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BlackBerry Deal Averts Service Shutdown

March 3, 2006

TORONTO (Reuters) – A threatened shutdown of the BlackBerry wireless e-mail service in the United States was averted on Friday when BlackBerry maker Research In Motion Ltd. agreed to a $612.5 million deal to settle a patent dispute that it acknowledged was hurting its profits.

The agreement between Canada’s RIM and NTP, a U.S. patent-holding firm, ends a more than four-year U.S. court battle over NTP claims that RIM had infringed on its patents in the BlackBerry, which has become the communications device of choice among many executives, politicians and Hollywood celebrities.

RIM said all terms of the agreement have been finalized and a U.S. court dismissed NTP’s litigation on Friday afternoon.

“It is very important that we got the scope that we wanted and this scope relates to all of NTP patents and it covers all RIM’s products and services and technologies,” Jim Balsillie, co-chief executive of RIM said on a conference call.

In a separate announcement on Friday, RIM acknowledged that the increasingly acrimonious dispute was hitting its bottom line and was leading customers to delay buying BlackBerry products.

RIM cut its forecast for its fourth-quarter earnings before patent litigation provisions to 64 cents to 66 cents a share. It had previously forecast 76 cents to 81 cents a share and analysts surveyed by Reuters Estimates had expected, on average, 79 cents.

RIM also cut its forecast for net subscriber additions in the quarter to 620,000 to 630,000 from its previous forecast of 700,000 to 750,000.

“The absolute motivation for this was really to give clarity and certainty to all of our ecosystems, so we can really start our new year … with all of these issues resolved, and a clear exciting growth path going forward with no more of the noise and distraction,” Balsillie said.

The early evening news sent shares of RIM up 14 percent to $82 on the Inet electronic brokerage in after-hours trading.

NTP filed suit against Waterloo, Ontario-based RIM in 2001 and a jury found in NTP’s favor in 2002.

Early last year the companies reached a tentative $450 million settlement but that deal quickly fell apart and both sides hunkered down for a long fight.

The companies said the new agreement relates to all patents owned and controlled by NTP and covers all of RIM’s products, services and technologies.

“Its about damn time. … The marketplace has to hope that this is finally the end,” said independent telecoms analyst Jeff Kagan.

The settlement appeared to end a saga that added fuel to the contentions of some analysts that U.S. patent cases were out of control and hurting business development.

Others said the fight was emblematic of the quest by technology innovators to get recognition for their inventions in the face of incursions by big business.

The dispute had even prompted the U.S. Department of Justice to tell the court that BlackBerry services were vital to its operations.

(Additional reporting by Dan Wilchins in New York)




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