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NTP patent keeps BlackBerry in a jam

FAQ Handheld maker waits for rulings on whether its device infringes on patents the company doesn't own.

The maker of the BlackBerry handheld is anxiously awaiting word from two government offices whether the technology inside its device infringes on patents the company doesn't own and how much it may have to pay to license that technology.

Eight patents separate any harmony between Waterloo, Ontario-based Research In Motion, which makes the BlackBerry, and Virginia-based patent-holding company NTP, which owns the rights to the patents.

A federal appeals court ruled last year that RIM infringed on NTP's patents, but the two sides have been unable to reach a settlement. RIM has been able to continue selling BlackBerry devices in the United States while a lower district court reviews the case. That court is expected to rule this week on whether RIM's tentative $450 million deal back in March is enforceable, or if NTP can continue to negotiate for more.

Why RIM won't blink
In patent dispute with NTP, the "only thing that matters" right now is a court's judgment about the patents, says co-CEO Jim Balsillie.

At the same time, the U.S. Patent Trademark Office is reviewing the last of the eight patents, which may end up making a stronger case for NTP in the long run, according to one attorney.

RIM is expected to update the financial community on the case on Wednesday, after the market closes, when it reports the results of the first quarter of its fiscal 2006. Analysts surveyed by Thompson Financial expect RIM to report a per-share profit of 55 cents, up from 36 cents for the same period last year. Sales could reach as much as $452 million, analysts said, a growth of 68 percent from last year.

What do these legal tangles mean for BlackBerry customers?
By all accounts, BlackBerry customers will see no disruption in either their service or how they can use the wireless device.

If RIM ends up refusing to license the technology, co-CEO Jim Balsillie has said that his engineers have created a technical workaround that can be used with all existing and future BlackBerry devices, thereby skirting the patent issue. NTP co-founder Donald Stout said that he's tired of hearing about RIM's workaround and that if the company wanted to get away from NTP's legal paperwork, it should just go do so.

What has the USPTO been reviewing?
The technology in question pertains to eight U.S. patents that cover how e-mail is sent over wireless networks to devices with mobile computer processors. The patents are owned by Thomas Campana, who helped co-found NTP to manage the paperwork and enforce the licensing.

The director's office of the USPTO has reviewed seven of the patents under an ex parte format, which means that the review is only between the USPTO and the patent holder. The patent office rejected five of Campana's and NTP's patents and then turned around and rejected two more this month. The negative rulings were part of a re-examination in which rejections are quite common.

The last patent (U.S. Patent No. 6,317,592) is a bit different in that RIM has asked to intervene in the review process as "interparties," which is legal under technology patents filed after 1999. NTP filed its claim in 2002 when it accused RIM of using the technology in its BlackBerry mobile devices without licensing it. The patent office is looking at whether RIM can participate in the last review.

What happens if the patent office upholds NTP's patent?
Not much at first. Whichever side prevails, the other is sure to appeal the ruling. The first chance will be before the Patent Appeals Board and then again in the Federal Circuit Court. NTP's Stout said the proceedings could take anywhere from two to four years, but he doesn't expect it to go that long.

Balsillie said he is eager to dismiss the issue.

So does this mean that RIM has only one more patent standing between it and a chance to nullify the jury's infringement findings?
No. According to RIM attorneys, the patents may still be reinstated because it is so early in the review process, potentially making them even stronger in future rulings.

What about the $450 million pay out to settle the infringement suit?
The two companies had made a tentative deal in March in which RIM agreed to pay the fines after a jury found RIM had infringed on NTP patents.

So what happened?
Negotiations stalled after the USPTO began rejecting the patents mentioned in the original claim. Details of the negotiations haven't been made public, but some people believe the deal fell apart over which company will be able to license the disputed patents to other parties. NTP's Stout said his company only agreed to negotiate. Balsillie said he is more than happy to pay the $450 million and put the argument to rest.

What about other companies? Doesn't NTP license its technology to Nokia?
Yes, Stout said the company has a signed licensing agreement with Nokia as well as Good Technologies and other, unnamed handset manufacturers. Stout declined to talk about NTP's patent strategy beyond its suit against RIM.

If NTP were to prevail with both the USPTO and the lawsuit under review by an appeals court, Balsillie said NTP would more than likely extend its patent fight to the carriers and handset vendors like Cingular Wireless, Sprint and Verizon Communications.

One problem for RIM is that its corporate strategy at this point depends on companies licensing and distributing its client software. Those companies have been reluctant to do so under threat of lawsuit. Balsillie said RIM spent years developing its technology and considers NTP's patent position akin to blackmail.