December 1, 2005
Judge May Halt BlackBerry Service in U.S.
RICHMOND, Va. -- A federal judge has rejected Research In Motion Ltd.'s effort to settle a patent case and moved a step closer to reissuing an injunction that threatens BlackBerry e-mail service in the United States.
U.S. District Judge James R. Spencer on Wednesday turned down the wireless device maker's bid to enforce a preliminary $450 million settlement reached earlier this year with NTP Inc., a small firm that has convinced a jury that BlackBerry infringes on its patents for wireless communication.
In another blow to RIM, Spencer also turned down the Canadian company's request to delay the case pending final word from the U.S. patent office, which has preliminarily rejected the patents at the heart of the lawsuit.
With those issues out of the way, Spencer next plans to address damages and, once again, an injunction would force RIM to halt BlackBerry service in the United States. After a jury decided against RIM in 2002, Spencer held off on the injunction pending appeals.
Analysts and industry observers say RIM, based in Waterloo, Ontario, will likely be forced to settle the lawsuit for as much as $1 billion. Still, some also say RIM's hands aren't completely tied; it's also somewhat unlikely NTP would want to force a shutdown, a scenario that could leave it with a smaller payoff.
"I think there's going to be a settlement, and it's just a matter of how much is to be coerced out of them," said Rod Thompson, a San Francisco patent attorney.
In a statement, RIM said it has been preparing technology that would keep its service running in the United States, where most of its 3.65 million BlackBerry customers are based. But analysts, however, are skeptical about the effectiveness of any workaround.
James H. Wallace Jr., an attorney for Arlington, Va.-based NTP, said he hoped the judge's decisions would "bring the parties back to the table."
However, RIM's statement gave no indication it was ready to compromise, saying it would proceed with plans to appeal an earlier court decision to the U.S. Supreme Court.
"While further review by the Supreme Court is generally uncommon, RIM continues to believe this case raises significant national and international issues warranting further appellate review."
RIM says an injunction would be inappropriate for a number of reasons, including the patent office proceedings, public interest concerns, and the Supreme Court's recent decision to hear an appeal in the eBay Inc. (EBAY) v. MercExchange case that addresses the use of injunctions in patent suits.
In the meantime, RIM's customers, some of whom warmly refer to their devices as CrackBerries for their addictive use, are getting worried.
Citigroup analyst Daryl Armstrong said an injunction ruling could lead some users to move ahead with contingency plans.
Among those concerned is the U.S. government, which has thousands of employees with BlackBerries. While NTP has promised that the injunction wouldn't apply to government and emergency employees in the United States, the Justice Department argued in a court filing that RIM might have difficulty pinpointing its workers.
NTP has responded that wireless carriers would be able to identify their government users with ease.
Shares of RIM fell $3.79, or about 5.8 percent, to $61.13 in Wednesday's trading. The stock has tumbled 41 percent over the past year after peaking at $103.56 last December.
Wednesday's developments also appeared to boost the shares of Palm Inc. (PALM), which makes competing handheld devices including the popular Treo. The stock rose $1.61, or 6 percent, to close at $28.38 on the Nasdaq Stock Market.
NTP was co-founded by Thomas J. Campana Jr., a Chicago-area engineer who in 1990 created a system to send e-mails between computers and wireless devices. The BlackBerry hit the market in the late 1990s, becoming a hit with lawyers and businesspeople who wanted to check e-mails away from their offices and home computers.
But NTP's founders noticed similarities between their technology and the BlackBerry. In 2001, they filed suit, and a year later, a federal jury in Richmond agreed that RIM had infringed on NTP's patents.
The jury awarded the smaller company 5.7 percent of U.S. BlackBerry sales, though Spencer later increased that rate to 8.55 percent. The amount of damages and fees now exceeds $200 million and grows along with the BlackBerry's popularity.