Users urge BlackBerry maker to settle

The latest setback for Research in Motion in its long-running patent infringement battle has at least some users saying it is time for the BlackBerry maker to give up the fight and settle.

The company’s legal woes have raised the specter of users of the popular e-mail devices getting their service cut off, though legal experts and industry observers say that is highly unlikely.

That’s especially true given that RIM last week was given another chance to settle. Just days after a federal judge’s rulings against RIM, its legal adversary, NTP, sent RIM an offer of a license contract, with a royalty rate of 5.7%.

NTP is a patent holder and licensing company co-founded by Thomas Campana, an engineer and inventor to whom the original patents in this case were issued. He died last year. NTP in a suit filed in 2001 claimed that RIM’s products and services infringed those patents.

Last week, U.S. District Court Judge James Spencer for the Eastern District of Virginia denied a request by RIM to enforce the terms of a $450 million settlement that RIM had negotiated with NTP earlier this year. For reasons that haven’t been made public, the two companies didn’t consummate that deal. According to RIM’s Web site, Spencer concluded that the settlement was not an “enforceable agreement” Spencer also denied a RIM motion to hold off court proceedings “until the U.S. Patent & Trademark Office reaches a final determination in its reexamination of the NTP patents.”

Ironically, the day after Spencer’s ruling, the Patent Office issued yet another preliminary rejection of yet another NTP patent claim, according to an Associated Press story. RIM argues these rejections show NTP’s patents are invalid. The ruling could not be confirmed by Network World’s deadline.

The 5.7% royalty rate offered by NTP is the same rate that a jury previously had ruled was fair, according to Don Stout, a partner at the firm of Antonelli, Terry, Stout & Kraus LLP, and the other co-founder of NTP. Stout now does NTP’s legal work and still holds company stock. That trial ended in a victory for NTP, and the essential finding – that RIM had infringed – was upheld by an appeals court.

“We’re saying to them, ‘You have the opportunity to settle,'” Stout says. RIM did not respond to a request for comment by deadline.

RIM should take the offer, users say.

“The BlackBerry is a very big piece of the technology picture at our firm,” says Frank Gillman, director of technology for Allen Matkins LLP, a law firm in Los Angeles. Nearly every lawyer and all of the top management staff have the e-mail devices, about 250 in all.

“The BlackBerry has such a pervasive presence in legal, entertainment, medical and other client-oriented businesses, and in half the [U.S.] government,” Gillman says. “RIM’s going to have to come to the table and say, ‘What do we need to do’ to settle?”

RIM still faces the possibility of a new injunction that could shut down its service and product sales in the United States. That’s not what NTP wants. “It’s only if they refuse to pay that we’re going to shut them down,” he says.

RIM says it has created software that would allow its service to continue running without infringing NTP patents. “Our position is that this design-around is [still] covered by our patents,” Stout says.

The promised software fails to comfort. “They say they have patches and ways that will enable the customer base to continue to use these products,” Gillman says. “Clearly what they don’t say is, ‘it’s going to be a royal pain in the butt to download all these patches, deploy them, administer the changeover and everything else.’ It’s going to be complicated.”

Consulting firm TowerGroup says a court ruling in favor of NTP is unlikely to lead to a wholesale shutdown of RIM’s service. The firm expects the two companies to reach a settlement within 30 days, with RIM agreeing to pay $750 million to $1 billion. That could eventually lead to higher costs for companies that rely on the BlackBerry, TowerGroup says.