Image: Blackberry users
Richard Drew  /  AP
If a federal judge orders RIM to shut down its BlackBerry service, millions of users will be disconnected.
updated 2/24/2006 6:06:01 AM ET 2006-02-24T11:06:01

Hear that noise? It's the sound of 4.3 million e-mail addicts shaking in their boots.

Later today, a federal judge will hear arguments in the long and ugly patent battle between Research In Motion (nasdaq: RIMM - news - people) and NTP — and could order RIM to shut down its hugely popular wireless e-mail service. The decision could leave millions of "CrackBerry" addicts disconnected from their favorite gadgets, cost RIM upwards of a billion dollars and cause chaos for users who depend on the devices.

"It will be a tremendous inconvenience for the portion of our workforce that has come to depend on it," says Jean-Marc Halbout, CIO of Quest Diagnostics, and a fan of the BlackBerry service.

The legal dispute began in the early 1990s, when inventor Thomas Campana came up with a method for delivering wireless e-mail, and co-founded NTP to protect his patents. NTP never released a product, but not long after, RIM did — and their "BlackBerry" caught on quickly.

In 2000, NTP filed a patent-infringement suit against RIM, and in 2003, Judge James Spencer of the U.S. District Court for the Eastern District of Virginia ruled in NTP's favor, awarding $210 million in damages. He also granted an injunction banning BlackBerry sales and service in the U.S., but put it on hold pending appeal. Ever since, the case has lurched through various courts and appeals; for a while, it even looked like RIM and NTP had reached a $450 million settlement, but the deal fell apart.

Eventually, the case returned to Spencer's court, where he quickly made it clear that he wanted the whole mess over and done with, saying he'd "spent enough of my life and time on NTP and RIM." In the months since, he has refused to be swayed by the U.S. Patent and Trade Office striking down the patents or to heed the entreaties of high-profile users, including the U.S. Department of Justice, which said that a ban could disrupt essential government services.

In Friday's hearing, Spencer will hear arguments over whether or not to enforce the long-delayed injunction. It's expected that he'll issue his decision soon after.

Most observers agree that Spencer is likely to enforce his earlier injunction. But opinions vary on what that will actually mean, and whether it will really cut RIM off from the market that provides 70 percent of its sales.

Avi Greengart, principal mobile-device analyst for Current Analysis, says an injunction is likely. But he says he expects Spencer to grant a delay long enough for RIM to keep service running while not infringing on NTP's patents. Earlier this month, Jim Balsille, co-CEO of RIM, said the company had developed and tested software fixes that should allow the service to stay online if Spencer moves forward with the injunction; he says the new technology wouldn't infringe on NTP's patents.

If the workarounds actually work, that means RIM is under less pressure to sign a costly settlement with NTP and can continue to fight the case in court or haggle for a cheaper deal.

But that's not to say the workaround is a cure all. Implementing it would be messy and could cause problems. "It's going to put an undue administrative burden on customers to make upgrades to their software," says Gene Signorini, research director at the Yankee Group. "It certainly isn't what customers want to see."

Will users stick around?
If the workaround does turn out to be troublesome, it's not likely to cost RIM that many customers; switching carriers is costly, and most users will probably stick around regardless of the nuisance. But all the trouble and resultant bad press would probably force RIM to settle quickly — and on NTP's terms; a deal that could cost a billion dollars or more.

Another possible scenario has RIM and NTP settling before Spencer makes his ruling. But at the moment, NTP has the advantage, and it seems unlikely they'd cash out before getting a ruling.

Not everyone thinks a decision to enforce the injunction is a given. Stephen B. Maebius, a patent lawyer and partner with Foley and Lardner in Washington, D.C., says the case is simply too close to call, and that patent rulings in RIM's favor have blown the case wide open: "Now it's kind of a tossup."

Nor will Yankee Group's Signorini speculate on Spencer's ruling. But he does says the distraction has already hurt RIM: Even though it hasn't cost the company many customers, many will question their long-term BlackBerry investment. "RIM has opened up the avenue for competitors," he says. Companies that stand to benefit from a wounded RIM include smartphone competitors Palm (nasdaq: PALM - news - people), Nokia (nyse: NOK - news - people ), Motorola (nyse: MOT - news - people) and Sony Ericsson (nyse: SNE - news - people), as well as software vendors like Microsoft (nasdaq: MSFT - news - people).

Complicating RIM's prospects is the likelihood that even if it can get a good settlement, the company will be hit with lawsuits from shareholders angry that it spent so much time and money to fight NTP's claim.

Plenty of BlackBerry users remain faithful to Research in Motion — and to their favorite gadget. "We are not worried about service being shut down," says Beth Perlman , CIO of Constellation Energy Group and another BlackBerry fan. "We have spoken to executives at RIM and feel comfortable that they have proven workarounds."

Of course, that doesn't mean they won't jump ship if they have to. "We have been testing [Microsoft's] Windows mobile devices for some time," says Perlman. "We have these devices ready for executives should the need arise. So we're prepared either way."

© 2012


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