Shutdown avoided as BlackBerry dispute is settled

Research In Motion (RIM) and NTP have settled their long-standing legal battle, with RIM paying NTP US$612.5 million to settle all of NTP's patent claims against it.

NTP has granted RIM an unfettered right to continue its business, including its BlackBerry business, according to a RIM statement. All terms of the agreement have been finalized and the case against RIM was dismissed by a court order Friday afternoon.

The case had threatened to shut down service to most of the millions of BlackBerry users in the U.S. NTP was seeking an injunction against RIM in the U.S. District Court for the Eastern District of Virginia. At a hearing last week, Judge James Spencer did not rule on the injunction but slammed the companies for failing to settle the case. RIM had said it had a workaround for the RIM service that would steer clear of NTP's patents.

The agreement relates to all patents owned and controlled by NTP and covers all of RIM's products, the statement said. It eliminates the need for any further court proceedings or decisions, RIM said.

RIM made the deal to get the dispute out of the way, said Jim Balsillie, chairman and co-Chief Executive Officer (CEO) of RIM, in Waterloo, Ontario.

"The absolute motivation was really to give clarity and certainty to all our ecosystems so we can really start our new [fiscal] year, which starts Monday ... with no more of the noise and distraction of this suit," Balsillie said on a conference call after the deal and RIM's fourth-quarter earnings were announced.

Balsillie said the settlement covers all partners and all technologies. "It was very important to get the scope we wanted," he said.

Users expressed relief at the settlement and annoyance at the lawsuit.

Judy Wilks, a Blackberry user and San Francisco-based vice president of public relations (PR) firm Bite Communications, said she is pleased the patent dispute has been resolved and the threat of a service interruption has ended.

"We PR people are addicted to our BlackBerries, so would have been at a loss without them," she said. "We love being connected at all times."

Justin Beech, who owns and runs DSLreports.com, in New York, was not surprised at the deal.

"Actually, I never thought they'd turn off service; too many powerful people depend on them. And I also think NTP is abusing the patent system, so I am a little annoyed that RIM blinked and basically funded their next half dozen court cases," Beech wrote in an e-mail message from his BlackBerry.

The NTP patents involved in the case have been found invalid by the U.S. Patent and Trademark Office and are still in the midst of what may be a lengthy re-examination process. Balsillie said RIM did not feel good about settling over questionable patents.

"There's no question we took one for the team here. At the core, it's just over three bucks a share, and in that respect it sounds like a prudent thing for the company. ... It's not a good feeling to write this check for patents that will not survive for sure," he said.

The deal takes a load off the back of RIM as it faces growing competition, but users may still have anxiety about having one company control devices, network operations centers and connections to carriers, according to Bob Egan, an analyst at Tower Group, a market analysis company in Dedham, Massachusetts. A threat to that one company's technology can wreak havoc, he said.

"Proprietary closed-loop systems present some benefits, but they also present a certain atmosphere of risk in the marketplace," Egan said. Emerging competitors such as Microsoft Corp. and Sybase Inc. don't have the same liability, he added.

At the hearing last week, RIM's lawyers, including Henry Bunsow, argued an injunction would hurt the U.S. economy because BlackBerry devices play a "crucial role" in important industries such as hospitals, utilities and banks.

NTP lawyers said RIM had continued to use NTP's technology even though a jury ruled for NTP in its claim for wireless e-mail patents in August 2003.

In August 2003, the U.S. District Court for the Eastern District of Virginia ruled in favor of NTP, based in Arlington, Virginia, and ordered RIM to pay damages of US$53.7 million.

In December 2004, the U.S. Court of Appeals for the Federal Circuit rejected an earlier injunction issued by the Virginia district court. The district court issued the original injunction in August 2003 but stayed the ruling pending appeal.

(Additional reporting by Grant Gross in Washington and Robert McMillan and Elizabeth Montalbano in San Francisco.)

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