business

The BlackBerry Wrangle Gets Weirder

RIM releases documents that it says explain why NTP'S terms are unacceptable. Meanwhile, the judge hints that both sides are in for a shock

Days after sparring before a judge in a Virginia courtroom, Research In Motion (RIMM), maker of the BlackBerry wireless paging service, and its nemesis, NTP, are back in the ring.

At stake is a patent dispute over the e-mail service and whether the judge will impose an injunction that shuts down BlackBerry service across the U.S. The two traded jabs publicly over what kind of settlement it would take to end their dispute. RIM execs have said that they can't live with the terms NTP has proposed in the past. But it has declined to go into details of the deal, other than saying it would shut down RIM's business and wouldn't cover RIM's partners.

That changed on Feb. 27. NTP issued a press release expressing mystification about why RIM balked at terms proposed in December and accusing RIM of misstating the facts. "It's time to set the record straight: NTP has offered and continues to offer RIM a license that fully protects everyone -- RIM's customers, carriers, and partners," NTP said.

UNPRECEDENT CONFLICT.

  Within hours, RIM elaborated on the reasons it opposes the deal. In an extraordinary move, the company released a scathing response and pointed to a document filed with the court as part of its argument for why it hadn't reached a settlement. The document is the opinion of Roger M. Milgrim, a New York lawyer and patent expert paid by RIM to look at a settlement agreement offered by NTP on Dec. 1.

"Don't be fooled by NTP's aggressive stance," wrote Mark Guibert, a vice-president at RIM, in an e-mail that included Milgrim's court affidavit. "They are simply trying to convince the court and the public that they're being reasonable because they don't want to look like extortionists."

Like virtually every other part of this case up to now, the latest round of actions is remarkable. Companies usually try to find a way to settle patent disputes in an effort to avoid an outcome that may result in lost business. And they typically don't make their disagreements over these settlements public, legal experts say. "I've never seen anything like this at all," says James Hurst, a patent lawyer and partner at Winston & Strawn in Chicago.

RIM'S CONCERNS.

  NTP and RIM have been locked in this increasingly contentious legal fight for years. NTP successfully sued RIM for patent infringement in 2002. Though RIM tried all its options, even asking the U.S. Supreme Court to get involved, it had little luck in completely overturning the ruling. On Feb. 24, RIM wound up back in the U.S. District Court in Virginia where it was found guilty, arguing in a last ditch effort that its U.S. service and sales shouldn't be shut down (see BW Online, 2/24/06, "RIM's Biggest Day in Court").

So why is RIM so against the proposed settlement? Milgrim writes that it leaves room for NTP to come back in the future and sue RIM and its partners. According to Milgrim, the agreement is written in such a way that only service sold by RIM would be covered -- not service sold by RIM's wireless partners. That could leave them susceptible to lawsuits by NTP, he argues.

Device manufacturers that license RIM's BlackBerry Connect and BlackBerry Direct software also aren't covered by the agreement, Milgrim says. Companies including Motorola (MOT) and Nokia (NOK) have licensed this software so they can provide BlackBerry's flavor of mobile e-mail on their handhelds. Milgrim says that while the agreement covers RIM products, RIM can't extend its license to device partners.

While RIM has the right to sell products that include the NTP patents, partners that include RIM products in their devices cannot, Milgrim says. Milgrim also said it wasn't entirely clear how broadly RIM's devices would be covered by the NTP claims patents. That's because there is still some debate about how broadly the NTP claims extend over the wireless e-mail systems.

A JUDGE'S WARNING.

  In its statement, NTP said it wanted to set the record straight. NTP in particular pointed out two parts of the settlement agreement that it says addresses RIM's assertions and concerns about its wireless carrier partners and its products. "RIM's public assertions that NTP has not proposed a license that protects its carriers is both disingenuous and intentionally misleading," NTP says. RIM's Guibert, though, simply responded by writing: "As NTP well knows, the scope of a license depends on the definitions and NTP has merely quoted part of a provision with none of the underlying definitions. As with much of NTP's statements, it is only part of the story and is inherently misleading."

Even as the two side trade jabs, the clock is ticking. Judge James Spencer, who is overseeing the case, said in the hearing on Feb. 24 that he expects to rule shortly on whether to impose an injunction (see BW Online, 2/24/06, "BlackBerry's Waiting Game"). After saying how surprised he was that the two sides hadn't reached a settlement, he warned them that neither would be happy if he had the final say.

"You let this be a court decision and you're going to get a court decision," he said. "A court-imposed decision will be imperfect." It might be imperfect, but it may be the only way this fight comes to an end.

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