Supreme Court Rejects RIM

The Supreme Court today rejected an appeal by BlackBerry in its ongoing court case with NTP over the patents behind the Blackberry mobile email service. The ruling, which was not unexpected, leaves RIM with few other legal options to avoid a shutdown of its popular email service.

Officially, the ruling came as a denial of a "petition for a writ of certiorari." The justices declined without comment to consider RIM's appeal to overturn rulings from two lower courts. The company had argued that U.S. patent law should not cover the Blackberry service since RIM's servers are located in Canada.

RIM now has two options: hold out and wait for a final ruling from the U.S. Patent and Trademark Office, which has issued preliminary findings that invalidate the NTP patents; or settle with NTP for a sum that could reach hundreds of millions of dollars. (See Feds Hit NTP Patents, Again.) The company has reportedly placed almost $250 million in an escrow account to cover an eventual settlement with NTP.

"RIM has consistently acknowledged that Supreme Court review is granted in only a small percentage of cases and we were not banking on Supreme Court review," said Mark Guibert, VP of corporate marketing at RIM, in a statement. "The Patent Office continues its reexaminations with special dispatch, RIM's legal arguments for the District Court remain strong and our software workaround designs remain a solid contingency."

The ruling followed another contentious week in the long-running patent dispute between RIM and NTP, a patent-holding company founded by Thomas Campana, who developed a wireless communications system in the late 1980s. NTP sued RIM for patent infringement in 2001 and won a 2002 judgment that awarded the company $54 million and ordered RIM to shut down its service. The two firms reached a settlement in early 2005, but that agreement was later set aside, and U.S. District Judge James R. Spencer has issued a series of rulings in the case adverse to RIM, making it clear that he will not wait for the Patent Office's final ruling before deciding the patent case. (See Users in Blackberry Jam.)

Last week, NTP filed papers saying that it would support a 30-day grace period in the event of a Blackberry shutdown, to allow users to switch to another service, and that it would agree to exempt government users of Blackberry. RIM responded, as it has in the past, that it has a workaround solution that would allow users to continue using their Blackberries with no infringement of the NTP-held patents. (See Blackberry Users Cling Tightly.) Quoted in The Wall Street Journal last week, RIM CEO Jim Balsillie said that the NTP suit "is all about greed. It's about a willingness to abuse the overburdened patent system for personal gain."

Along with the denial of RIM's appeal, the Supreme Court also allowed "friend-of-the-court" briefs to be filed in support of RIM from the Canadian government, the Canadian Chamber of Commerce, and Intel Corp. (Nasdaq: INTC), which once owned a stake in RIM and which reportedly plans to provide a mobile-phone processor in upcoming versions of the Blackberry.

As of Noon Eastern time, RIM shares were down 1.7 percent in heavy trading on the Nasdaq.

— Richard Martin, Senior Editor, Unstrung

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