RIM-NTP showdown draws near

Research In Motion (RIM) moved closer on Wednesday to a showdown with NTP, a patent holding company, over BlackBerry service after a court dismissed its request to impose a failed settlement agreement on the two companies.

The ruling by Judge James Spencer of US District Court in Richmond, Virginia, means RIM will either have to renegotiate a settlement with NTP or face a shutdown of its BlackBerry wireless e-mail service in the US, perhaps within the next month.

The company does not break down its operations by country, but it is estimated that about 70 percent of its revenue from 3.65 million BlackBerry users worldwide comes from US customers.

Most analysts say a shutdown is unlikely because of the enormous financial damage it would do to the company.

If a shutdown does occur, RIM has said that it will substitute an alternate, user-tested technology that does not violate NTP's patents, although it has offered few details about it.

Spencer previously banned the sale and use of the BlackBerry system for everyone other than government account holders after finding that RIM had violated some wireless e-mail patents owned by NTP. That order was held up to permit RIM to mount an appeal, which was unsuccessful.

On Wednesday, Spencer issued a one-page order rejecting RIM's request to impose a proposed settlement reached out of court between the two companies last spring. It would have resolved the dispute in exchange for a US$450 million payment from RIM. But the deal fell apart after both sides accused each other of trying to add unacceptable conditions.

"The court finds that the two parties do not have a valid and enforceable settlement agreement," Spencer wrote.

The decision was reached without a hearing, and the reasons for Spencer's order were sealed.

The judge also dismissed a request by RIM to delay any order until the US Patent and Trademark Office completes a review of NTP's patents. To date, the patent office has rejected five of the seven NTP patents at the heart of the case. But NTP, which is based in Arlington, Virginia, has challenged those findings and the process is likely to continue for months, if not longer.

Kevin Anderson, a lawyer for NTP, said he hoped that Wednesday's ruling would persuade RIM to end its court challenges and try to negotiate a settlement.

"Our viewpoint has always been that RIM has the keys to its own jail cell," Anderson said. "They can get a deal that fully protects them and their customers at a price everyone agrees is fair."

Anderson declined to discuss exactly what that price might be, though he said it might not necessarily be higher than the US$450 million of the earlier agreement.

In a statement, RIM said it would continue to prepare an appeal to the US Supreme Court.

"While further review by the Supreme Court is generally uncommon, RIM continues to believe this case raises significant national and international issues warranting further appellate review," the company said.

Many analysts, however, are coming to the view that RIM is fast exhausting its legal options.

"RIM's legal alternatives are diminishing; therefore, the probability of a settlement is increasing," said Mike Abramsky, an analyst in Toronto with RBC Dominion Securities. (Its parent company, the Royal Bank of Canada, has a banking relationship with RIM.)