The maker of the BlackBerry e-mail device Friday said it settled its long-running patent dispute with a small Virginia-based firm, averting a possible court-ordered shutdown of the BlackBerry system and a disruption of wireless service for millions of users.
Research In Motion Ltd. (RIMM) has paid NTP Inc. $612.5 million in a "full and final settlement of all claims," the companies said.
James Balsillie, RIM's co-chief executive, said the company was "taking one for the team," sparing its customers and partners the uncertainty of litigation.
"We're happy to do that to support the team, but do we feel good about it? No," Balsillie said.
At a hearing last week, NTP had asked a federal court in Richmond, Va., for an injunction blocking the continued use of key technologies underpinning the BlackBerry wireless e-mail service.
At the hearing Friday, Judge James R. Spencer expressed impatience with RIM and urged a settlement.
"He basically questioned the sanity of RIM, and said it wasn't acting very rationally," said Rod Thompson, patent attorney at Farella, Braun and Martel in San Francisco. "His prodding of the parties worked."
The settlement is on the low end of expectations, Thompson said, especially since RIM will not have to pay any future royalties. There had also been talk of NTP receiving a stake in RIM.
Shares of RIM shot up $13.78, or 19 percent, to $85.70 during after-hours trading, when the settlement was announced. They had closed 53 cents higher at $71.92 in regular trading Friday on the Nasdaq Stock Market.
"NTP is pleased that the issue has been resolved and looks forward to enhancing its businesses," said Donald Stout, NTPs co-founder, in a written statement.
Thomas Campana Jr., the other founder of Arlington, Va.-based NTP, in 1990 created a system to send e-mails between computers and wireless devices. Campana died in 2004. He is survived by his wife, who owns a large stake in NTP.
RIM, which is based in Waterloo, Ontario, had already put away $450 million in escrow, the amount of a settlement in 2005 that later fell apart. RIM will record the additional $162.5 million in its fourth-quarter results, it said.
The settlement ends a period of anxiety for many of the more than 3 million BlackBerry users in the United States. Uncertainty over the outcome had some customers wondering whether they would experiences brief outages or even a shutdown.
"I'm relieved," said Matt Lattman, a management consultant in Boston. "I've had it for about a year, and at this point, I can't imagine life without it."
RIM said Friday that it had added 620,000 to 630,000 new subscribers in the fiscal fourth quarter, which ended in February, below the 700,000 to 750,000 it had estimated in December. It blamed the shortfall on unexpectedly high uncertainty among customers about the litigation.
RIM also cuts its revenue estimate for the quarter to $550 million to $560 million, from a previous forecast of $590 million to $620 million. Earnings excluding litigation costs are now expected at 64 cents to 66 cents per share, down from 76 cents to 81 cents.
RIM had assured users it had developed new software to work around NTP's patents. But because few details were released, analysts and some corporations expressed concerns about the viability of the technology and the legal ramifications of adopting it.
"Even though you have a workaround, you ask yourself a question: Is there a price at which you can put this behind you? We came to that point," Balsillie said.
The workaround too, might have been challenged by NTP, introducing yet another twist to this complicated and long-running case.
In arguing against an injunction, RIM's attorneys had stressed the public interest in keeping its service running. Government and emergency employees would be exempt from the BlackBerry ban, but sorting them from other users would prove difficult and problematic.
RIM attorneys also noted that the U.S. Patent and Trademark Office, in a proceeding parallel to the Virginia case, was poised to finally reject all patents at the heart of the case.
Spencer first issued an injunction in 2003 but held off on its enforcement during RIM's appeals. After those efforts largely failed, the case returned to Spencer.