BlackBerry maker Research In Motion Ltd. suffered a somewhat mixed ruling in its legal battle with patent holding company NTP Inc. A U.S. federal appeals court ruling affirmed 11 of NTP’s 16 claims against RIM-a potentially serious blow for the device maker-but also sent back the remaining five claims to a Virginia district court for reconsideration.
The ruling has no immediate affect on RIM or NTP, although it further limits RIM’s options for victory. NTP has won a series of legal skirmishes since a jury ruled against RIM in 2002.
The ruling took investors on a wild ride Tuesday. RIM’s stock shot up from around $90 per share to almost $105 per share on news of a decision in the case. Nasdaq then halted trading to give investors a chance to review the news. When trading resumed, RIM’s stock dropped to around $85 per share at the close of trading. On Wednesday the company’s stock was trading at around $82 per share.
Both NTP and RIM found parts of the ruling to applaud. NTP pointed out that the appeals court “unanimously affirmed the prior jury verdict” and said it was confident that it would win a favorable ruling on the remaining five claims. RIM on the other hand pointed out that the U.S. appeals court “vacated” the district court’s judgement as well as its injunction. The district court last year issued an injunction on the sale of RIM’s products-which would have forced the company to turn off its BlackBerry sales and service-but also stayed the injunction pending an appeal. However, the threat of an injunction still looms as a final outcome.
RIM also pointed out that the U.S. Patent and Trademark Office is re-examining NTP’s patents, a move that creates a further layer of ambiguity to an already complicated case. The patent office could take another year to make a ruling on the patents, and it’s unclear what effect the ruling would have on the outcome of the case.
Observers agree that an injunction is highly unlikely as it wouldn’t benefit RIM or NTP-if RIM ultimately loses, it would likely sign a licensing agreement for the use of NTP’s patents. The district court’s ruling sets the royalty rate at 8.55 percent-higher than most royalty arraignments in the wireless industry.
However, the case could stretch beyond the confines of the RIM vs. NTP fight. Those in the industry have said that NTP’s patents are so broad that they could apply to a variety of wireless e-mail offerings, which would cause a major stir in a market built around the service.
Investment firms cautioned patience on the case, which could still take years to ultimately resolve. Goldman Sachs reiterated its neutral rating, while ThinkEquity said it remains bullish on the company. Both firms make a market in RIM securities.
