[2005-11-15] RIM's U.S. customers needn't fret, analysts contend
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There is one thing that is almost certain in the prolonged patent dispute between Research In Motion Ltd. and NTP Inc.: Service in the United States will not be cut off.
Yesterday, the presiding judge granted the U.S. government's request to weigh in on the case with arguments and evidence against an injunction. The government had filed a submission to court last week saying it does not want anything to jeopardize a vital communications link for federal workers.
With the U.S. government firmly in his court, Jim Balsillie, chairman and co-chief executive officer of RIM, yesterday confidently talked up the company's relationship with the telecom firms that carry its service in the U.S. and around the world as "very harmonious." In a 50-minute presentation at a Scotia Capital Inc. conference, he never even mentioned the case or fielded a single question on the subject.
There are more than two million BlackBerry wireless subscribers in the U.S. and about 10 per cent of them are government employees. Increasingly, analysts believe a wholesale service shutdown is highly unlikely.
Both parties in the dispute are driving proceedings to the brink, however, convinced they can pull off a complete victory at the other's expense. NTP has walked away from a $450-million (U.S.) settlement offer, hoping for a better deal. But for the small, patent-holding firm, an injunction against RIM only benefits it as a negotiating tool. If RIM is shut out of the U.S., NTP won't see any royalties.
RIM, meanwhile, has used every legal tactic it can to delay final judgment, hoping the U.S. Patent and Trademark Office will eventually overturn the patents that the courts have found the company infringed upon.
In its initial review, the PTO has rejected all of the patent claims in question. RIM wants legal proceedings halted while the PTO completes its full review over the next several months, the company said in a filing with the District Court for the Eastern District of Virginia last week.
But RIM is running out of time, and the judge made his frustrations with both parties clear last week when he began proceedings to review the case on orders of an appeal court.
"Frankly, it's highly unlikely that I'm going to stay these proceedings . . . I don't run [the patent office's] business and they don't run mine," Judge James Spencer said.
Donald Stout, a co-founder of NTP and a patent lawyer, has said that RIM could have settled the infringement case four years ago for less than $50-million.
If that's accurate, then RIM's leaders clearly bungled the initial handling of the suit against them. But they have stepped up their game and hired more patent experts. They recently added a former law clerk of Judge Spencer to their legal team.
Today, concerns of an injunction boil down to one basic question, says Rob Sanderson, an analyst with American Technology Research in San Francisco. "Do these guys know what they are doing?"
For years the market has second guessed RIM's leadership, questioning everything from the decision to do its own manufacturing, to the refusal to equip BlackBerry devices with a pen-based interface and a large operating system that rival Palm Inc. adopted.
"The market has never given the guys the benefit of the doubt. But time and time again they have proved right," Mr. Sanderson said. "They know their legal options better than anyone, and their settlement options. They should be given more credit that they know what they're doing."
Mr. Balsillie has said the company has tested a "workaround" system that would deliver BlackBerry service but operate on technology independent of the patents NTP holds.
Some analysts dismiss his claim as a temporary public relations effort meant to ease concerns.
It would involve nothing less than the "complete overhaul of the hardware and software that supports the BlackBerry messaging service," said Carmi Levy, a senior analyst at Info-Tech Research Group in London, Ont. "It's analogous to rebuilding an airplane while it's still in flight."
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