The deal gives RIM an "unfettered right" to keep using NTP’s technology to keep the BlackBerry network running
BlackBerry maker Research In Motion and patent-holding company NTP on March 3 announced that both parties have entered into a settlement agreement for $612.5 million and a license that will end the patent litigation that had been threatening to shut down BlackBerry service in the United States. 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 conference call. Even if the U.S. Patent and Trademark Office eventually overturn 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.
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.
It is 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.
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 NTP’s patents run out in 2012. Spencer stayed the injunction, though, pending appeal. The Supreme Court eventually declined to hear RIM’s case. Spencer held a remand hearing on Feb. 24, ending that hearing with an appeal that the two sides settle.
"I must say I’m surprised that you have left this important and incredibly significant decision to the court," Spencer said at the hearing. "The court’s decision will be imperfect. The case should have been settled, but it has not been. So I have to deal with reality."
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 was not going to put much weight on the final office actions."
"It is a lot of money for patents that will not survive, for sure, but that does not do us any good if there is a court that does not wait."
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 had not 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.
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.
They have never offered us a full license, so I’m kind of hamstrung, said Balsillie, in a Feb. 24 interview with eWEEK.
On March 3, though, he said he was comfortable with the terms of the deal.
"There was the fundamental reality that uncertainty is not 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 did not have residual costs … it made sense to settle."
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 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.
The settlement is a relief to the millions of BlackBerry customers who faced the possibility of an injunction.
"I’m glad they reached a settlement so the customers do not 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.
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.
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.
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 company’s 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.
"It is 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."
A representative for NTP declined to comment beyond a press release distributed by the company. "NTP is pleased the issue has been resolved and looks forward to enhancing its businesses," Stout, said in the release.
"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."
As for the bottom line, RIM said it sees earnings of 64 cents a share to 66 cents a share, well below the company’s expectation for earnings between 76 cents a share to 81 cents a share. Those earnings results exclude RIM’s NTP settlement.
It is settled, and BlackBerry is safe.