BlackBerry maker pressed to settle suit

Va. judge may reissue injunction that could block service in U.S.

December 01, 2005|By NEW YORK TIMES NEWS SERVICE

OTTAWA -- Research In Motion Ltd. moved closer yesterday to a showdown with NTP Inc., a patent-holding company, over BlackBerry service after a court dismissed its request to impose a failed settlement agreement on the two companies.

The ruling by Judge James R. Spencer of U.S. District Court in Richmond, Va., means RIM will either have to renegotiate a settlement with NTP or face a shutdown of its BlackBerry wireless e-mail service in the United States, perhaps within the next month.

The company does not break down its operations by country, but it is estimated that about 70 percent of its revenue from 3.65 million BlackBerry users worldwide comes from U.S. customers. Most analysts say a shutdown is unlikely because of the enormous financial damage it would do to the company.

If a shutdown does occur, RIM has said that it could substitute an alternate, user-tested technology that does not violate NTP's patents, although it has offered few details about it. Shares of RIM dropped $3.79, or 5.8 percent, to close at $61.13 yesterday on the Nasdaq stock market.

Spencer previously banned sales and use of the BlackBerry system for everyone other than government account holders after a jury found that RIM had violated some wireless e-mail patents owned by NTP. That order was held up to permit RIM to mount an appeal, which was unsuccessful.

Yesterday, the judge issued a one-page order rejecting RIM's request to impose a proposed settlement reached out of court between the two companies last spring. It would have resolved the dispute in exchange for a $450 million payment from RIM. But the deal fell apart after both sides accused each other of trying to add unacceptable conditions.

"The court finds that the two parties do not have a valid and enforceable settlement agreement," Spencer wrote. The decision was reached without a hearing, and the reasons for Spencer's order were sealed.

The judge also dismissed a request by RIM to delay any order until the U.S. Patent and Trademark Office completes a review of NTP's patents. To date, the patent office has rejected five of the seven NTP patents at the heart of the case. But NTP, which is based in Arlington, Va., has challenged those findings and the process is likely to continue for months, if not longer.

Kevin Anderson, a lawyer for NTP, said he hoped that the rulings would persuade RIM to end its court challenges and try to negotiate a settlement.

"Our viewpoint has always been that RIM has the keys to its own jail cell," Anderson said. "They can get a deal that fully protects them and their customers at a price everyone agrees is fair."

Anderson declined to discuss exactly what that price might be, though he said it might not necessarily be higher than the $450 million of the earlier agreement.

In a statement, RIM, based in Waterloo, Ontario, said it would continue to prepare an appeal to the U.S. Supreme Court.

"While further review by the Supreme Court is generally uncommon, RIM continues to believe this case raises significant national and international issues warranting further appellate review," the company said. It noted in its statement that the Supreme Court agreed earlier this week to review a patent-related injunction against eBay Inc., suggesting that the development may be positive for its case.

Many analysts, however, are coming to the view that RIM is fast exhausting its legal options.

"RIM's legal alternatives are diminishing; therefore, the probability of a settlement is increasing," said Mike Abramsky, an analyst in Toronto with RBC Dominion Securities. (Its parent company, the Royal Bank of Canada, has a banking relationship with RIM.)

Some analysts have suggested that RIM may be forced to pay at least $1 billion to settle NTP's claim at this stage. But Susan Kalla of Caris and Co. sent a note to investors pegging the probable payoff at $700 million or less.

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