August 2, 2005

U.S. Court Scales Back Patent Ruling Against RIM

WASHINGTON/VANCOUVER, British Columbia -- A U.S. appeals court scaled back a December ruling on Tuesday that had upheld patent infringement charges against Research In Motion Ltd., the Canadian company that makes the BlackBerry wireless e-mail device.

Shares of the Waterloo, Ontario-based company moved higher following the news, amid hopes the decision could stretch out legal proceedings and delay a potential court injunction that would halt U.S. BlackBerry sales.

But RIM's opponent in the case, U.S. patent holding company NTP, said it believes its case remains strong and that it still intends to pursue an injunction.

NTP successfully sued RIM in 2002 for patent infringement and later won an injunction, stayed pending appeal, to halt U.S. sales of RIM's popular BlackBerry.

In the latest decision, the court reversed some additional infringement findings made by a lower court against RIM and again sent it back to a lower court for further review.

The appeals court overturned the lower court's finding that RIM had infringed NTP Inc.'s "method" patents, but reaffirmed the infringement of patents of the e-mail "system."

NTP lawyer James Wallace said the appeals court decision had struck down the most "controversial" infringement claims in the case but still left NTP with plenty of grounds to prevail.

"All we need is just one claim to shut them down," Wallace said.

By removing the controversial "method" claims, Wallace said, the decision will make it more difficult for RIM to build a case for any further appeals.

A spokeswoman for RIM said the company had no immediate comment.

As in its previous decision, the appeals court put aside any enforcement action against RIM, sending it back to the lower court for further proceedings.

The lower court judge, U.S. District Judge James Spencer, can either order an injunction against RIM or force both sides to honor the earlier settlement agreement, Wallace said.

RIM and NTP reached a tentative agreement in March to settle the suit for $450 million, but the deal fell apart in early June.

Wallace declined to say whether settlement talks with RIM were back on.

Shares of RIM rose following the news, climbing $2.78, or about 4 percent, to $73.08 on Nasdaq on a volume of more than 16 million.

In Toronto, the shares were up C$2.40, or 2.8 percent, at C$88.98, after sliding as low as C$82.68 earlier in the day.

One analyst said the ruling appeared to be modestly positive for RIM because it appeared to buy them more time.

"All those things that could be very damaging potentially to RIM have been slowed," said Rob Sanderson, an analyst with American Technology Research. "On first glance it looks like this. We're still going through the document."

Another complication in the case is that since the original ruling, the U.S. patent office has effectively struck down many of the patents held by NTP. But NTP plans to appeal the patent office rulings, a process that could take years.

($1=$1.21 Canadian)


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