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BlackBerry Appeal Is Rejected

January 24, 2006|James S. Granelli | Times Staff Writer

The U.S. Supreme Court's refusal Monday to take a case over BlackBerry e-mail pagers increases pressure on the addictive device's manufacturer to settle the patent fight, but analysts and legal observers said a threatened shutdown of the service was unlikely.

By giving the thumbs down to BlackBerry maker Research in Motion Ltd., the high court sent the case back to a U.S. District Court in Richmond, Va., where a jury in 2002 found that the company had infringed patents held by NTP Inc.

District Judge John R. Spencer issued an injunction suspending Canada-based RIM's operations in the U.S., potentially cutting off nearly 2.9 million users. But he stayed the order pending appeals. With the case back before him, Spencer is expected to decide on damages and whether the injunction should take effect.

NTP, in the meantime, has lost key backing from the U.S. Patent and Trademark Office, which said it would probably reject all of NTP's disputed patents next month. That could undermine its case against RIM and trim the damages it might collect.

"I think the outlook for both sides is just going to be more litigation," said analyst Ellen Daley at Forrester Research Inc. "There's no short-term solution."

The hand-held BlackBerrys have become must-have tools for Fortune 500 executives, Hollywood agents and Washington operatives -- and fashionable accessories for millions of other people. It can become so habit-forming that the device is also called "CrackBerry."

So what's a worried user to do?

Daley advises BlackBerry users to check out competitors, such as Palm Inc.'s Treo or Nokia's smart phones, and then wait.

"While the possibility is not 0%, we don't think the [BlackBerry] service is going to be shut down," Daley said.

Despite such assurances, some users are bracing for the worst.

"Oh my God, I can't imagine it," Pasadena lawyer Pamela Dunn said. "We have become so used to being able to communicate all times of the day and night, that I would have to find some kind of replacement. I even send e-mails when I am getting a haircut."

Although analysts said both companies would benefit from a settlement, Research in Motion and NTP are playing hardball. A proposed settlement for $450 million fell through last year after NTP rejected it.

Analysts' estimates on a settlement value vary from $250 million to $1 billion.

RIM has more than $700 million in cash and has set aside $240 million for the lawsuit. But the case isn't just about money, said analyst Susan Kalla of Caris & Co. in New York.

"It's much more emotional than just money," Kalla said. "It's like, 'We came up with it. It's not your technology; it's mine.' "

For its part, NTP is prepared to keep fighting, said its attorney, James H. Wallace Jr. of Washington.

Wallace said that if the patent office officially rejected NTP's patents, the Arlington, Va., company would take the case to three patent judges.

"If their decision is not satisfactory, we could go to the federal appeals court," he said.

That, at least, could buy NTP more time, analysts said.

"If you own NTP, the biggest fear is that the patent office overturns all the patents," said analyst Tavis McCourt of Morgan Keegan & Co. "So they're trying to force a settlement before all that happens."

RIM, which routes its e-mail traffic through Canada, said it had developed a work-around plan that requires customers to download software, which won't infringe the patents.

Many analysts, though, scoff at the plan, saying it will not work.

Even if it does, they said, customers may find it easier to buy a competitor's version.

RIM said that as the judge considered the injunction, he should put "significant weight" on the rejection of NTP's patents, RIM's ability to pay royalties to NTP and the lack of a practical way to prevent unintended consequences from an injunction.

RIM shares fell $2.37 to $64.25.

Times staff writer David Colker contributed to this report.

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