BlackBerry dispute showdown nears
Upcoming hearing could prove to be turning point in the protracted legal battle.
NEW YORK (CNNMoney.com) - BlackBerry maker Research in Motion and patent holding firm NTP are set to face off again Friday, when a hearing begins on whether to shut down the popular wireless e-mail device in the U.S.
At the hearing in a district court in Richmond, Va., Judge James Spencer could grant NTP's request to shut down Waterloo, Ontario-based RIM's BlackBerry operations, a move that could prove to be a turning point in the longstanding dispute.
"A hearing like this is usually just about sorting out the spoils, but there are a lot of wild cards that make this hearing interesting," said Bob Yoches, partner at Finnegan Henderson, a firm that specializes in intellectual property law.
An injunction is usually granted in intellectual property cases -- that's the right of the patent holder, according to Yoches. That bodes well for NTP, which successfully sued RIM (Research) for patent infringement in 2002.
But several developments have occurred since that judgment was made, which could influence Judge Spencer's decision.
Most recently, on Wednesday, as part of its reexamination of NTP's patent claims, the U.S. Patent and Trademark Office issued a final rejection of one of the five patents involved in the infringement suit .
The final rejection is widely expected to lead to the Patent Office's invalidation of all of the patents at issue in the legal dispute.
Jim Wallace, lead trial counsel for NTP, said he hadn't seen documents confirming the final rejection, but that such a move doesn't constitute the last word from the Patent Office, since NTP can appeal the ruling through the agency's appeals board, which could take another six to 12 months.
"It isn't final agency action. It will not change anything Friday," he told CNNMoney.com.
Judge Spencer has said he sees the patent reexamination as a separate process from the legal proceedings and won't wait for final word from the agency, but some experts said that now that the Patent Office appears to be speeding up the review process, it may be significant enough for him to rethink the issue.
"When a patent is in reexamination, its validity is in flux," said Gary Abelev, a partner with law firm Dorsey & Whitney.
Another issue the district trial court will consider is the impact of a BlackBerry shutdown on the public and the government. NTP has said it would exclude government workers from an injunction, but the Justice Department has voiced its concerns over the feasibility of a partial shutdown.
Judge Spencer is allowing the Justice Department to appear at Friday's hearing, but has denied the government's request to introduce new evidence in the case.
There's been a lot of legal wrangling on both sides, and the dispute has garnered widespread public attention, since a potential shutdown threatens to paralyze U.S. businesses and disrupt service for the gadget's more than 3 million users.
In a recent survey of financial services companies by Pyxis Mobile, 81 percent said BlackBerry service was critical or vital to their business, and nearly 80 percent said they were working on backup plans in case of service disruptions.
But analysts say a settlement -- which could occur at any time -- is more likely than a shutdown. A settlement would benefit both RIM and NTP, a small holding company that doesn't make its own products and stands to gain from a one-time payout.
Ben Bollin, an analyst at FTN Midwest Research, expects settlement terms to now fall below the initial $450 million agreement the two companies reached last year, but which later fell apart. That's less than half the $1 billion payment he was predicting earlier this year.
"I think RIM is realizing it has an upper hand. Basically they're just pushing a settlement out to the last possible minute. They realize they have leverage, they want a settlement to be on their terms," said Bollin.
RIM may also be using its backup software plan as a negotiating tool in the settlement process. The so-called workaround plan lowers the risk of a shutdown in the event of an injunction, analysts say. But even RIM has conceded in legal briefs that any disruptions would "cause concern to users and service providers" and hurt its business.
In a research note issued Wednesday, Canaccord Adams analysts said a settlement remains more likely than not and would be a positive outcome for RIM.
The outlook of an injunction is low, but there is "a high probability of a settlement in light of the expectations that Judge Spencer will take time to deliberate," the note said.
How much time Judge Spencer will take to make his decision remains unclear, but the case has already dragged on for nearly five years in a jurisdiction that likes to decide cases quickly, according to Yoches.
Furthermore, the Supreme Court is hearing a case about when it's appropriate to grant an injunction against a patent infringer.
The outcome of MercExchange v. eBay, which could come this summer, could frame the decision Judge Spencer makes. "It's not unheard of for judges to table an issue until they receive direction from the Supreme Court," Yoches said.
Click here for the latest tech headlines.