Mathew Ingram: Legal thorns entangle BlackBerry maker

Not that long ago, Research In Motion was on top of the world. The handheld-device maker, based in the small university town of Waterloo, Ontario - about two hours west of Toronto in Canada - had finally settled the longstanding legal suit that was pressuring both the company's stock and its business, clearing the way for it to continue growing the market for its popular BlackBerry email devices.

At US$450 million, the settlement didn't exactly come cheap, but RIM shareholders celebrated anyway, relieved that an agreement had been signed with US-based NTP to license the company's patents on wireless email.

Shares of Research In Motion (RIM) climbed by more than 20 per cent the day the news was announced, pushing the stock price past US$80 - higher than it had been in months.

Since then, however, the stock has sagged again, falling below US$60 a few weeks ago.

The euphoria that greeted the deal with NTP soon evaporated, as the two sides failed to follow through on their agreement, with each side blaming the other for the collapse of discussions.

And now they are back in court - appearing before one of the original trial judges in the case - and there is a real chance that RIM could be hit with an injunction preventing it from selling BlackBerrys in the United States.

How did it come to this? RIM says the agreement with NTP in March was a final, binding deal that allowed it an "unfettered right" not only to use the other company's technology, but to sub-license it to others - that is, the handheld-maker's telco partners.

NTP, however, said the arrangement was simply the first stage of negotiations and that the deal had not been finalised. Research In Motion, meanwhile, might not have been quite as eager to get the deal signed as it was earlier, since the company was also busy trying to get the US Patent and Trademark Office to invalidate the NTP patents - and this campaign was starting to show some signs of success.

The Patent and Trademark Office has now issued so-called "first office" letters rejecting all six of NTP's disputed patents, something that has helped buoy RIM's share price somewhat.

However, patent experts note that such rejection letters are not uncommon when claims are being reviewed, and don't necessarily mean that the patents in question will all be invalidated.

In any case, even if there were such a decision, it could be appealed through several levels of authority, stretching the case out for years.

Analysts who follow RIM say that level of uncertainty could not only keep a lid on the company's share price, but keep potential partners away as well.

And that would tie the device-maker's hands at the worst possible time: when competition in the wireless email market is intensifying, with Microsoft pushing hard to get users to let it handle their wireless devices, and competitors such as Good Technology, Seven Networks and Visto also keeping the pressure on.

And they aren't the only ones - cellphone maker Nokia just bought Intellisync, one of RIM's leading competitors, and clearly plans to make an assault on the market.

RIM has tried several different gambits to try to resolve the case in its favour: first it tried appealing against the original ruling, and lost. Then it tried to appeal against that to the Supreme Court, and was denied.

Then the company tried to get the entire appeal court to re-hear the original case, but that attempt also failed. It then asked the original judge, who is now in charge of the case again, to delay his decision until the Patent and Trademark Office rules on the validity of the NTP patents, but Judge James Spencer said he had no intention of doing so.

In fact, he said he would be making his decision relatively quickly, since he had "spent enough of my life and time on NTP and RIM".

Research In Motion has had some powerful support in its case, including both the US and Canadian Governments. The Canadian Government intervened in the case this year by filing a brief with the court in favour of one of RIM's arguments - that US patents don't apply to RIM because the servers that transmit wireless email to the company's BlackBerrys are located in Canada, out of the reach of US law.

The US Government intervened last week, asking the court to consider - before issuing an injunction to prevent RIM from selling BlackBerrys and wireless email in the US - that thousands of key US government personnel use the devices and would therefore be affected.

Neither of those arguments has had much effect, however, and the threat of an injunction is becoming more real with each passing day.

Some analysts say RIM is probably going to have to swallow both its pride and a hefty settlement fee - which could be as high as US$1 billion - in order to make the case go away for good.

It's either that, they say, or take the risk of doing further damage to the company's competitiveness at a time when it needs every ounce of strength to win the wireless email war.