US Supreme Court's decision puts BlackBerry manufacturer under increased pressure to settle dispute

The US Supreme Court's refusal this week to take a case over BlackBerry e-mail pagers increases pressure on the device's manufacturer to settle its patent fight. However, analysts and legal observers said that a threatened shutdown of the service was unlikely.

By giving the thumbs down to BlackBerry maker Research In Motion (RIM), the court sent the case back to a US district court in Richmond, Virginia, where a jury in 2002 found that the company had infringed patents held by NTP.

District judge John R Spencer issued an injunction suspending Canada-based RIM's operations in the US, potentially cutting off nearly 2.9 million users. But he stayed the order pending appeals.

With the case back before him, the judge is expected to decide on damages and whether the injunction should take effect.

NTP, in the meantime, has lost key backing from the US patent and trademark office, which said that 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.

Unfortunately for RIM, district court judge James Spencer, has scheduled a hearing on injunctive relief and damages for February 24th - before the patent office is likely to issue a final determination on the patents .

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

The handheld 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".

NTP first filed suit against RIM's patented system of redirecting corporate e-mail to a wireless device in November 2001 . A group of Illinois-based inventors, led by Thomas Campana, said in a statement of claim that the sale of RIM's BlackBerry in the US infringed on eight patents controlled by NTP, a holding company.

The US company claimed it had written to RIM in January 2000, notifying it of its patents and suggesting it take out licences to sell the BlackBerry in the US, but the Canadian company had failed to do so.

At the time the lawsuit was filed, BlackBerry had 246,000 subscribers. Now it boasts around four million users worldwide. However, the US market accounts for about 70 per cent of sales. So what's a worried user to do?

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

"While the possibility is not 0 per cent, we don't think that the BlackBerry service is going to be shut down," Daley said.

Despite such assurances, some users are bracing themselves 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 that both companies would benefit from a settlement, RIM and NTP are playing hardball. A proposed settlement for $450 million (€366 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 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 jnr of Washington. Wallace said that if the patent office officially rejected NTP's patents, the Arlington, Virginia, 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 Tavis McCourt of Morgan Keegan.

"So they're trying to force a settlement before all that happens."

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

Many analysts, though, scoff at the plan, saying that 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.