RIM Wins Reprieve

BlackBerry won a crucial reprieve today in the bitter patent dispute with NTP Software Inc. in a Washington courtroom.

U.S. District Judge James R. Spencer declined to issue an injunction that could have shut down the popular mobile email service Blackberry, and instead admonished RIM for not reaching a settlement and urged the two sides to reach an agreement.

The judge's inaction appears to have validated RIM's high-stakes gamble in the case. Still, he let RIM lawyers and executives know that an injunction could be forthcoming if there's no settlement, warning that any legal remedy would be "imperfect" for RIM's business.

Even as Spencer began hearing from NTP this morning, the U.S. Patent and Trademark Office issued a final rejection of one of the five NTP patents at issue. All five patents have been ruled invalid by the Patent Office in preliminary decisions; today's was the second to be officially set aside. Judge Spencer had previously said that he will not wait for a final decision from the Patent Office to make his own ruling, but as each NTP patent is struck down, the case of the Alexandria, Va., company, which was created to hold and enforce "push" email patent rights from the work of software developer Thomas Campana, has looked weaker.

"The Judge was able to hear today how an injunction would severely damage the public interest," said RIM co-CEO Jim Balsillie after the non-decision, "and that's a very important consideration in deciding upon any injunction."

NTP sued RIM for patent infringement in 2001, and RIM's appeals have been rejected by every federal court that has reviewed the case. A settlement in the case was reached early in 2005 but has since been set aside by Judge Spencer. (See RIM Ruling Foretells Changes.)

Many observers praised the judge for not acting intemperately in the face of the Patent Office's rulings against NTP's intellectual property, which lies at the heart of the case.

"I got a whole new respect for the judge today - despite showing impatience at times, he is clearly saying to RIM and NTP, 'Children, sit down, play nice and work this out quickly or I am going to give you both a time out," says Bob Egan, principal wireless analyst at Tower Group. "This judge, has the potential to shape history because of this case, but he clearly does not want to if he does not have to."

Even if RIM avoids losing the actual case, however, the litigation has cost it some market dominance.

"It's unfortuante that millions of users just received another dose of uncertainty today," says Danny Shader, CEO of RIM competitor Good Technology. "This litigation is bad for customers.

"But regardless of what ultimately happens, the longer this drags on, the more customers realize how risky it is to put all their eggs in one technological basket."

Indeed, before the judge's decision, many companies were grappling with the prospect of having to find alternative solutions to the Blackberry devices.

"If we had to switch to Treos, I would expect a cost of $650 to $850 per user, between hardware, software, configuration, and my time as well," says Rod Phillips, senior engineer at Independent Network Consultants in Crofton, Md.

The wider economic effect of a Blackberry shutdown, particularly on the financial sector, could be devastating. RIM has issued estimates saying that the slowdown effect on the U.S. economy could total $25 billion, a figure that NTP lawyer James Wallace disputed in court this morning.

Adds Independent Network Consultants president David Russo: "In the short run, depending on how it all plays out, it could be disruptive for our clients, and for millions of other folks."

"Twenty-five billion frankly doesn't surprise me," says Info-Tech Research Group senior analyst Carmi Levy, who has followed the RIM patent case since its onset. "In the U.S. alone, right now there are about 3 million users who would potentially be affected. One million of those are government and law-enforcement workers who would presumably be exempt -- so, say, 2 million people who are essentially addicted to their Blackberries, and without them their business would basically evaporate."

Saying that a shutdown of the mobile email service could cripple the economy, Balsillie, speaking at a technology conference on Thursday, repeated charges that NTP has acted in bad faith in settlement negotiations, demanding terms that would essentially take over RIM's business.

In remarks after today's hearing, he again struck a confident, combative tone: "[The Patent Office] rulings vindicate RIM's position and prove that the patents should have never been issued in the first place. We're looking forward to the eventual decision, and we're feeling comfortable with our contingency plans in any event."

In the court case, RIM has gambled that by stringing out its appeals, the court will hold off on its decision until the Patent Office review of the NTP-held patents is complete.

That strategy appears to have worked, for now.

"Judge Spencer needs to pay attention to what's happening on the patent side," adds InfoTech's Levy, "because this could really determine the future of the wireless sector. This is not just a business dispute between two companies: A shutdown of RIM would have huge economic ramifications that could be extremely damaging to the U.S. economy at a time when our competitiveness on a global scale is already in question."

— Richard Martin, Senior Editor, Unstrung

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