Thursday, October 27, 2005

HOW THE RIM/NTP PATENT DISPUTE MAY AFFECT FUTURE LITIGATION WITH PUBLICLY-TRADED COMPANIES: Now that the brouhaha over the RIM/NTP has temporarily died down, CNet has provided a handy chronology of the case, listing key events in the dispute.

After reading through it, I noticed that the original verdict (November 21, 2002) found that RIM was liable for (only!) $23.1 million when it was found they infringed 16 claims from 5 of NTP's patents. Having the benefit of hindsight, it would seem that RIM would have been better off by simply settling the case during that time.

Since RIM decided to fight, this was the reward for their efforts:

May 23, 2003 - Court increases RIM damages and hikes the royalty rate to 8.55 percent, which has to be set aside from RIM's U.S. sales until the case is concluded.

Aug. 5, 2003 - Court issues injunction banning U.S. BlackBerry sales, but stays the ruling pending an appeal.

March 16, 2005 - RIM says it agrees to pay $450 million to settle the dispute with NTP, sending its stock soaring more than 17 percent.

June 9, 2005 - RIM shares fall 5 percent after the two companies fail to finalize a settlement.

October 7, 2005 - RIM stock plunged 10 per cent before trading was halted
on news that the Federal Circuit rejected the BlackBerry maker's request for a
new hearing.

October 21, 2005 - trading of RIM stock is halted for the second time in three weeks when the Federal Circuit denied RIM's request to delay sending the case back to a lower court while RIM sought certiorari to the U.S. Supreme Court. The Supreme Court subsequently denied taking that case, further hitting RIM's stock.
What a rough ride. Of course, there are still the reexaminations being conducted in the USPTO, which currently bode in RIM's favor, but it is still unkown how NTP's responses will overcome the rejections being made in the proceedings. And if the judge rules to force an injunction on RIM, watch out.

This all has to be welcome news for holding companies, which now seem to have investor skittishness over patent infringement cases working in their favor. Just in the last week, Intel and Amazon had to explain to stockholders that earnings were less-than-desirable due to settlements ($300 mil and $40 mil respectively) made late in pending litigation. Each stock got hit over the news.

After seeing the nightmare that RIM is currently experiencing (never mind the potential injunction), holding companies have some pretty compelling arguments for publicly-traded defendants to reach settlement earlier (such as Forgent, which recently had RIM settling with them over their JPEG patent).

While patent infringement cases have dogged companies for years, the public is getting more in tune with the effect of patents, and the potential harm (or benefit, depending on which side you take) that they can cause. And the "hotter" each story becomes in the press, the greater the likelihood will be that investor confidence in a stock will wane.

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