The settlement allows RIM to sidestep a potential freeze; the lengthy litigation process may have the company keeping a closer eye on competitors.
Posted Mar 6, 2006
Companies and their mobile workers are breathing a shared sigh of relief following Research in Motion's (RIM) agreement with intellectual property company NTP, to settle their long-running patent infringement battle. Under the terms of the settlement, announced on Friday, RIM paid a one-time sum to NTP of $612.5 million to settle all claims against RIM and for a full perpetual license going forward, according to RIM. In exchange, NTP granted RIM a license allowing the company to continue its BlackBerry wireless business.
The agreement, which relates to all patents owned and controlled by NTP and covers all of RIM's products, services, and technologies, allows RIM and its partners to sell RIM products, services, and infrastructure free and clear of any claim by NTP. This includes any claims that NTP may have against wireless carriers, channel partners, suppliers or customers in relation to RIM products or services, or against third-party products and services used with RIM products and services. The agreement covers all current NTP patents involved in the litigation and any future NTP patents. RIM will have the right to grant sublicenses under the NTP patents to anyone for products or services that interface, interact, or combine with RIM's products, services, or infrastructure. "Fundamentally, we [entered into this settlement] to give certainty, predictability, calmness, [and] comfort to our whole ecosystem," said RIM chairman and co-CEO Jim Balsillie said during a Friday conference call.
RIM's courtroom battles with NTP date to 2001, when NTP alleged that RIM had infringed on its wireless email patents. In August 2003 the U.S. District Court for the Eastern District of Virginia awarded NTP $53.7 million and granted an injunction preventing RIM from making, using, or offering to sell handhelds, services, or software in the United States; the court stayed the injunction pending an appeal by RIM. The fight appeared to be over in March 2005, when RIM agreed to pay NTP $450 million, a figure that related primarily to settlement of past damages, and included the judgment and money escrowed totaling $137 million. However, the feud made its way back to the courtroom when the agreement disintegrated.
With the current settlement, the additional amount of $162.5 million (the balance needed to add up to the full $612.5 million) will be recorded in Q4. As a result of the uncertainty stemming from the NTP litigation, RIM also announced that preliminary, unaudited operating results for Q4 ending March 4, 2006, are below previous expected figures.
In the wake of the settlement and the removal of uncertainty, end-user companies are certainly resting easier. "They were concerned about it and they were investigating options from Good Technology and Intellisync, for example, but they didn't really purchase because they didn't want to make a change unless it was absolutely necessary," says Ellen Daley, principal analyst for telecom and networks at Forrester Research. But, as a result of the cloud of uncertainty stemming from the court case, companies were gearing up for a "just in case" scenario, Daley adds. "What we expect now to happen is that the wedge those competitors like Good, Palm, and Intellisync have within companies, is going to be exploited pretty significantly over the coming year. This comes at a bad time for RIM, Daley continues, "[because] Microsoft especially is really going hard after companies." Microsoft's alternative uses Windows Mobile devices instead of BlackBerry, delivers push email from Microsoft Exchange and does not require a separate piece of infrastructure like the BlackBerry Enterprise Server does, according to Daley.
Daley notes that RIM is "not going to go away," but she adds that "as companies start to adopt mobile applications beyond wireless email, like mobile sales force automation or field service, that's going to be increasingly a Microsoft solution instead of a RIM solution."
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