RIM from providing service to more than three million BlackBerry users nationwide. (1) The anxiety of consumers was substantial. Individual users often have a strong emotional attachment to their handheld email devices. Businesses whose employees rely on BlackBerry devices for communication potentially faced substantial economic disruption. (2) Experts have estimated that enterprise BlackBerry users faced costs of approximately $845 per BlackBerry to switch to an alternate device that offered similar services, totaling an estimated $1.5 billion nationwide. (3)

Though the March settlement allayed consumer fears, the respite was short-lived, as rival Visto Corp. filed suit against RIM on April 28, seeking a permanent injunction and monetary damages. (4) While a new round of litigation over the BlackBerry has once again threatened consumer interests, consumers cannot act in their own defense. There is currently no procedural mechanism for consumers, typically decentralized and not named as defendants, to intervene as a class in a suit in which a patent holder sues a product manufacturer or service provider for infringement. (5)

This Comment proposes a procedural solution to the obstacles faced by decentralized consumers. The "consumer class defense" would allow consumers to protect those interests that are inadequately represented by the producer defendant. Assaf Hamdani and Alon Klement have recently proposed the class defense to allow certification of defense classes at the instigation of defendants rather than plaintiffs. (6) They recommend this procedural device in the limited circumstances of dispersed individual defendants faced with identical suits. This Comment takes the Hamdani and Klement proposal a step further and suggests that the class defense has a more expansive applicability, not only for achieving economies of scale and overcoming collective action problems in litigation, but perhaps more importantly in obtaining settlements. This defense is particularly appropriate in patent litigation that threatens to bar the consumer from the full use and enjoyment of an infringing product. In such situations it is often in the consumers' interest to obtain a settlement that resolves the uncertainty of a possible future injunction and avoids the costs of developing and switching to an alternative product.

1. WHY CREATE A CONSUMER CLASS DEFENSE?

   The consumer class defense provides a mechanism for consumers to act collectively to pursue litigation or settlement when their interests diverge from those of the producer defendant. (7) Consumers as a class can opt to intervene in pending patent suits and either consolidate resources with the producer defendant or reach a settlement independently. Though a defendant class poses unique due process concerns, the use of settlement-only or opt-in classes can ensure that due process is satisfied. (8) The primary advantage of the consumer class defense is internalization by the litigants of consumer interests that will encourage efficient outcomes to patent disputes.

   Under the current system, when an alleged patent holder decides to sue and the producer defendant determines its litigation strategy, the impact of the patent litigation on consumers, whether positive or negative, is an externality. (9) This failure of the plaintiff and the named defendant to take all interests into account in the cost-benefit calculation leaves open the possibility of inefficient litigation decisions. At the margins, the addition of consumer interests to the decision-making process and the settlement pool is likely to have an impact on the original parties' choice of litigation tactics and on whether a settlement can be reached. (10)

   The class defense advances the interests of the producer defendant, consumer defendants, and the plaintiff, with little possibility that any party will find itself in a less desirable position. In litigation, the class defense will generally be a Kaldor-Hicks improvement (11) because any value the plaintiff loses from patent invalidation will be gained by the consumers. In reaching settlements, the class defense is a Pareto improvement (12): the plaintiff receives a higher settlement, consumers may continue to use the product, and the producer is no worse off.

   For the producer defendant, the class defense can provide the benefit of additional funds from consumers, which expands both settlement and litigation opportunities. At the same time, the class defense does not limit the litigation choices that are otherwise available to the producer. Though consumers can intervene in a suit, they can neither force nor block a settlement. (13) Therefore, the producer defendant may continue to litigate or settle independently from consumers.

   Consumers also risk little and...