BlackBerry maker Research In Motion Ltd. (RIMM) has reopened its legal battle with NTP Inc. (search) after failing to finalize a $450 million settlement that would have resolved their bitter and potentially damaging patent dispute.
RIM's stock closed down 5 percent as investors, who had largely assumed the dispute was resolved, fretted about the renewed risk of a court injunction that would halt U.S. sales of RIM's flagship wireless e-mail device.
RIM, which helped popularize mobile e-mailing with its thumb-operated BlackBerry (search), said Thursday it had asked a U.S. court to enforce the terms of the deal announced in March because NTP "refuses to honor all of its obligations".
Lawyers for closely held NTP, a U.S.-based patent holding company, did not immediately return phone calls.
"RIM is not looking to modify any aspect of the binding term sheet, but rather to have the court enforce the term sheet that both parties committed to and signed," RIM co-chief executive Jim Balsillie told analysts on a conference call.
"I'm a pragmatic businessman ... I'm not looking to play any games, or do any quibbling or deviate from anything we agreed to do here."
Shares of Waterloo, Ontario-based RIM fell $3.89 to $73.55 on Nasdaq on a volume of more than 25 million. In Toronto, the stock fell C$4.11 to C$92.89.
The news prompted Legg Mason analyst Timm Bechter to cut his rating on RIM to "hold" from "buy".
Balsillie said he could not give the exact details of the dispute because the settlement terms are covered by a confidentiality agreement. This left analysts to speculate on its cause.
RBC Capital Markets analyst Mike Abramsky said in note that RIM seemed to hint that NTP is asking for more than the $450 million and wants to impose restrictions on RIM's business going forward.
Canaccord Capital Peter Misek said he believed RIM's management did not change their minds, but that NTP may not have realized the nature and full scope of the licensing deal they signed.
NTP successfully sued RIM in 2002 for patent infringement. In December, a U.S. appeals court upheld the patent infringement finding against RIM, but said part of the earlier ruling was flawed and sent the case back to a lower court.
The Canadian company agreed in March to pay $450 million, believed to be one of the largest such settlements, to end the dispute and predicted the negotiation of a final settlement deal within weeks.
The initial settlement triggered a 17 percent jump in RIM's share price, as investors cheered the elimination of a major legal overhang. NTP also won a court injunction in 2003 halting U.S. BlackBerry sales, but that was stayed pending the outcome of the appeal process.
Since then, the Patent and Trademark Office (search) has issued "first office actions" questioning the validity of two of the five NTP patents involved in the case, Balsillie said. He said this suggests it will do the same with the other three patents.
But the chief executive said the patent office decisions had no bearing on RIM's latest legal actions and it was aware they could be overturned when they made the settlement.
"We were well aware of that, but there's a risk of being caught in a time gap and not having certainty with courts. So we took a prudent though difficult business decision and committed to it," he said.
"Are there better possible scenarios than the $450 million? We're not approaching this trying to improve our deal here."