Update: RIM settles NTP patent fight with $612.5M payment

'It's about time,' says one BlackBerry user.

Research In Motion Ltd. announced late today that it has agreed to pay $612.5 million to NTP Inc. to settle the long-running legal fight between the two companies.

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.

BlackBerry users expressed relief the fight was finally over.

"We're delighted to hear of the settlement and that the matter is resolved," said Frank Gillman, who works at a law firm in Los Angeles and oversees more than 200 attorneys and other staff who rely heavily on the popular handhelds. "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."

"It's about time," said Chris Barber, CIO at Western Corporate Federal Credit Union (WesCorp) in San Dimas, Calif. The company's 30 users "have all become addicted" to BlackBerries, and losing them would have been a "huge inconvenience," he said.

Under the terms of the settlement, which was announced late in the day, RIM will make a one-time payment to NTP. In return, NTP has granted RIM a license that enables RIM to continue its BlackBerry service.

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“We are pleased to have reached an amicable settlement with RIM," said Donald E. Stout, NTP’s co-founder. "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. NTP is pleased that the issue has been resolved and looks forward to enhancing its businesses.”

Government BlackBerry users had fretted that losing their service could cause them problems, so they had asked a federal judge last week to be exempt from any order to shut down the service.

According to NTP, the deal covers all current NTP patents involved in the litigation as well as future NTP patents. "All of RIM's past and future products, services and technologies will be covered as well as all RIM customers and providers of RIM products and services, including wireless carriers, distributors, suppliers and ISV partners," NTP said in a statement. "The agreement permits RIM and its partners to sell its products, services and infrastructure completely free and clear of any claim by NTP."

James Balsillie, RIM's president and co-CEO, said during a conference call late today that the settlement will completely put the matter behind the company. "The litigation has been dismissed by the court this afternoon," he said.

"It's very important that we got the scope that we wanted," Balsillie said. "The absolute motivation for this really was to give clarity and certainty to our [customer] ecosystem."

Asked why the company paid the settlement before the patent issues are ultimately resolved by the U.S. Patent and Trademark Office, Balsillie said it needed to be done to put the matter behind the company.

"It's not something that anybody feels good about," he said. "Really, we fundamentally did this for the industry. It's clear there's going to be patent reform but the court made it clear that it wasn't going to wait for these things."

"At that point, we had to do what was best for all people," Balsillie said. "There's no question that we took one for the team here."

One heartening factor, he said, has been that dedicated RIM customers have stuck by the company.

"We didn't have one customer tell us they decommissioned one unit," he said. "They just slowed down" their deployments. "It's a trust relationship. It's a reciprocal relationship we've built together... and at the end of the day, that's our primary responsibility. Nobody feels good about this, but we're happy to put it behind us."

Despite the bitter legal fight, many analysts had expected a last-minute settlement, believing RIM wouldn't want to risk either a service shutdown or force its customers to download a software work-around.

"It's great to have moved beyond the legal battle," said John Halamka, CIO at CareGroup Healthcare System in Boston, which supports about 500 BlackBerry users, including doctors and nurses. "I only hope that this does not lead to more suits of this nature, since innovative companies could spend more time in the courts than on creating new products."

Halamka tried other technologies in search of a viable replacement in case RIM had to shut down its service, but he said BlackBerry was the most robust.

He sent his comments to Computerworld via his own BlackBerry.

Bob Carasik, a system architect in the operations and corporate technology architecture group at Wells Fargo & Co. in San Francisco, expressed relief over the settlement. But he added that the company's BlackBerry users generally weren't worried about the patent dispute.

"People believed something would be worked out in the end," Carasik said.

"We are glad it is over," said Bryon Nichols, IT manager at GBD Architects Inc. in Portland, Ore.

But the architecture firm wasn't worried about the dispute. Just yesterday, before it had any inkling of the settlement, GBD decided to increase Blackberry usage from three to 26 of the company's 100 employees, according to Nichols. He said the company discussed the patent dispute during its decision process but ultimately figured "the threat of a shutdown was too low to be a concern."

"I knew they would settle," Nichols said.

Just one week ago, U.S. District Court Judge James Spencer had said there was no escaping that RIM had been found to be infringing on NTP's patents. Spencer went on to say that the two sides should have settled out of court.

Tom Lindenfeld, a political strategist in Washington and a devout BlackBerry user, also said he never doubted that the lawsuit would be resolved and that BlackBerries would remain a fixture in the business world.

"My attitude has always been that it would never get shut down because there was too much money in it," Lindenfeld said. "When that much money is at stake, they're going to find a way to keep it going."

The settlement means Lindenfeld may soon begin shopping for a new model to replace his well-worn BlackBerry, since the uncertainty surrounding the lawsuit had kept him from buying a replacement.

"I hadn't looked for alternatives, but I did resist buying new equipment," he said. "I'm a major BlackBerry user, and for me it frees me from the obligations of being at my desk and in my office. I've come to operate using it in some ways more than my laptop."

"This settlement is not unexpected," said Paul Devinsky, a partner in the Washington office of law firm McDermott Will & Emery LLP. "Judge Spencer's insistence that he would soon issue a judgment and his impatience that an agreement had not yet been made were clear indicators that the parties needed to come to a business resolution."

Al Porco, CIO at Central Brooklyn Family Health Network in New York, said that with RIM's stock price going up and no further court action expected, "the only thing that RIM has to worry about now is Microsoft or Apple looking to get a piece of the pie" for wireless e-mail.

"Everyone can breathe a sigh of relief," said industry analyst Jeffrey Kagan. "Worried BlackBerry customers can relax, their service won't be cut off. Competitors who have been salivating over the potential opportunity of gaining new customers if BlackBerry went down have to be disappointed. But this is a better ending for customers, companies and everyone.

"Now, BlackBerry can get on with the business instead of concentrating on this possible shutdown," Kagan said.

Jack Gold, an analyst at J. Gold Associates in Northboro, Mass., said, "The only thing I worry about now is if NTP will now go after other folks" with wireless e-mail services. "I bet they do go after other guys to get money out of them, too."

In a separate earnings statement, RIM said it attracted 70,000 fewer new subscribers than expected during the quarter ending March 4, primarily as a result of "uncertainty surrounding the NTP litigation" causing corporate customers as well as consumers to defer BlackBerry purchases.

"While some uncertainty was anticipated in December, the overall impact was greater than previously anticipated," the Ontario-based company noted, likely providing impetus for a settlement.

RIM's revenues were flat for the fourth quarter compared to the third and lower than expected: about $550 million to $560 million, compared to the $590 million to $620 million forecast earlier. Sales were still higher than the $405 million a year earlier.

Final quarterly results are scheduled to be announced on April 6.

RIM has been locked in a court battle for more than four years with privately held NTP, which successfully sued RIM for infringing on its patents.

NTP last week had asked Spencer for an injunction against BlackBerry service in the U.S. with a 30-day grace period for users and the immediate imposition of $126 million in damages for past infringement.

RIM and NTP reached a tentative deal valued at $450 million last year, but that agreement fell apart, and analysts had estimated any new settlement could cost RIM $1 billion.

The small portable BlackBerry e-mail devices are used by more than 3 million U.S. subscribers, including government officials and lawmakers.

Michael Garvey, a patent attorney with Pearne & Gordon LLP in Cleveland who has been following the case, said that despite the settlement, the re-examination proceedings at the Patent and Trademark Office should continue.

Computerworld's Todd Weiss, Matt Hamblen, Carol Sliwa and Sharon Machlis contributed to this report.

Copyright © 2006 IDG Communications, Inc.

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