BlackBerry blackout avoided as RIM settles

Research In Motion Ltd. (RIM) and NTP Inc. have settled theirlong-standing legal battle, with RIM paying NTP US$612.5 million tosettle all of NTP’s patent claims against it.

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

The case had threatened to shut down service to most of themillions of BlackBerry users in the U.S. NTP was seeking aninjunction against RIM in the U.S. District Court for the EasternDistrict of Virginia. At a hearing last week, Judge James Spencerdid not rule on the injunction but slammed the companies forfailing to settle the case. RIM had said it had a workaround forthe RIM service that would steer clear of NTP’s patents. There’s noquestion we took one for the team here… It’s not a good feelingto write this check for patents that will not survive for sure. JimBalsillieChairman and co-CEO, Research in Motion Ltd.Text

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

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

“The absolute motivation was really to give clarity andcertainty to all our ecosystems so we can really start our new[fiscal] year, which starts Monday … with no more of the noiseand distraction of this suit,” Balsillie said on a conference callafter the deal and RIM’s fourth-quarter earnings wereannounced.

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

Users expressed relief at the settlement and annoyance at thelawsuit.

Judy Wilks, a Blackberry user and San Francisco-based vicepresident of public relations (PR) firm Bite Communications, saidshe is pleased the patent dispute has been resolved and the threatof a service interruption has ended. “We PR people are addicted toour BlackBerries, so would have been at a loss without them,” shesaid. “We love being connected at all times.”

Justin Beech, who owns and runs, in New York, wasnot surprised at the deal.

“Actually, I never thought they’d turn off service; too manypowerful people depend on them. And I also think NTP is abusing thepatent system, so I am a little annoyed that RIM blinked andbasically funded their next half dozen court cases,” Beech wrote inan e-mail message from his BlackBerry.

The NTP patents involved in the case have been found invalid bythe U.S. Patent and Trademark Office and are still in the midst ofwhat may be a lengthy re-examination process. Balsillie said RIMdid 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 soundslike a prudent thing for the company. … It’s not a good feelingto write this check for patents that will not survive for sure,” hesaid.

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

“Proprietary closed-loop systems present some benefits, but theyalso present a certain atmosphere of risk in the marketplace,” Egansaid. 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 BlackBerrydevices play a “crucial role” in important industries such ashospitals, utilities and banks.

NTP lawyers said RIM had continued to use NTP’s technology eventhough a jury ruled for NTP in its claim for wireless e-mailpatents in August 2003.

In August 2003, the U.S. District Court for the Eastern Districtof 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 FederalCircuit rejected an earlier injunction issued by the Virginiadistrict court. The district court issued the original injunctionin August 2003 but stayed the ruling pending appeal. (Additionalreporting by Grant Gross in Washington and Robert McMillan andElizabeth Montalbano in San Francisco).

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