RIM Settles With NTP For $612m

by Glen Shapiro, LawAndTax-News.com, New York

07 March 2006

After Federal District Court Judge James R. Spencer last week told BlackBerry-maker RIM and its attacker NTP that they were wrong not to have settled their action, the two firms acted quickly to agree a final settlement, announced over the weekend.

Research In Motion, fearful of the re-imposition of an injunction by Judge Spencer, has agreed to pay $612.5 million to bring the firms' 2-year spat to an end. RIM's shares rose immediately. RIM had been saying that it had developed and tested software workaround designs for all BlackBerry handsets operating on converged voice/data networks in the United States; but users were running scared, and a renewed injunction against BlackBerry would probably have seen a swing to alternative devices, some of which were being marketed heavily during recent months.

The long-running dispute over ownership of the e-mail 'push' technology contained in Research in Motion's BlackBerry devices had seen Judge Spencer impose an injunction and financial penalties on RIM, but the Court of Appeals for the Federal Circuit vacated the awards and remitted the case to Judge Spencer's court for further proceedings in 2005.

During 2005, the parties did agree a $450m settlement, but this was not finalized, and Judge Spencer ruled against enforcing it. Then, late last year, NTP reportedly said it would accept a payment equal to 5.7% of BlackBerry's expected revenue in the US until 2012, when its patents expire, which would have added up to $900m according to market analysts.

Meanwhile, the Patent Office has been reviewing NTP's patent claims, and has rejected them in its initial rulings, based in part on prior art not considered in the District Court trial in 2002; but it will be some time yet before the Patent Office issues final rejections. And NTP threatened to appeal against Patent Office rulings, stretching out the process for years to come.

After the settlement was announced, RIM reported relatively poor results for the fourth quarter of 2005, due to uncertainty over the action. However, RIM has provided $450m against a settlement in previous quarters, and will expense the remainder of the award in the final quarter of the year, something it is well able to, with nearly $2 bn in short-term investments on its balance sheet.

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