Research In Motion Pays NTP $612.5 Mln to End Suit

Research In Motion Ltd. paid $612.5 million to settle a patent dispute with NTP Inc., ending a four- year legal battle and averting the shutdown of BlackBerry e-mail service across the U.S.

All terms have been finalized and litigation by NTP has been dismissed, the companies said in a joint statement today. The settlement relates to all patents owned and controlled by NTP and covers all of Research In Motion's products, the companies said.

A settlement would remove a legal challenge that has dogged Research In Motion since 2001 and threatened to halt service to as many as 3.2 million Americans, including Wall Street bankers and White House staff. Research In Motion Co-Chief Executive Officer James Balsillie can now focus on fending off competitors such as Palm Inc. and Motorola Inc., amid signs that BlackBerry is slipping in popularity among consumers.

"A settlement is the only way to make NTP go away,'' Richard Williams, an analyst with Garban Institutional Equities in Jersey City, New Jersey, said before the announcement. "It's in no one's best interests that BlackBerry shut down.'' Williams rates the shares "buy'' and doesn't own them.

Research In Motion's U.S. shares rose 53 cents to $71.92 at in Nasdaq Stock Market composite trading before the announcement and the trading halt. The shares have risen 9 percent this year, indicating shareholders were anticipating a settlement.

U.S. District Judge James R. Spencer on Feb. 24 delayed a decision on whether to order a halt to BlackBerry service. He had been deciding how much Research In Motion owes for infringing NTP patents. A Richmond, Virginia, jury in 2002 found the patents were infringed and Research In Motion lost the appeal.

Concerns Soothed

Analysts including Garban's Williams, Mike Abramsky at RBC Capital Markets in Toronto and Pablo Perez-Fernandez, an analyst at ThinkEquity Partners in San Francisco, anticipated a settlement of between $1 billion and $1.5 billion.

Research In Motion has about $1.6 billion in cash and generated $1.35 billion in revenue last year, mainly from BlackBerrys, which allow instant e-mail exchange, day planning and mobile-phone service.

The prospect of a court-ordered halt to service prompted the U.S. and Canadian governments to get involved in the dispute. Canada unsuccessfully challenged the infringement finding and the U.S. said it was concerned a shutdown would interfere with critical communications.

Concern

Members of Congress were so concerned by the prospect of a shutdown that they wrote to the director of the U.S. Patent and Trademark Office, which is separately examining the validity of the NTP patents. Research In Motion developed an alternative technology to keep BlackBerrys running during any court-ordered halt.

Since first being sold in 1999, the BlackBerry has gained a market share of more than 70 percent among hand-held e-mail devices, according to FTN Midwest Research. The machines have been dubbed the "CrackBerry'' by those addicted to it.

NTP settled amid signs that the patent office was leaning toward canceling its patents. The 2001 suit claimed Research In Motion infringed five patents for inventions by electrical engineer Thomas Campana, NTP's founder. Infringement findings on two patents were upheld by an appeals court.

The office has said the two patents shouldn't have been issued because they don't contain a new invention. NTP can appeal that decision to a board within the patent office and then to a court. That review will continue because the patent office action is separate from the litigation.

Research In Motion and NTP have agreed to settle before. The companies reached a tentative agreement last March under which Research In Motion would have paid NTP $450 million. The accord fell apart in June.

Competition

An agreement may also soothe concerns of customers such as United Parcel Service Inc. and FedEx Corp., whose workers all have the device and who said in December they were looking into alternative services.

The dispute caused some potential subscribers to "pause,'' Research In Motion's Balsillie said. The company lowered its forecast for subscriber growth in the quarter ending this month, predicting 700,000 to 750,000 new customers instead of 775,000 to 825,000.

The settlement may help BlackBerry stem a slide in its popularity among consumers. Palm Inc. sold 602,000 of its rival Treo devices last quarter, almost as many as Research In Motion's 645,000 BlackBerrys. In the previous quarter, there was a 150,000- unit gap. Treo also beat the BlackBerry in a customer satisfaction survey conducted by Brandimensions, a researcher that assesses a product's "buzz'' on the Internet.

New Devices

Motorola and Nokia Oyj, the world's largest phone makers, are also scheduling releases of new devices. Microsoft Corp., Good Technology Inc. and Seven Networks Inc. also offer versions of BlackBerry-type technology.

FTN in a report last month estimates BlackBerry market share could drop to 50 percent by 2010. A report March 2 by consulting firm Telwares Communications LLC showed a shutdown of BlackBerry service would have cost customers $844 each to find an alternative.

Pleasanton, California-based Telwares said the litigation had "profoundly impacted'' customers.

Source: Bloomberg

Does this also mean no injunction? Is RIM free and clear now they paid up!

Did you not read jibi's post?

No, RIM paid NTP 612 million dollars for nothing. They can still be shut down at any time.

Oops, sorry. Sarcasm gene kicked in.

Yes, RIM is in the clear.

$613.5mm is like 2 Billion CDN, right?

I wonder how many new posts there will be about this before Monday morning? Next weekend?

Typical terms of a settlement include a dismissal of the action with prejudice, meaning it can never be brought again. Part of the settlement value is, therefore, the cost of a license to use the NTP-owned technology up to the point there is nothing more for NTP to license (i.e., when the patents expire or when the PTO issues reexam certificates altering or revoking claimed territory).

Yes I did read jibi's post. But I just wanted someone to be clear about it. Kinda like "quick someone pinch me" I must be dreaming.. I thought this would drag on for another 6mo-1yr before my company would let me install a BES on our network.

NTP got screwed! $612m on a revenue of $1.3b last year alone, RIM won't even feel it seeing as they had $450m put a side already.

Anyway I don't care just as it would never affected us here in the UK, only slowed down roll out of new products.

finally it's over !

Actually, considering the fact that the Patent Office is invalidating all of the patents, I'd say NTP did pretty well.

NTP will just appeal against the Patent Office's judgement.