Judge Scolds RIM for Not Settling

James Balsillie, center, co-chief executive of Research in Motion Ltd., speaks to reporters along with attorney Henry Bunsow in Richmond.
James Balsillie, center, co-chief executive of Research in Motion Ltd., speaks to reporters along with attorney Henry Bunsow in Richmond. (By Steve Helber -- Associated Press)
By Yuki Noguchi
Washington Post Staff Writer
Saturday, February 25, 2006

RICHMOND, Feb. 24 -- A federal judge Friday criticized Research in Motion Ltd., the Canadian company that makes the BlackBerry e-mail device, for failing to settle its patent dispute with McLean-based NTP Inc. While the judge did not impose an injunction that many users feared would halt the popular BlackBerry service, his comments led observers to conclude that the injunction could come soon.

"The hallmark of sanity is to remain firmly tethered to reality," U.S. District Judge James R. Spencer said after hearing more than 3 1/2 hours of testimony from both sides. "One unfortunate reality for RIM that they want to forget is that there was a trial, a jury was selected, evidence was received, and when all was said and done, they found RIM had infringed the patents and the infringement was willful."

In 2002, a jury of 12 men and women found RIM guilty of willfully infringing patents held by NTP and awarded NTP royalties that as of last November totaled $240 million. Those patents are under review at the U.S. Patent and Trademark Office, however, and Friday the agency rejected the validity of the second of five relevant patents that underlie the dispute with RIM. That review is independent of the legal case, and NTP can still appeal those rejections, which may take several years, patent experts said.

Since its introduction in 1999, the BlackBerry has become a mainstay among white-collar workers, many of whom depend heavily on the palm-sized device to send and receive e-mail in real time when they are away from their desks. At the hearing, RIM's lawyers cited the dependence of the BlackBerry's more than 3 million U.S. subscribers, arguing that the service has become so critical in various industries that losing it would significantly harm the economy.

RIM co-chief executive Jim Balsillie, who sat silently in the front row of the courtroom, asserted after the hearing that his company has not been offered a "reasonable" settlement by NTP and urged BlackBerry users not to be concerned about losing service.

"No matter what, the BlackBerry service will keep working," said Balsillie, who emerged from the courthouse yesterday to a swarm of photographers, reporters and television cameras.

RIM has created a software work-around that will skirt any patent problems and has been tested by several dozen customers, Balsillie said, although he did not say when that would be widely available to users. Also, Balsillie and his lawyers repeatedly cited the patent agency's recent rejections of the two NTP patents.

But Spencer seemed unmoved by the patent agency's findings. Instead, the judge said he would decide "as soon as reasonably possible" how much in damages RIM owes to NTP, and whether and how to issue an injunction.

Spencer mocked RIM for an apparent "contradiction" in its assertions that BlackBerry service is vitally important but, at the same time, that a work-around solution would be easy to implement. "You say there will be a catastrophic effect and the Western civilization will be shaken," he said, inspiring laughter from the packed courtroom. "And then from other stuff I've read, it's a minor inconvenience."

Spencer appeared most interested in the testimony of U.S. Justice Department lawyer John J. Fargo, who urged that any injunction be carefully crafted to exempt about 1 million government, emergency and government-contractor subscribers.

Spencer's comments signaled he would issue a swift decision, and one that would affirm the jury's earlier finding, said Rebecca Arbogast, an analyst with Stifel, Nicolaus & Co. "I don't think either one of those messages was good for RIM," she said.

"It's very clear to me that he thinks an injunction is proper," said Brian E. Ferguson, a Washington-based patent attorney. "I think [RIM] is really backed into a corner," with no other realistic option than to go back and try to settle the case, he said.

In a written statement, NTP said it continues to try to meet with RIM to discuss settlement. "We . . . believe, based on the closing remarks of Judge Spencer, that the Court was receptive to the merits of our arguments."

Yesterday's deliberations were followed closely by BlackBerry users, eager to know the fate of their device. Sean Cunningham, 39, said he has no backup plan. The Arlington resident said he bought his BlackBerry in 2001, and within three days was addicted, checking it between 20 and 30 times a day. "I can't do without it," he said.

Laurel resident Thomas Johnson, 41, and his friend Paul Bennet, 42, said they are beginning to face the possibility BlackBerry service may go out. That would mean they'd have to revert to Plan B: the Palm Treo.

Competitors to BlackBerry's service, meanwhile, say they have been experiencing a surge in interest as companies look for potential replacements.

Good Technology Inc., which has a licensing agreement with and is partly owned by NTP, said it has signed up 1,300 businesses to test its e-mail service since December. Visto Corp., another small competitor to BlackBerry, said it has received hundreds of inquiries from corporate BlackBerry users searching for alternatives.

Major mobile phone providers, meanwhile, continue to sell Blackberries on the Web and in their stores despite uncertainty about how the judge may rule and how well RIM's work-around will perform.

"Right now our focus is on testing the contingency software," which is known as Blackberry MultiMode Edition, said John Kampfe, a spokesman for Cingular Wireless LLC, the nation's largest mobile phone company. "Cingular does have a broad portfolio of corporate e-mail solutions beyond Blackberry. We are evaluating scenarios involving such alternative platforms as GoodLink . . . and Cingular Xpress Mail. Those are two that customers could avail themselves of in addition to Blackberry MultiMode Edition if that were to become necessary."

Kampfe said those two products do not work on RIM Blackberries and would require a customer to obtain a different handset.

Verizon Wireless and Sprint Nextel Corp., the nation's second- and third-largest mobile phone companies, said they had drawn up contingency plans but declined to offer details on them.

Staff writers Arshad Mohammed and

Ylan Q. Mui and staff researcher Karl Evanzz contributed to this report from Washington.

© 2006 The Washington Post Company