RIM settlement lifts cloud over BlackBerry’s future

Research In Motion’s multi-million dollar settlement of NTP’s patent infringement suit may allow the Blackberry maker to move forward, but the resolution also sets a precedent for similar suits to follow, legal and industry experts

said Wednesday.

After a hard-fought three-year battle in the U.S. courts, RIM announced it agreed to pay holding company NTP US$450 million in final and full settlement of all claims to date against the Waterloo, Ont.-based firm and upfront licencing fees.

The amount includes US$137 million held in escrow. The remaining US$313 million will be expensed in the fourth quarter, according to a press release statement issued Wednesday morning. The statement went on to say that further comment and details will not be released until RIM’s Q4 conference call on April 5, pending completion of the agreement.

The resolution in part allows RIM and its partners to sell its products, services and infrastructure free from any claim by NTP or any claims that NTP may have against wireless carriers, ISV partners or third party devices that use RIM’s BlackBerry Connect or BlackBerry Built-In technology.

This means, for example, that RIM can move ahead more quickly with partners like Nokia, which started licensing BlackBerry software in 2002, said Mark Quigley, research director at the Yankee Group’s office in Ottawa.

“Now Nokia doesn’t have to worry about a significant trademark hurdles and patent hurdles that had not been satisfactorily addressed,” said Quigley. “Consider the number of Nokia devices in the marketplace and compare it to the number of RIM devices: it’s a significantly higher percentage of end users that they then have the opportunity to go after.”

A 2004 Yankee Group survey indicated that 45 per cent of respondents preferred RIM over IBM and Good Technology as a preferred mobile e-mail service provider. Good Technology, for example, held three per cent market share.

“The fact (RIM) has been able to penetrate into that market that deeply is interesting because to date they have tied the software together with the device,” said Quigley.

Legal experts — and seemingly investors— agree that RIM’s decision was most likely the right one. Following the announcement, RIM’s stock price on the Toronto Stock Exchange jumped nearly 18 per cent from $80 per share on Tuesday, March 15 to $96 on Wednesday.

“NTP was quite prepared to fight this as hard as it took,” said Simon Chester, partner at Toronto-based law firm Heenan Blaikie. “While patent litigation was hanging out there, there was a cloud on the RIM stock. Now that cloud has been removed and everyone can go back to work.”

Likewise, Martin Langlois partner at international law firm Stikeman Elliot, said the settlement allows RIM to get past this dark chapter in its history.

“It’s been something that’s been hanging over their heads for so long that people are just happy it’s over with and allow RIM to move ahead,” said Martin Langlois.

John McKeown, partner at Toronto law firm Cassels Brock, added the resolution is a good business decision on RIM’s part.

“If they’ve got a paid up license they are in effect paying all license fees up front once and for all,” said McKeown, adding that companies normally pay license fees on a monthly or quarterly basis. “That could be quite a good deal.”

McKeown added the settlement is not unreasonable given the magnitude of the problem that RIM faced.

“If the litigation carried on, eventually the injunction was going to be in place and they wouldn’t be in business in the U.S.,” he said, referring to an injunction that would block RIM from the North American Market. In December, the Court of Appeal for the Federal Circuit decision that ruled RIM infringed on NTP’s patents. The ruling reversed an injunction from a Richmond, Va. trial court’s decision and passed the case back to the district court.

Roger Hughes, partner at Toronto law firm Sim & McBurney, which specializes in patent and trademark law, said RIM didn’t have much of a chance anyway as the U.S. courts are a crapshoot when it comes to patent law.

“U.S. jury trials on patent matters is just like going to Vegas,” said Hughes. “That’s why you find a lot of these people do these patent trials because what’s your downside.”

Despite the upsides, Quigley and others point out that the settlement could be used as a precedent for similar lawsuits.

“The fact that it’s a large settlement may encourage others to opportunistically to take a look and you even may see some frivolous suits as a result,” said Quigley. “It’s an awful lot of money and some folks opportunistically may take a shot at it.”

Similarly, Hughes said RIM’s a mark now. “It’s just sort of paint a target on your head and all the opportunists in the world are going to think that they’re a soft touch. That’s the problem when you make these publicized settlements.”

Langlois added: “Unfortunately this decision will be out there and stand as a precedent until somebody goes back and fights that battle.”

Comment: info@itbusiness.ca

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