RIM Takes A Legal Hit, But The Saga Drags On
By Carlo Longino, Wed Dec 15 01:00:00 GMT 2004

A US appeals court delivered a blow to Research In Motion in its patent dispute with NTP, sending the case back to a lower court which could remove its stay on an injunction that could stop the company from selling its products in the US.

It's a key decision for RIM, whose largest market by far is the United States. The appeals court said the lower district court had properly upheld 11 of NTP's 16 claims, but sent the case back so the lower court could reconsider the monetary penalties and injunction because of the "misconstruction" of one of the claims. NTP originally sued back in 2002 with a court ruling in its favor and awarding the company more than $50 million. The current ruling includes an 8.55% royalty on BlackBerry sales, with RIM running up a tab of about $135 million now, according to NTP.

Some device makers that have licensed RIM's software have attempted to get around the situation by licensing the patents in question directly from NTP, and the US Patent Office is also reviewing the patents, though any decision on their validity could be several years down the line. In any case, it's a serious development for RIM, which will have to reach some sort of settlement or licensing arrangement should it exhaust all its legal options. NTP wants to get paid, but it also probably doesn't want to lock RIM out of the market. NTP, after all, doesn't manufacture anything, it's merely an intellectual property holding firm. Forcing RIM to pay royalties on its future sales, as well as those in the past, will be its real goal.

If nothing else, the decision removes the best-case scenario for RIM that the court would overturn the decision. The timing isn't great, either, since some storm clouds are gathering for the company as rivals look to cut into its lead of the mobile e-mail market. RIM is in a tough position, straddling the device and software markets. The company wants to establish its software and services as the mobile e-mail standard -- which means it needs to get on as many devices as possible -- but it also wants to protect its hardware sales, which are expected to account for three-fourths of its total revenue in the next fiscal year.