Optical/IP Networks

RIM Ruling Foretells Changes

A federal judge's ruling Wednesday invalidating the settlement between Research In Motion Ltd. (RIM) (Nasdaq: RIMM; Toronto: RIM) and patent-holder NTP Inc. (no Website) could herald a major shift in the world of wireless email, which is dominated -- at least in North America -- by the Canadian maker of the BlackBerry device, and hasten the arrival of products built around standard operating systems.

In the short-term, NTP's long-running patent dispute with RIM could theoretically shut down the BlackBerry service, throwing Wall Street, not to mention the federal government, into disarray. For hardcore users of the device, the ongoing patent dispute has been akin to watching a wayward iceberg from the deck of a cruise ship.

"I've been following this for almost five years now, and every 18 months they say they're going to shut it down," notes Maria Krueger, assistant VP for information services at Stephens Inc., a Little Rock-based financial services firm with around 255 employees using company-supplied BlackBerries. “But when I talk to my contacts at [carriers] Cingular and Alltel, they're telling us that we don't need to worry about it. RIM is not going to be allowed to shut down. So I'm not worried 'til something actually happens."

Indeed, the federal government has filed papers in the NTP-RIM suit arguing that the BlackBerry service is essential to government functioning and therefore cannot be allowed to shut down. And even if U.S. District Judge James R. Spencer eventually rules against RIM the U.S. Patent and Technology Office has already issued a preliminary judgment that invalidates all eight of the NTP patents -- which, once it becomes final, could make the case before Judge Spencer moot. What's more, any decision against RIM would likely involve a phase-out period so that enterprise users could shift to a new wireless email platform – or so that RIM could implement the work-around solution it says it has already developed.

Whatever happens in the NTP litigation, BlackBerries, which have rapidly gone from being pricey status symbols to essential tools for thousands of mobile executives and salespeople, are facing increased competition from devices that use more standardized operating systems, as opposed to RIM's proprietary software.

"We see this as part of a fundamental shift in the way computing is done by enterprises," says Danny Shader, CEO of Good Technology Inc., which provides software for a range of wireless email devices. "It will be a 10-year shift beyond wireless email toward very powerful enterprise handheld computing. Anything you now do on your laptop, you will want to do on your handheld."

Motorola Inc. (NYSE: MOT), Nokia Corp. (NYSE: NOK), and Palm Inc. are all planning to release handheld wireless email devices in the first half of 2006, and both Nokia and Microsoft Corp. (Nasdaq: MSFT) are virtually giving away wireless access to business emails. Adverse legal news for RIM may simply hasten an inevitable transition, as companies choose a non-proprietary solution over RIM's elegant-but-exclusive technology.

The seeming ubiquity of BlackBerries notwithstanding, only around 1 percent of the world's 650 million corporate email accounts are currently mobilized using BlackBerry or similar systems. As the market grows, competition will increase, and the market will get more fragmented as it grows, says Gartner/Dataquest principal analyst Todd Kort. "Nokia will take their slice, Motorola will take their slice. RIM's business will continue to grow, but probably not at the phenomenal rate of the last three years."

Earlier this month, RIM revised downward its projections for the third quarter, saying subscriber growth would be around 8 percent lower than previous estimates. The company blamed the drop on delayed releases for its new 8700 and 7130 series.

Ultimately, the NTP-RIM litigation will be seen as a sideshow in a larger, and very familiar, technological arc, according to Shader. "It's like every other kind of computing," he says. "It starts out proprietary, but corporations want to get to standard operating systems and tools. It's not so much the litigation driving that shift -- it's the natural order of things."

— Richard Martin, Senior Editor, Unstrung

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