Judge ruling may end BlackBerry sales in US

A federal judge won’t hold up court proceedings in NTP Inc.’s patent lawsuit against Research In Motion Ltd. (RIM), opening the door to a possible injunction that would stop sales of BlackBerry mobile e-mail devices, and shut down BlackBerry service, in the U.S.

RIM had filed two motions, one to enforce an agreement with NTP to settle the case and another to stop the court proceedings while the U.S. Patent and Trademark Office re-examines NTP’s patents. Judge James Spencer of the U.S. District Court for the Eastern District of Virginia on Wednesday denied both motions. He ruled that the parties don’t have a valid settlement agreement and said the district court could not hold up the case during a patent re-examination that could take years.

RIM, in Waterloo, Ont., sells BlackBerry wireless handhelds and operates a push e-mail service. NTP, a patent holding and licensing company in McLean, Virginia, sued RIM in 2001 claiming the company’s devices, e-mail system and method of operating the system infringed NTP patents. NTP won a jury verdict in 2002. In March, the companies announced they had agreed to settle the dispute by having RIM make a US$450 million payment to NTP in exchange for a perpetual license to NTP’s patents. However, the deal fell through, as RIM thought the press release constituted a final agreement while NTP insisted the companies had never reached a definitive agreement.

“We would hope today’s significant developments would bring them back to the table,” said James Wallace, an attorney with Wiley Rein & Fielding LLP, in Washington, D.C., who represents NTP.

One Canadian analyst believes there is a “very good” chance that NTP and RIM will ultimately reach a final settlement, as neither party would like to see BlackBerry cease operations in the U.S.

“This (case) is obviously NTP’s key to success (and) the last thing the NTP wants to see is a BlackBerry shutdown, because if BlackBerry shuts down, then so does NTP’s revenue stream,” said Carmy Levy, senior research analyst at London, Ont.-based Info-Tech Research.

He said NTP is merely playing a “very high-stakes game of brinkmanship” with RIM, in the hope of increasing the amount of the final settlement. And with the threat of an injunction looming over RIM’s head, the Canadian firm would somehow have to play along.

“The closer (NTP) can push RIM to the edge of the cliff, the more money (RIM) will be inclined to pay as part of the final settlement,” said Levy.

The court next will schedule briefings with the parties and set a date for a hearing on the injunction and damages, according to the orders by Judge Spencer. An injunction could be imposed by the end of the year, Wallace said.

Meanwhile, RIM is seeking an appeal to the U.S. Supreme Court and expects the high court to decide over the next few months whether to hear that appeal, it said in a statement Wednesday.

RIM believes an injunction would be inappropriate because of the ongoing patent re-examination, the request for Supreme Court review and other factors, including public interest concerns over suspending BlackBerry service, the statement said. RIM is also preparing software work-arounds it could use if necessary to maintain BlackBerry services in the U.S., it said.

Judge Spencer’s order on the settlement agreement isn’t surprising considering how hard it is to enforce a settlement, intellectual property attorney Robert Andris said in an e-mail message Wednesday.

“This ruling will almost certainly force the parties back to the bargaining table — both have too much to lose,” said Andris, a partner at Ropers, Majeski, Kohn & Bentley, in Redwood City, California. “NTP risks losing an established source of future revenue in the form of royalties from RIM, and RIM risks an injunction that could shut the company down all together.”

Blackberry users don’t see a possible shutdown as a looming threat right now, according to In-Stat analyst Allen Nogee.

“I don’t see a lot of fear,” Nogee said. “Certainly people hope that they’ll get it worked out.”

However, a settlement could hit users in its own way, he added. “The costs have to come from somewhere. … You might see higher fees. It’s fairly expensive anyway” at $40 to $60 per month for the service, Nogee said.

The ongoing legal headaches, combined with mounting competition from mobile e-mail vendors such as Good Technology Inc. and Intellisync Corp., are bad news for RIM, Nogee said. Moreover, Microsoft is a growing threat with Windows Mobile 5.0 coming on a new Palm Inc. Treo, and Nokia Corp., a RIM licensee, has developed its own push e-mail technology.

As if all that isn’t enough, RIM is also in a five-day hearing this week in the U.K. regarding patent lawsuits involving Inpro Licensing SARL.

Still, the company has a loyal following among business users who are used to the BlackBerry experience and wouldn’t readily trade it for another, Nogee said. In its fiscal second quarter, which ended Aug. 27, the company added about 620,000 subscribers for a total of approximately 3.65 million, according to a RIM press release.

The Info-Tech analyst said the NTP case could set a precedent for other smaller companies that lay claim to patents but don’t actually sell or market anything. “They wait in the wings for other companies to use similar technologies,and then they sue them. U.S. patent law allows them to do that.”

While Canadian patent policies are significantly less radical, according to Levy, Canadian technology firms that conduct business in the U.S. are subject to these patent laws and, as RIM has learned, are open to similar lawsuits.

“Let’s be clear. This is not a case of technology theft,” said Levy, “It’s just RIM had the bad luck to step on NTP’s toes and NTP is leveraging it as far as it possibly can, because NTP has no other way of raising money at this point in its existence.”

– With files from Nancy Gohring in Dublin and Mari-Len De Guzman

Related links:

Blackberry suits, rivals dog RIM

Patently remarkable: Ottawa’s intervention in RIM patent case sparks legal debate

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