February 24, 2006

Judge Delays BlackBerry Cutoff Decision

By Peter Kaplan and John Crawley

RICHMOND, Virginia -- A U.S. judge on Friday stopped short of ordering an immediate shutdown of millions of BlackBerry devices, but reminded manufacturer Research In Motion Ltd. it had already been found to have infringed the patents of NTP Inc.

U.S. District Judge James Spencer's delay in deciding on an injunction increased the pressure for an out-of-court settlement between the parties, analysts said.

"They avoided the injunction and second of all it looks like the judge is pushing toward a precipitated settlement," analyst Kona Shio of Conscius Capital Partners said.

The delay sent RIM shares soaring, but the judge expressed skepticism about RIM's argument that a shutdown of the portable e-mail devices would hobble critical public services.

At a nearly four-hour hearing, Spencer noted that RIM had told investors that its software work-around would avoid disruptions to its more than 3 million U.S. users.

Spencer said he would issue a decision on an injunction "as soon as reasonably possible" but gave no indication of when.

But he said there was no escaping that RIM had been found to be infringing on NTP's patents. "The simple truth, the reality of the jury verdict has not changed."

Spencer also said RIM and NTP should have settled. They reached a tentative settlement of $450 million early last year, but the deal fell apart.

The key question now, say observers, is whether the two sides will strike an agreement.

"Is that going to happen? I think if they have an opportunity to do that at reasonable terms they will," American Technology Research analyst Rob Sanderson said.

Martin Glick, a patent lawyer for RIM, said the company was still in active negotiations with privately-held NTP.

"Judges always try to find ways to urge the parties to reach a resolution," he told reporters outside of court.

NTP said in a statement it had tried to meet with RIM this week. "We want all BlackBerry users to know that we have repeatedly attempted to settle this issue with RIM."

RIM shares rose as much as 12.7 percent to $78.38 before trimming their gains to $73.81, up 6.16 percent on Nasdaq in mid-afternoon trading.

Canada-based RIM has been locked in a court battle for more than four years with privately held NTP which filed suit late in 2001. A jury found in favor of NTP in 2002.

Earlier on Friday, NTP asked Spencer for an injunction against U.S. BlackBerry service with a 30-day grace period for users to find alternative service and sought an immediate imposition of $126 million in damages for past infringement.

RIM countered by arguing a shutdown would be against the public interest.

A lawyer for the U.S. Justice Department asked Spencer to exempt all government employees and contractors from any shutdown and sought a 90-day grace period for all users.

Some users are so reliant on the gadgets that they have dubbed them "CrackBerries."

Among the alternatives to the BlackBerry is the Treo 650 smartphone made by computer and smartphone maker Palm Inc..

Others who could cash in on a BlackBerry blackout are Nokia, Samsung Electronics and Hewlett-Packard Co., which offer e-mail capable mobile phones.

RIM has challenged the validity of the NTP patents in an administrative proceeding at the U.S. Patent and Trademark Office but the process is lengthy and NTP could appeal any final decision against it back to the courts.

On Wednesday the patent office issued decisions rejecting two of the five patents at issue in the case.