Judge Bans Sales of Software Found to Violate Blackboard's Patent

By KATHERINE MANGAN

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A federal judge in Texas issued an order on Tuesday against Desire2Learn Inc., banning the Canadian company from any U.S. sales of its current course-management software, which a jury recently found to infringe a patent held by Blackboard Inc.

The decision, by U.S. District Judge Ron Clark, came one day after Desire2Learn and Blackboard had faced off in a federal courtroom in Beaumont, Tex., and it caught both parties by surprise. The judge had told the companies on Monday that they had 10 days to work out details of royalties that Desire2Learn would pay to Blackboard, and that he would reserve final judgment until that agreement was completed.

But late Tuesday, Judge Clark issued an injunction that went beyond what Blackboard had requested. The ban applies not only to future sales of Desire2Learn's products but to its existing U.S. customers as well. It banned Desire2Learn from "encouraging, supporting, aiding, or abetting the use of" its already-installed software systems.

The case has been closely watched by higher-education technology officials. Many people worry that if Blackboard succeeds in enforcing its patent, colleges and universities will have fewer choices in course-management systems.

Blackboard had said it would be satisfied with a partial injunction that applied only to future sales of Desire2Learn's products. "I am pleased with the result, but committed to working with Desire2Learn to find a solution that will allow their clients to continue teaching and learning," Matthew Small, Blackboard's general counsel, said. The company reiterated that commitment on its Web site Tuesday evening.

Monday's hearing was set to consider how to carry out the verdict reached last month in another federal courtroom in eastern Texas, in Lufkin. Judge Clark presides in both courts. The jury in Lufkin found that Desire2Learn had infringed a patent by its much-bigger rival, Blackboard, and awarded Blackboard $3.1-million in damages (The Chronicle, February 25). The Canadian company is expected to appeal that verdict.

On Tuesday, Judge Clark also ordered Desire2Learn to send copies of the injunction within 15 days to the lawyers of its current and potential customers in the United States.

Introduction of New Product

He gave Desire2Learn a 60-day stay before the injunction will take effect. Diane M. Lank, Desire2Learn's in-house lawyer, said that will give the company enough time to roll out an upgraded course-management system that, company officials say, will not infringe Blackboard's patent.

"This is not solely a design-around," she said of the new software. "This has been in the works for over a year, and the vast majority of changes are in response to ongoing collaboration with our clients."

In an interview last week, Desire2Learn's president, John Baker, said people who used the new software system would not notice any significant changes.

In the weeks leading up to Monday's hearing, each of the companies summarized its position for the court. Desire2Learn posted its position on its Web site, while Blackboard's was filed under seal.

In its filing with the court, Desire2Learn argued that forcing it to stop sales for three months, which Blackboard had apparently requested, could cause "tremendous hardship" because many universities are expected to decide in the next few months which course-management systems to buy. The company also argued that a 10-percent royalty fee would be fairer, and more in line with the jury's recommendation, than the 25-percent that Blackboard was seeking.

Referring to its American rival by the abbreviation "Bb," the Canadian firm stated in its filing that "Bb's overreaching underscores the real motive behind this suit: Bb, which claims to have over 90 percent of the course-management system market today, wants to exclude its most effective competitor from the United States market entirely."

But Mr. Small said that Blackboard's patent and its lawsuit against Desire2Learn were not meant to squelch competition.

"Desire2Learn could come up with a workaround," he said, "and there are plenty of other companies" in the course-management business. "Competition is good, and we want competition."

In 2006 Blackboard told the U.S. Department of Justice during an antitrust review that its planned takeover of another rival, WebCT, would not inhibit competition in the market. The company specifically mentioned Desire2Learn as one of the companies that would still be competing with it for customers. Blackboard lawyers apparently were not asked about, and did not mention, the patent that Blackboard had just been granted in January of that year.

Fears of Fewer Choices

Critics in higher-education technology circles say that patent did, in fact, limit competition in the market. Just months after meeting with the Justice Department, Blackboard filed a lawsuit against Desire2Learn, accusing the company of infringing that patent.

Mr. Small acknowledged last week that Blackboard did not mention either the patent or the lawsuit to the Justice Department.

"They didn't ask about a planned lawsuit, and we didn't have a lawsuit planned. It wasn't even a thought at that time," Mr. Small said.

Desire2Learn continues to insist that Blackboard's patent is invalid. Besides the expected appeal, the company plans to fight the patent during a pending review by the U.S. Patent and Trademark Office. On its patent-information blog, Desire2Learn said that even if Blackboard's patent survives an appeal and the pending review, Desire2Learn "can easily and cheaply redesign its product so that it falls well outside the boundaries of the asserted claims of the patent."

The redesigned version should be ready in a few weeks, Ms. Lank said.