The BlackBerry-maker suffered yet another black eye last week in its legal scrap with NTP Inc.
A Virginia judge rejected a request from Research In Motion Ltd. to enforce a $450 million settlement with NTP Inc., which claims patents to the wireless technology in question. RIM initially agreed to the settlement in March, but the deal fell apart.
“The court finds the parties do not have a valid and enforceable settlement agreement,” Judge James Spencer wrote in his ruling last week. Analysts say the Canadian developer may end up shelling out four times NTP’s asking price.
The court also rejected RIM’s request to stop the case pending the U.S. Patent and Trademark Office’s review of NTP’s patents, saying the review likely won’t affect the current case. “Reality and past experience dictate that several years might very well pass from the time when a final office action is issued by the PTO to when the claims are finally and officially `confirmed’ under appeals,” Spencer wrote.
The Nasdaq briefly halted trading of RIM’s stock following the ruling, and shares slid $3.79 to $61.13 when trading resumed. But investors’ faith returned Thursday and the stock rebounded, ending the day at $64.65.
RIM has more than $1 billion in cash in addition to the $450 million earmarked for a settlement, so the company probably could afford to buy its way out of the mess. But a substantial payout-coupled with increasingly cutthroat competition in the wireless e-mail space-could take a hefty toll on the industry’s dominant player.
Following the rulings, NTP said it would continue to call for an injunction on the sale of BlackBerry devices and service. However, the Arlington, Va.-based patent-holding company said it is not looking to block service for federal, state or local government entities or first responders.
NTP also said it wants the court to enforce a 2002 jury ruling that awarded NTP royalties on BlackBerrys sold in the United States. Under that ruling, according to NTP, RIM owes $210 million in royalties to date.
Spencer will hear arguments from both companies in the next several weeks before deciding whether to grant NTP’s injunction and force RIM to stop service. RIM could have as little as 30 days to settle before shutting down service to its U.S. customers. While users in other countries would not be affected, RIM is facing similar patent-related complaints in the United Kingdom.
RIM has appealed the NTP case to the U.S. Supreme Court, but acknowledged in a statement that “further review by the Supreme Court is generally uncommon” in such cases. Barring a dramatic reversal, the Canadian developer could pay as much as $2 billion in cash and stock to settle the case.
The company said it has been developing software work-arounds that would allow it to maintain service without infringing on NTP patents, but has said it would provide details only if the software must be deployed.
TowerGroup, a Massachusetts-based research firm, said that while it doesn’t believe the court will force RIM to kill its service, it expects the two companies “to reach a revised financial settlement in the area of $750 million to $1 billion within the next 30 days. This settlement could ultimately translate into a higher cost of ownership for financial companies dependent on the BlackBerry channel.”
Others say a settlement could be far more expensive for RIM. ThinkEquity Partners L.L.C. urged investors to liquidate shares of the company, noting that a settlement of between $1.5 billion and $2 billion is possible.
“RIMM is now cornered, in our view,” ThinkEquity wrote in a research note. “Given the specter of a U.S. injunction, RIMM seems to have no choice but to settle under terms agreeable to NTP. … As a result, we believe that RIMM’s only option is to crawl back to the negotiating table and pray.”
