Research In Motion Ltd. dodged a bullet as a U.S. District Court judge stopped short of ordering an immediate shutdown in service to U.S. BlackBerry users last Friday.
Judge James Spencer rebuked both RIM and patent-holder NTP Inc. for failing to settle their dispute, saying he plans to decide later whether to issue an injunction that would kill service to BlackBerry subscribers. Spencer added, however, that RIM had clearly infringed on NTP’s patents, and said he probably would rule first on how much money NTP is owed in damages.
NTP asked Spencer during the hearing to order RIM to pay $126 million for infringing on its patents.
“We presented a very strong case,” the Washington-based company crowed in a statement released following Friday’s proceeding, “and believe, based on the closing remarks of Judge Spencer, that the court was receptive to the merits of our arguments.”
Shares of RIM jumped $5.80, or 8 percent, on news of Spencer’s announcement. But the Waterloo, Ontario-based developer still faces a shutdown that could come any day, forcing it to deploy workaround technology that skirts NTP’s patents but likely would be difficult and costly to implement.
In a prepared statement released earlier this month, RIM claimed the workaround would “remain invisible to users and maintain the existing platform benefits” for network operators and IT staffers. But the company seemed to backpedal Friday, telling Spencer the new software would require 2 million man-hours to implement.
The surprising concession is sure to raise concerns among BlackBerry users and businesses shopping for wireless e-mail services. RIM’s stranglehold on the U.S. market has loosened in recent months as several smaller competitors have exploited users’ fears of a service shutdown due to the 4-year-old legal battle.
And the blackout could come any day. Spencer, without laying out a timetable, warned the companies that he would step in if they failed to come to terms on their own.
“My reaction is that he’s given all indications that he will ultimately issue an injunction,” said Wesley Mueller, a patent attorney with the intellectual property firm Leydig, Voit & Mayer Ltd. “I think what he’s doing in his delay in ultimately deciding to issue the injunction is trying to give the parties time to work it out.”
Mueller has followed the RIM case but does not represent either party.
Such a settlement would surely cost RIM hundreds of millions of dollars. The companies had settled on a $450 million payoff last year only to have the deal fall apart; recent reports indicate NTP had asked for $1 billion to settle the matter as recently as late last year.
Given such an expensive option, RIM appears to work to bide as much time as possible while the U.S. Patent and Trademark Office reviews NTP’s patents. The patent office Friday issued a final rejection of the second of three patents at the heart of the case, and has signaled it plans to reject the third patent on final review.
Spencer has indicated he won’t wait for a final decision from the patent office, citing possible NTP appeals that could take years to resolve. While it seems likely the process ultimately will nullify NTP’s claims, the legal battle between the two companies almost certainly will have run its course by the time the patent issues are resolved.
Any settlement with NTP will be final, and likely won’t be contingent on the outcome of the patent office reviews. Unless RIM can find a more efficient workaround, the market leader may need to dig deep to make its 4-year-old headache go away. And the BlackBerry maker would have no recourse if it settles only to have the patents ultimately invalidated, Mueller said.
“My read on Spencer’s take is that RIM had its shot at litigating the case fully in district court, it went through a jury trial, and the decision (in favor of NTP) was affirmed on appeal,” Mueller said. “I don’t think he’s going to stay an injunction pending the outcome of the patent office review, although he may change his mind.”
