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BlackBerry case: No shutoff, for now
February 24, 2006
Research In Motion and NTP have agreed to settle the patent dispute over the BlackBerry device for $612.5 million, the companies announced in a press release on Friday. Under the agreement, RIM will receive a license to NTP's patents going forward, they said.
The agreement involves a one-time payment to NTP, RIM co-CEO Jim Balsillie said during a Friday afternoon conference call. Even if the U.S. Patent and Trademark Office eventually overturns NTP's patents, NTP will not have to repay the $612.5 million. "There is no provision for the PTO re-exam. This is a full and final settlement," he said.
Audio
Reporter roundtable
Join News.com reporters and editors
as they discuss the implications of
the long-running case.
Download mp3 (6.1MB)
"It's very important we got the scope we wanted. The scope relates to all of NTP's patents and relates to all of RIM's products," Balsillie added. "We really did this to give certainty, and calmness and comfort to our ecosystem."
RIM and NTP briefly agreed to settle the case for $450 million in March of 2005, but that deal later fell through. RIM thought the companies had come to a final agreement, but NTP believed the matter had never been finalized, and the litigation continued.
Dennis Kavelman, RIM's chief financial officer, said RIM was feeling the effects of enterprise customers waiting for resolution in the case before expanding their current BlackBerry usage or upgrading to new hardware and software.
Balsillie expressed his frustration with Judge James Spencer's inclination to move forward with the case and not wait for the USPTO to complete its re-exam. "It was surprising and disappointing that the court wasn't going to put much weight on the final office actions."
"It's a lot of money for patents that will not survive, for sure, but that doesn't do us any good if there's a court that doesn't wait."
Audio
Conference call
During a Friday conference call,
RIM co-CEO Jim Balsillie discusses
the details of today's settlement.
Download mp3 (1.2MB)
The agreement comes one week after the companies argued over whether Judge Spencer should impose an injunction on the sale and support of BlackBerry devices in the U.S. During that hearing, Spencer expressed his frustration that the companies hadn't settled their dispute, and promised to rule promptly on the injunction.
Patent lawyers agreed that strong words from Judge Spencer last week hinted at an injunction in RIM's future and played a major role in the speedy resolution.
The judge "did say that although he is not issuing an injunction today, RIM shouldn't take any comfort in thinking he'd never issue an injunction, so he kept that option open and was strongly encouraging the parties to settle," said George Chen, a patent attorney with the firm Bryan Cave in Phoenix, Ariz.
The judge's ready acceptance of the parties' settlement and dismissal of their case on Friday "is indicative of the fact that he was sitting on an injunction, ready to go," said Paul Andre, an intellectual property partner at Perkins Coie in Silicon Valley. In situations where an injunction appears imminent and the patent holder is willing to grant licenses, it's fairly standard for parties to settle, he said.
Click here for a PDF of the judge's dismissal order. Click here for a PDF of the judge's order releasing the funds from escrow. Trading in RIM stock was halted prior to the announcement. When the shares started trading again in the after-hours market they immediately jumped $10.43, or 14.5 percent, to $82.35.
Months of uncertainty regarding the BlackBerry took a financial toll on RIM, the company said in Friday's press release. RIM said after trading Friday that sales for its fourth fiscal quarter, which ends Saturday, would be in the range of $550 million to $560 million--lower than the $590 million to $620 million guidance the company had provided in December. But sales were still well above RIM's $404.8 million total for the same quarter a year ago.
Earnings per share, excluding costs related to the NTP litigation, were expected to be between 64 cents and 66 cents. The company had forecast earnings per share of 76 cents to 81 cents.
Net subscriber accounts for the quarter were expected to be in the range of 620,000 to 630,000, well below the 700,000 to 750,000 forecast in December.
Audio
Conference call
Jim Balsillie calls Friday's agreement
with NTP the "final settlement"
in the long-running case.
Download mp3 (644KB)
RIM had been fighting to limit the damage from a 2002 jury verdict that found that it infringed on several of NTP's patents related to mobile e-mail communications.
In 2003, Spencer imposed an injunction on the sale and support of BlackBerry devices in the United States, but he stayed that injunction, pending the appeals process. Spencer also increased the damages awarded by a jury as a result of misconduct by RIM's lawyers during the trial and ordered the company to put 8.55 percent of its quarterly revenue into an escrow account, pending the appeals process.
A federal appeals court lifted the injunction and sent the case back to a lower court in 2004, though it agreed that most of NTP's patent claims are infringed by the BlackBerry system. With that basic question of infringement appearing to be settled, the debate turned to two other areas: the patent re-examination process and RIM's "work-around."
In recent weeks, the prospect of a BlackBerry shutdown had loyal users of the device fretting about the prospect of losing their mobile e-mail service.
"We have been informed that the case was amicably settled and we are pleased that the resolution reached will preserve the public interest in the use of RIM's technology," said Cynthia Magnuson, a U.S. Department of Justice spokeswoman. The department had argued before the court that a BlackBerry shutoff would be devastating to government users.
On Capitol Hill, stomping grounds for hundreds of 'Berry-dependent politicians and staffers, the details of the settlement had not yet been digested but drew initial positive reactions.
"If this means that service will not be disrupted in any way, shape or form, then obviously, we're very happy that's the case," said John Brandt, communications director for the U.S. House of Representatives Administration Committee, which oversaw the purchase of BlackBerrys for all 435 House members back in 2001.
The news was welcome in other quarters as well.
"Those of us who rely on instant access to our corporate e-mail are breathing a huge sigh of relief--our significant others, maybe not," said Frank Gillman, chief technology officer at the Los Angeles law firm Allen Matkins.
The settlement announcement was no surprise to Michael Sacksteder, a patent litigation partner at Fenwick & West in San Francisco. "When you are terrified and hopeful at the same time, and you're going to find out one way or another soon, that's when parties tend to resolve what have seemed to be unresolvable situations," he said.
Sacksteder said he thought NTP would continue to pursue appeals of the patents for which the U.S. Patent and Trademark Office recently issued "final office actions" rejecting their validity. "The way that the procedure works is that after time expires for appealing under the statute, the Patent Office issues a re-exam certificate that says your claims have been cancelled and you don't have a patent anymore, and I'm sure that they dont want that to happen," he said, noting that "there might be other targets" for infringement claims from the company.
A representative for NTP declined to comment beyond a press release distributed by the company Friday. "NTP is pleased the issue has been resolved and looks forward to enhancing its businesses," Donald Stout, NTP's co-founder, said in the release.
"It's better late than never," said Rob Enderle, principal analyst with The Enderle Group. "But their customer base is not going to forgive them for RIM turning them into cannon fodder during the process."
"Bottom line, this is very good news for BlackBerry users," said Tim Bajarin, president of Creative Strategies. "It means their service will continue, and it allows RIM to continue going after corporate business."
See more CNET content tagged:
NTP, injunction, Research In Motion Ltd., patent, settlement
22 comments
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If RIM wasn't wrong, the parties would have settled for $0 or maybe paid a bit to NTP just to go away.
RIM is now stating - We are paying NTP over $600 million because we stole from them and no matter how hard our laweyers tried, and how much political influence we tried to exert, NTP kept winning in court.
Good for the inventor. May he Rest-In-Peace. Thank you NTP for putting up huge amounts of money and taking the risk.
But if you read all of NTP's patents and also learn the history of Campana's work, you will see that this is a typical example of patent lawyers generalizing a niche invention to vaguely cover technologies neither the inventor nor the patent lawyers envisioned. Make the wording general enough, and suddenly you can wag your finger to accuse a toaster maker of infringing the patent of a heater.
I applaud RIM for standing by their principles for so long and am saddened that they caved in. I am curious, if NTP's patents do not stand up after final review by USPTO, will NTP return RIM's payment?
That left RIM with two unsavory choices: 1) wait on the PTO re-exam to invalidate NTP's patents and risk the injunction (which would be a death knell for their business, no matter what their planned software workaround was; or 2) pay NTP so the matter goes away, but at least they got to kick NTP in the corporate groin by having initiated the PTO review that will invalidate all the "IP" that came into play in this case.
irretrievably broken hasn't been paying attention, or, at least,
has never had personal experience with it.
The RIM case is an obvious example. As a software developer, I
was involved in creating landmark IP contracts in the early
1980's, so one would expect I would side with NTP on this issue.
This assumption would be incorrect.
I believe that Judge Spencer stands in the position of the
"muscle" in a Mafia-style extortion scheme. He has served no
socially beneficial purpose and his idiotic pig-headed stance in
the face of full knowledge that the patents he so assiduously
defended were (excuse me) patently false, that one is forced to
assume that his decision was based not on law but criminal
conflict of interest. His stance, strong-arming RIM to pay
protection money for patents that are, and alway have been,
INVALID, is reprehensible at best, criminal at worst.
I don't use a Blackberry and have no personal dog in this fight,
but I believe that this case is a canary in the coal mine. The
system is broken and if it doesn't get fixed we're all hosed.
The "inventor" representatives applauding this travesty are
short-sighted and venal. If they can't recognize the difference
between legitimate intellectual property and hosebag
extortionate litigation fodder, they don't warrant an opinion.
someone else's invention, copywriting somebody else's story,
etc., should be criminalized. Jail and restitution must be equal
remedies. Stealing ideas from people wrecks their lives and
diminishes their families unjustly to degradation, poverty and
want.
If it can be proven that a company purposely used someone else's invention - knowingly - the CEO/owner should go to prison.
If there was no intent, then no criminal act occurred.
The guy that invented intermitant window wipers for cars had to sue many of the car companies. Some honest car companies looked at the other cases and settled. Other slimeball car companies just kept fighting because paying money later is better for their bonuses and stock options then paying now.
If those CEO's were facing jail time, the lawyers would have had fewer billable hours and the inventor would have had a lot less stress.
Lots of people called that inventor all kinds of bad names, but in the end, he invented it and all the car companies paid him.
There are two ways these can work - one maliciously, and one more innocently:
1.) INNOCENT:
Company A creates (or obtains the rights to) Invention Z.
Company A patents Invention Z.
Company B uses, or makes too similar an implementation of, Invention Z.
Company B hadn't done their homework, and is likely liable to Company A, for their use of Invention Z.
2.) MALICIOUS:
Company A creates (or obtains the rights to) Invention Z - *with the intent to let it sit in the background for the forseeable future.* In other words, they do pretty much nothing with it.
Company B incorporates Invention Z (or something very similar) into Product X.
Product X becomes a hugely popular success - and perhaps a de facto, or even official (e.g, ANSI, ISO), standard.
Company A lowers the boom, and demands a big wad o f money from Company B.
Company B may or may not settle - if not...
Company A sues Company B.
Company A gets a huge judgement, eventual settlement, or even an injunction - crippling something that has become a standard for a large userbase.
Is it just me, or is there something just plain wrong with the second scenario?
It'd be a pain to prove it... but some of these seem like that - esp. where they involve widespread standards. NTP's patent is a good example - it seems as if no one in this country had even *heard* of them before this. It's not enough to prove culpability in the second scenario... but it's damn suspicious IMHO.
Other good examples are Unisys with LZW (GIF, and even more sadly, V.42biz. Yes, I know that modems are a thing of the past for a lot of people... but the fact that such a thing made it into a world standard is screwed up), and one company a while back which claimed rights over something used in the JPEG standard (again, never heard of them).
The latter of those is just plain BS - and I'm almost sure it fits into my second hypothetical scenario above. I mean... that was almost 20 years ago. They had plenty of time to bring that up before when they did.
Blackberry's days are numbered already. It'll go the way of Apple and it's Macs. Maybe you can play music on your Blackberry's in the future.
The patent dispute had threatened to end RIM's popular BlackBerry e-mail service to millions of users in the U.S. and has been the subject of a contentious, four-year patent battle between the two companies. <a class="jive-link-external" href="http://www.media-press-release.com/desk/200603/24855.htm" target="_newWindow">http://www.media-press-release.com/desk/200603/24855.htm</a>
MIhai
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