Its settled, and your BlackBerry is safe.
BlackBerry maker Research In Motion and patent-holding company NTP on March 3 announced that both parties have entered into a settlement agreement and a license that will end the patent litigation that had been threatening to shut down BlackBerry service in the United States.
Under the terms of the settlement, RIM will make a one-time payment to NTP of $612.5 million. In return, NTP has granted RIM a license that will let RIM continue its BlackBerry-related wireless business, according to officials at both companies.
“We are pleased to have reached an amicable settlement with RIM,” Donald Stout, co-founder of NTP, said in a statement. “We believe that the settlement is in the best interests of all parties, including the U.S. Government and all other BlackBerry users in the United States.”
The license covers all the current wireless e-mail patents involved in the litigation as well as any future NTP patents, officials said.
The resolution also protects all the wireless carriers and channel partners who sell BlackBerry products, as well as any other hardware makers who have licensed BlackBerry software for use in their own devices.
NTP sued RIM for patent infringement on nine wireless e-mail patents in 2001.
U.S. District Judge James Spencer ruled in favor of NTP in 2003, instructing RIM to halt its sales of BlackBerry devices and services in the United States until NTPs patents run out in 2012. Spencer stayed the injunction, though, pending appeal. The Supreme Court eventually declined to hear RIMs case. Spencer held a remand hearing on Feb. 24, ending that hearing with an appeal that the two sides settle.
“I must say Im surprised that you have left this important and incredibly significant decision to the court,” Spencer said at the hearing. “The courts decision will be imperfect. The case shouldve been settled, but it hasnt been. So I have to deal with reality.”
As recently as a week before the settlement, RIM officials insisted that settlement was not an option, based on the terms NTP had offered up until then.
“Theyve never offered us a full license, so Im kind of hamstrung,” said Jim Balsillie, chairman and co-CEO of RIM, in a Feb. 24 interview with eWEEK. “Its like: Jim, would you be happy being 6 feet, 6 inches tall? Itd be nice, but its not an option in this lifetime.”
On March 3, though, he said he was comfortable with the terms of the deal.
“There was the fundamental reality that uncertainty isnt enjoyed,” Balsillie said in a conference call following the settlement announcement.
“Once we could finally get a scope of license that protected our whole ecosystem, and a fixed amount that didnt have residual costs … it made sense to settle.”
The settlement is a relief to the millions of BlackBerry customers who faced the possibility of an injunction.
“Im glad they reached a settlement so the customers dont have to bear the burden of their squabble,” said Robert Rosen, CIO of a major BlackBerry customer, the National Institute of Arthritis and Musculoskeletal and Skin Diseases at the National Institutes of Health, in Bethesda, Md.
Robert Reilly, president of the Professional Inventors Alliance in Washington, said he believes RIM is the bad guy in this case, regardless of how much Americans love their BlackBerry devices.
“I am outraged by RIMs conduct and think that they should have paid far more,” he said. “It is well documented that most important inventions come from individual inventors, while large companies tend to only produce small incremental inventions. When patent pirates bankrupt or literally run inventors into their graves, the costs to society are much greater than what the inventor bears.”
“I am glad that the ordeal is over for Campanas family and associates,” Reilly said. (NTP co-founder Thomas Campana died in June 2004 at the age of 57.)
But Is the Case
But the case also has brought concerns of future drawn-out patent disputes.
“Its great to have moved beyond the legal battle,” said John Halamka, CIO of Harvard Medical School and Caregroup Health Systems, a Boston-area hospital consortium that supports some 800 BlackBerry devices.
“However, I hope this settlement does not lead to more suits of this nature. Innovative companies could spend more time in court than on creating new products.”
This is not the first time RIM and NTP have announced a settlement. In 2005, the two companies announced a settlement deal of $450 million, but the deal fell apart when the two companies could not agree to terms.
And Judge Spencers case dismissal included an interesting phrase: “ORDER that this matter is settled, and by stipulation of the parties, this action is hereby DISMISSED WITHOUT PREJUDICE,” reads a March 3, 2006, entry in his court docket.
“When you do something without prejudice it usually indicates that it is not final,” said Neil Smith, a patent attorney at Sheppard Mullin Richter & Hampton LLP, in San Francisco. “It doesnt mean that it is not binding, but its not as binding as it could be.”
However, Balsillie maintained that the new deal is final.
“We know we took one for the team, but this is behind us,” he said.
Throughout the past several months of the dispute, RIM had been touting a technical backup plan that customers could implement in case of an injunction.
While RIM officials said the workaround plan did not infringe on any patents, and that “dozens” of customers had tested it out, there was still fear surrounding it.
“Customers said, We liked the workaround, but we dont enjoy this uncertainty,” Balsillie said. “At that point, if you can get a fixed-rate payment with no residual … a smart person just puts it behind him. When that opportunity was able to be had we just took it.”
Indeed, the NTP dispute apparently caused some prospective RIM customers to hold back. Also on March 3, RIM said the number of new subscribers would be in the range of 620,000 to 630,000 for the fiscal fourth quarter, down from the companys December projection of 700,000 to 750,000.
RIM also cut its revenue outlook for its fiscal fourth quarter. The company said revenue will be $550 million to $560 million, compared to its previous projection of $590 million to $620 million given in December. RIM said software and service revenue was lower than expected.
As for the bottom line, RIM said it sees earnings of 64 cents a share to 66 cents a share, well below the companys expectation for earnings between 76 cents a share to 81 cents a share. Those earnings results exclude RIMs NTP settlement.
Editors Note: This story has been updated to include comments from NTP and RIM, customer and analyst reaction, and information about a previous settlement, and will continue to be updated as events warrant.
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