BlackBerry Is Saved by a Settlement
The prayers of BlackBerry addicts were answered Friday after the maker of the popular e-mail pager settled a patent case and averted a court-ordered shutdown.
Research in Motion Ltd. agreed to pay $612.5 million to resolve claims that its hand-held phone and e-mail device infringed on patents held by a Virginia company. That outfit, NTP Inc., won a federal jury verdict against RIM in 2002, and a judge was weighing whether to suspend BlackBerry service in the United States.
That left compulsive users biting their thumbnails at the prospect of living without their electronic leash, which some wags call the CrackBerry.
“Fundamentally, we really did this to give certainty and predictability and calmness to our whole ecosystem,” said RIM Chairman Jim Balsillie, referring to customers, carriers, partners and affiliates of the company, based in Waterloo, Canada. “There’s no question we took one for the team.”
Research in Motion shares shot up almost 19% after the deal was announced, and users expressed relief that they could continue checking e-mail at home or on the road.
“I was waking up every morning wondering if I would have service,” said Mitchell Ohlbaum, president of Legend Mortgage Corp. in Los Angeles.
Like many users, Ohlbaum had explored switching to a rival device, such as Palm Inc.’s Treo.
“We had a backup plan because we can’t afford not to be connected,” said a “very much” relieved Scott Mitchell Rosenberg, who heads Platinum Studios in Beverly Hills. “We’re addicted, but we’re willing to change our drugs.”
Rosenberg was rigging up his BMW to display BlackBerry messages on the dashboard when news of the settlement broke. He’s so connected that he carries two devices, with separate carriers for times when service goes down on one of them.
NTP co-founder Donald E. Stout said the agreement was in the best interests of all parties -- especially the U.S. government, a major BlackBerry user that had objected to the proposed injunction.
The license granted under the settlement covers all NTP patents and all BlackBerry devices and technologies and includes all future royalties, both sides said.
“The irony is that this is a case that could have been settled three to five years ago for a lot less money,” said Paul R. Ryan, chairman of patent licensing company Acacia Research Corp. in Newport Beach. “The case was mishandled by RIM, and egos got in the way.”
After NTP, a patent holding company, won its case, RIM appealed. The company lost, but it also attacked the validity of the patents, where it had more success. The U.S. Patent and Trademark Office had begun rejecting NTP’s patents.
Previous settlement talks faltered. Research in Motion proposed settling the case last year for $450 million, but NTP wanted as much as $1 billion.
Last week the judge in the case chastised both sides for failing to settle the case and said he would weigh whether to suspend BlackBerry service in the U.S., which accounts for 3 million of RIM’s 4.3 million customers.
Balsillie said a big reason to settle was that sales of BlackBerry pagers were off more than expected in the last three months. The company lowered its earnings and revenue estimates. He stressed that customers weren’t abandoning their pagers; they just weren’t committing to future service with the litigation still pending.
The company, which had expected to add as many as 750,000 customers in the current quarter, will instead add 620,000 to 630,000, Chief Financial Officer Dennis Kavelman said. Revenue is expected to be flat at $550 million to $560 million.
The NTP agreement, which includes about $450 million already socked away for expenses and settlement, will reduce RIM earnings by about $3 a share. At the end of November, the firm had more than $1 billion in cash and short-term investments.
Research in Motion shares gained 53 cents to $71.92 in regular trading Friday. Before the settlement announcement, after-hours trading was halted. When it resumed, RIM shares reached $85.50.
