BlackBerry saved

Research In Motion and NTP have agreed to settle the patent dispute over the BlackBerry device for US$612.5 million, the companies announced in a press release on Friday. Under the agreement, RIM will receive a licence to NTP's patents going forward, they said.

The agreement involves a one-time payment to NTP, RIM co-CEO Jim Balsillie said during a Friday afternoon conference call. Even if the US Patent and Trademark Office eventually overturns NTP's patents, NTP will not have to repay the US$612.5 million. "There is no provision for the PTO re-exam. This is a full and final settlement," he said.

"It's very important we got the scope we wanted. The scope relates to all of NTP's patents and relates to all of RIM's products," Balsillie added. "We really did this to give certainty, and calmness and comfort to our ecosystem."

RIM and NTP briefly agreed to settle the case for US$450 million in March of 2005, but that deal later fell through. RIM thought the companies had come to a final agreement, but NTP believed the matter had never been finalised, and the litigation continued.

Dennis Kavelman, RIM's chief financial officer, said RIM was feeling the effects of enterprise customers waiting for resolution in the case before expanding their current BlackBerry usage or upgrading to new hardware and software.

Balsillie expressed his frustration with Judge James Spencer's inclination to move forward with the case and not wait for the USPTO to complete its re-exam. "It was surprising and disappointing that the court wasn't going to put much weight on the final office actions."

"It's a lot of money for patents that will not survive, for sure, but that doesn't do us any good if there's a court that doesn't wait."

The agreement comes one week after the companies argued over whether Judge Spencer should impose an injunction on the sale and support of BlackBerry devices in the US. During that hearing, Spencer expressed his frustration that the companies hadn't settled their dispute, and promised to rule promptly on the injunction.

Patent lawyers agreed that strong words from Judge Spencer last week hinted at an injunction in RIM's future and played a major role in the speedy resolution.

The judge "did say that although he is not issuing an injunction today, RIM shouldn't take any comfort in thinking he'd never issue an injunction, so he kept that option open and was strongly encouraging the parties to settle," said George Chen, a patent attorney with the firm Bryan Cave in Phoenix, Ariz.

The judge's ready acceptance of the parties' settlement and dismissal of their case on Friday "is indicative of the fact that he was sitting on an injunction, ready to go," said Paul Andre, an intellectual property partner at Perkins Coie in Silicon Valley. In situations where an injunction appears imminent and the patent holder is willing to grant licenses, it's fairly standard for parties to settle, he said.

Trading in RIM stock was halted prior to the announcement. When the shares started trading again in the after-hours market they immediately jumped US$10.43, or 14.5 percent, to US$82.35.

Months of uncertainty regarding the BlackBerry took a financial toll on RIM, the company said in Friday's press release. RIM said after trading Friday that sales for its fourth fiscal quarter, which ends Saturday, would be in the range of US$550 million to $560 million -- lower than the $590 million to $620 million guidance the company had provided in December. But sales were still well above RIM's US$404.8 million total for the same quarter a year ago.

Earnings per share, excluding costs related to the NTP litigation, were expected to be between 64 cents and 66 cents. The company had forecast earnings per share of 76 cents to 81 cents.

Net subscriber accounts for the quarter were expected to be in the range of 620,000 to 630,000, well below the 700,000 to 750,000 forecast in December.

RIM had been fighting to limit the damage from a 2002 jury verdict that found that it infringed on several of NTP's patents related to mobile e-mail communications.

In 2003, Spencer imposed an injunction on the sale and support of BlackBerry devices in the United States, but he stayed that injunction, pending the appeals process. Spencer also increased the damages awarded by a jury as a result of misconduct by RIM's lawyers during the trial and ordered the company to put 8.55 percent of its quarterly revenue into an escrow account, pending the appeals process.

A federal appeals court lifted the injunction and sent the case back to a lower court in 2004, though it agreed that most of NTP's patent claims are infringed by the BlackBerry system. With that basic question of infringement appearing to be settled, the debate turned to two other areas: the patent re-examination process and RIM's "work-around."

In recent weeks, the prospect of a BlackBerry shutdown had loyal users of the device fretting about the prospect of losing their mobile e-mail service.

"We have been informed that the case was amicably settled and we are pleased that the resolution reached will preserve the public interest in the use of RIM's technology," said Cynthia Magnuson, a US Department of Justice spokeswoman. The department had argued before the court that a BlackBerry shutoff would be devastating to government users.

On Capitol Hill, stomping grounds for hundreds of 'Berry-dependent politicians and staffers, the details of the settlement had not yet been digested but drew initial positive reactions.

"If this means that service will not be disrupted in any way, shape or form, then obviously, we're very happy that's the case," said John Brandt, communications director for the US House of Representatives Administration Committee, which oversaw the purchase of BlackBerrys for all 435 House members back in 2001.

The news was welcome in other quarters as well.

"Those of us who rely on instant access to our corporate e-mail are breathing a huge sigh of relief -- our significant others, maybe not," said Frank Gillman, chief technology officer at the Los Angeles law firm Allen Matkins.

The settlement announcement was no surprise to Michael Sacksteder, a patent litigation partner at Fenwick & West in San Francisco. "When you are terrified and hopeful at the same time, and you're going to find out one way or another soon, that's when parties tend to resolve what have seemed to be unresolvable situations," he said.

Sacksteder said he thought NTP would continue to pursue appeals of the patents for which the US Patent and Trademark Office recently issued "final office actions" rejecting their validity. "The way that the procedure works is that after time expires for appealing under the statute, the Patent Office issues a re-exam certificate that says your claims have been cancelled and you don't have a patent anymore, and I'm sure that they don't want that to happen," he said, noting that "there might be other targets" for infringement claims from the company.

A representative for NTP declined to comment beyond a press release distributed by the company Friday. "NTP is pleased the issue has been resolved and looks forward to enhancing its businesses," Donald Stout, NTP's co-founder, said in the release.

"It's better late than never," said Rob Enderle, principal analyst with The Enderle Group. "But their customer base is not going to forgive them for RIM turning them into cannon fodder during the process."

"Bottom line, this is very good news for BlackBerry users," said Tim Bajarin, president of Creative Strategies. "It means their service will continue, and it allows RIM to continue going after corporate business."