A U.S. appeals court upheld a patent infringement finding against BlackBerry e-mail device maker Research In Motion Ltd. Tuesday, but said part of an earlier court ruling was flawed and sent the case back to a lower court.
The decision spurred wild trading in shares of Waterloo, Ontario-based RIM. The stock initially soared almost 15 percent on news that a decision had been reached, but erased those gains after the court released details of the decision.
The stock fell almost 9 percent after a trading halt was lifted.
Analysts offered widely divided opinions on whether the decision was mainly negative or positive for RIM.
The U.S. Court of Appeals for the Federal Circuit said a lower court had "correctly found infringement" in the case that pitted RIM against patent holding company NTP Inc.
But the appeals court concluded that the lower court had misconstrued the term "originating processor", raising questions about five of the 16 patent claims that RIM has challenged.
It sent the case back to the lower court to determine if the verdict should be modified.
The appeals court also rejected one of the key arguments advanced by RIM -- that Blackberry is not subject to U.S. patent law because RIM's main relay facility is located in Canada.
"According to legal experts that we've already consulted on this, this is a resounding victory for NTP," said one Toronto-based analyst who follows the firm.
But a second analyst said RIM would benefit because it would get a second opportunity to make its case.
Tim Biggam, chief options strategist with Man Financial, said the stock jumped at first because the ruling initially appeared favorable to RIM as it appeared the case will be going back to court and "in essence will be reopened."
Kona Shio, an analyst with investment research firm Conscius Capital, said he expects the stock to come under pressure in the near term because the decision ruled out the best-case scenario of the case being overturned.
RIM said in a brief statement it will continue to provide updates on the case but had no further comment and details.
Lawyers for NTP said in a statement they were pleased that the appeals court upheld infringement of 11 of the 16 litigated claims and said it was "confident" that will win the additional 5 claims when the case is reheard.
Closely held U.S.-based patent holding company NTP successfully sued RIM in 2002 for patent infringement, a ruling that RIM has appealed. A U.S. court last year issued an injunction banning BlackBerry sales in the United States, but stayed that injunction pending the outcome of the appeal.
The appeal was heard on June 7 by three judges on the U.S. Court of Appeals for the Federal Circuit.
NTP's lawyers said the court of appeals decision moves the case one step closer to have the lower court lift its stay, reconfirm and enforce the injunction, based on the 11 claims.
They said total damages accrued by RIM for past infringement were about $113 million as of August, 2004.