TELECOM Digest OnLine - Sorted: RIM Ruling Risks US Blackberry Shutdown

RIM Ruling Risks US Blackberry Shutdown

Jeffrey Hodgson (reuters@telecom-digest.org)
Sat, 22 Oct 2005 12:05:31 -0500

By Jeffrey Hodgson

Research in Motion Ltd. moved closer on Friday to an injunction that
could halt U.S. sales of its popular BlackBerry wireless device after
it lost a bid to suspend a patent case against it.

The U.S. Court of Appeals for the Federal Circuit denied RIM's motion
to stay the case until the U.S. Supreme Court decided whether to
accept RIM's request for an appeal.

The case goes back to 2002, when patent holding company NTP
successfully sued RIM in a lower court. It won an injunction in 2003
to halt U.S. sales of the BlackBerry and shut down its service,
although that ruling was stayed pending appeal.

The appeals court scaled back the initial ruling, but still concluded
that RIM infringed on NTP patents. RIM shares sank earlier this month
when the appeals court refused to reconsider the matter further.

The case will now move back to the U.S. District Court for the Eastern
District of Virginia where it was first heard by Judge James Spencer.

NTP said on Friday it will ask the court to confirm the injunction. It
said an injunction would not affect BlackBerry products used by
U.S. federal, state, or local governments, where the wireless email
device has become increasingly popular.

RIM said it believed an injunction was inappropriate but added: "It
ultimately will be up to the courts to decide these matters and there
can never be an assurance of a favorable outcome in any litigation."

The Waterloo, Ontario-based firm will also ask the U.S. Supreme Court
to suspend proceedings pending a possible review, although it
acknowledged this was "generally uncommon."

FAILED SETTLEMENT

RIM and NTP reached a $450 million settlement on the dispute in March,
but the deal fell apart in June. RIM wants the lower court to enforce
the agreement.

Canaccord Capital analyst Peter Misek said there was now a 50 percent
chance RIM and NTP may reach a settlement of between $450 million to
$1 billion. He said there was a 20 percent chance that an injunction
is issued.

"We believe the impact of an injunction to RIM would be severe. We
would guess that the stock could fall $20 to $50 per share," Misek
said in a note to clients.

RIM shares closed down 3.6 percent, or $2.32, at $62.34 on Nasdaq on
volume of more than 13.2 million. In Toronto, the stock lost C$1.75 to
close at C$74.

American Technology Research analyst Rob Sanderson said the latest
ruling should not come as a surprise.

"What RIM was asking was to not move this case forward until the
Supreme Court can decide. That request is almost never granted, so
it's not unexpected," he said.

He said decisions for the lower court judge will include whether to
reconfirm the injunction, whether to stay it pending review, and
whether the earlier settlement was valid.

Sanderson said RIM may have helped its position by showing it was
willing to settle, as courts prefer to see settlements in such cases.

He also noted that the U.S. Patent and Trademark Office recently
finished reexamining eight NTP patents and issued initial rulings
rejecting 100 percent of the claims.

Those rulings are not final and NTP has said it plans to see the full
reexamination process through, which could take years. Some analysts
have said that until that process is complete, the patents remain
valid in the eyes of the court.

Copyright 2005 Reuters Limited.

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