RIM, NTP Both Win in Settlement
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In the end, according to analysts, both Research in Motion (RIM) and NTP won in their historic $612.5 million patent infringement settlement cut Friday.
After more than five years of fierce legal engagement that ultimately threatened to cut off RIM's popular U.S. Blackberry e-mail service, the Canadian-based RIM kept its U.S. service alive, its customer base intact and its immediate future solid, if a little less profitable in the short term.
RIM is holding $450 million toward the settlement and the additional $162.5 million will be accounted for in the fourth quarter.
RIM warned Friday the ongoing litigation would impact the company's fourth quarter bottom line, with the $550 million in revenue expected to be lower than December's projected $590-$620 million.
On the other hand, revenue in the same quarter last year was $404.8 million.
For Virginia patent holding firm NTP, $612.5 million shows that patience does, indeed, have it rewards.
"That's a lot of money and a very good return on investment," Bill Hughes, principal analyst at In-Stat, told internetnews.com. "The business of buying patents that haven't been fully developed certainly pays off."
Carmi Levy, a senior research analyst at Info-Tech Research Group, added, "They [NTP] should be thrilled with the settlement. Unfortunately, this will serve to encourage more lawsuits of this type."
Since RIM rolled out its Blackberry in 2000, NTP claimed certain parts of the Blackberry infringed on NTP's wireless patents.
While NTP never developed an alternative product with its patents, it doggedly pursued RIM for a share of Blackberry profits and future royalty payments.
Once both a district court and an appeals court agreed with NTP, the only issue was the amount of the settlement.
Ultimately, NTP got its cash but, according to RIM, NTP gets no future royalties and gives up all future potential claims against RIM.
In addition to the injunction against U.S. Blackberry service that materialized, settlement figures as high $1 billion also proved off base.
"Their [NTP's] patents began eroding like snow in spring," Levy said.
As part of the protracted litigation between RIM and NTP, the U.S. Patent and Trademark Office (PTO) reexamined the patents involved in the dispute. On a strictly preliminary basis, the PTO slowly began eliminating possible NTP claims against RIM.
"When NTP was riding high, it goosed the [settlement] number," Levy said. "The settlement went down as a result of what was happening at the PTO."
It probably also didn't help NTP's bargaining position that corporate America didn't drop Blackberry service for alternatives such as Palm.
"RIM has a very unique position in that they had a head start [on other wireless services]," Hughes said. "IT departments are not always comfortable with wireless and didn't really follow up with alternatives."
Ultimately, though, Levy said the settlement came as a result of U.S. District Judge James Spencer, who presided over the original infringement trial in 2002.
At that point, the jury awarded NTP $23 million in damages. Spencer also ordered an injunction against U.S. Blackberry service but delayed the order while RIM pursued its appeals.
RIM and NTP did near a settlement of $450 million last summer but that fell apart when NTP refused to drop possible litigation against RIM partners.
Finally on Feb. 24, the case was back in Spencer's court for damages and a possible injunction. An irritated Spencer ordered the two companies to settle the matter or that he would and neither side might not be happy with the ruling.
"If the judge hadn't pushed, RIM probably would have held out," Levy said.