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Originally published Thursday, June 16, 2005 at 12:00 AM

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BlackBerry backup plan set in patent impasse

Research In Motion Co-Chief Executive Officer James Balsillie said he has back-up technology to keep U.S. BlackBerry devices running should...

Bloomberg News

Research In Motion Co-Chief Executive Officer James Balsillie said he has back-up technology to keep U.S. BlackBerry devices running should a 3-month-old patent settlement with NTP fall apart.

"A workaround is a viable option," Balsillie said in an interview yesterday. The alternative technology would run BlackBerry phones and pagers and is designed not to infringe on patents held by NTP.

Balsillie said he is making preparations to continue operations in the U.S. after a $450 million settlement with NTP collapsed last week. The dispute may force Research In Motion to stop selling its BlackBerry devices in the U.S., where sales to Wall Street traders and corporate executives helped generate about two-thirds of the company's $1.35 billion in 2004 revenue.

"There is a danger that the injunction on U.S. sales might happen," said Edward Timmons, an analyst with Legg Mason Wood Walker, who said questions around the settlement caused "turmoil and uncertainty."

Shares of Waterloo, Ontario-based Research In Motion have fallen 6.4 percent since the company said the agreement was in doubt. The stock fell 44 cents to $72.01 yesterday. NTP, a patent-licensing company based in Arlington, Va., isn't publicly traded.

Legg Mason's Timmons and colleague Timm Bechter, as well as Peter Misek of Canaccord Capital, cut their ratings on Research In Motion after the company said the settlement was in doubt. Two other analysts, Deepak Chopra of National Bank Financial and JPMorgan Chase's Paul Coster, lowered their price targets for Research In Motion stock.

Research In Motion had more than 3 million BlackBerry subscribers as of May 9. Known in some circles as "CrackBerries" for their habit-forming tendencies, the devices are used by executives, money managers eager to keep up on market headlines, as well as political figures such as Karl Rove, deputy chief of staff to President Bush.

NTP and Research In Motion are awaiting a court decision, expected this week, on whether Research In Motion can ask a judge to enforce the settlement terms. The accord fell apart when the companies met to forge final terms.

Difference of opinion

Research In Motion is seeking a judge's ruling that those terms are clear and binding. The dispute is over sub-licenses that Research In Motion could use for other products, NTP said in court papers filed June 9.

The impasse "was quite unexpected," Balsillie said. "We had a contract, we had an agreement, we were explicit on the terms of the agreement. I really thought this issue was behind us."


In a June 13 filing with a U.S. Court of Appeals, Research In Motion said the lack of clarity is hurting its business.

The $450 million offer "is a staggering amount of money," Balsillie said. "It's not like we're trying to pay less. We're simply trying to get what we bargained for."

NTP lawyer James Wallace of Wiley Rein & Fielding in Washington, D.C., called the dispute a "difference of opinion" on what was agreed to in the original settlement.

"The difference relates to the scope of the license and sublicensing rights," Wallace said in an interview, declining to elaborate on specifics beyond the company's court filing.

In December, the U.S. Court of Appeals in Washington, D.C., upheld a jury finding that Research In Motion infringed patents held by NTP that cover a system of receiving and transmitting e-mail. The court remanded the case on one issue, giving the sides time to settle before Research In Motion faced an order to halt sales of some BlackBerries.

Appeal filed

Research In Motion has asked the appeals court to reconsider that December decision. NTP said the court should continue with its review of that request without sending the case back to the trial judge on the settlement issue.

Balsillie declined to discuss details of the "workaround" plan, citing confidentiality. He said the company is working "expeditiously" to get the legal issues resolved.

NTP may have patents that cover the alternate technology, NTP lawyer Wallace said.

"We have so many patents and so many patent claims that cover so many aspects of this," he said. "I obviously haven't discussed this with them, but maybe he has something up his sleeve. Jim's a very clever guy."

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