Research In Motion (RIM) (Nasdaq: RIMM; TSX: RIM) today provided an update in the patent litigation between RIM and NTP, Inc. (“NTP”). RIM has developed and tested software workaround designs for all BlackBerry handsets operating on converged voice/data networks in the United States. Although there is no injunction order in place, and RIM believes it has strong legal and factual arguments opposing an injunction, RIM has developed these software workaround designs as a contingency to allow BlackBerry service to continue should the court implement an injunction in the current litigation involving the NTP patents.
“RIM remains pragmatic and reasonable in its willingness to enter into a settlement that would generously compensate NTP while protecting RIM’s business and partners,” said Jim Balsillie, Chairman and Co-CEO at Research In Motion. “NTP’s public offer of a so-called ‘reasonable’ license, however, is simply untenable. It comprises illusory protection for RIM and its partners and requires a lump-sum payment for the theoretical life of the patents even though the US Patent Office is expected to nullify them.”
Mr. Balsillie added: “RIM’s workaround provides a contingency for our customers and partners and a counterbalance to NTP’s threats. This will hopefully lead to more reasonable negotiations since NTP risks losing all future royalties if the workaround is implemented.”
RIM’s Workaround Strategy:
Workarounds are a legitimate strategy that have been respected by the courts as a means to avoid infringement. In the years leading up to its public launch in 1999, BlackBerry was invented wholly independently of NTP’s patents and comprises a wide spectrum of designs and inventions that are outside the scope of NTP’s patents. There are only 9 claims relating to 3 NTP patents remaining in dispute in this litigation and those claims are only directed to specific implementations of certain aspects of the BlackBerry products and services. As a result, RIM has been able to modify its underlying BlackBerry message delivery system to “work around” the NTP patent claims. Although the development of this modification required substantial R&D effort from RIM and would require software updates in the event of an injunction, RIM has ensured that the industry leading functionality, performance and user experience remains intact.
Legal Opinion on Workaround:
RIM has received a confidential and privileged legal opinion confirming that RIM’s software workaround designs do not infringe any of the NTP patent claims remaining in the litigation. This legal opinion was provided by a leading expert in patent law and workarounds from one of the world’s largest law firms. As mediation, litigation and reexamination proceedings and activities continue before the courts and the United States Patent and Trademark Office (“Patent Office”), RIM will continue to protect the confidential and privileged nature of certain information.
Multi-Mode Edition Software:
RIM has incorporated the workaround designs into a software update called BlackBerry Multi-Mode Edition that has been developed and tested as a contingency. RIM has also filed new patent applications with the Patent Office to cover its workaround designs. BlackBerry Multi-Mode Edition is so named because the software is capable of operating in different modes that can be remotely activated by RIM through its Network Operations Center (NOC). In the absence of an injunction, the software and the underlying message delivery system can continue to run in “Standard Mode” (identical to the manner in which the current BlackBerry software and system operate) and the workaround will remain dormant. In the event of an injunction, RIM is able to remotely activate “US Mode” via its NOC and the workaround designs would automatically engage for each handset containing the Multi-Mode Edition software update.
RIM invested significant engineering effort to develop workaround designs that remain invisible to users and maintain the existing platform benefits for system administrators, application developers and network operators, while modifying the necessary underlying elements of the BlackBerry message delivery system to be fundamentally different from the NTP patent claims.
Pre-Existing BlackBerry Customers:
There is no injunction currently in place and any potential injunction would not necessarily apply to customers that purchased a BlackBerry handset prior to the effective date of any such injunction. RIM believes there are persuasive legal grounds for (at least) exempting pre-existing customers from any injunction and RIM has raised these arguments in its court submissions. In the event of an injunction without such an exemption however, the BlackBerry Multi-Mode Edition software update would allow continuing service for pre-existing customers.
New BlackBerry Customers:
In the event of an injunction barring new sales of products utilizing RIM’s current system designs, RIM will have already pre-loaded the new BlackBerry Multi-Mode Edition software on to BlackBerry handsets and incorporated it into BlackBerry Enterprise Server software prior to shipping.
RIM has commenced the network certification process required for all software updates and will soon begin to ship the new software latent on new handsets in addition to making the software update generally available at the web site listed below for corporate IT departments and others to download and implement in accordance with their IT procedures. RIM, NTP and the US Department of Justice have all raised issues that would warrant a transition period following a potential injunction order. NTP has proposed a 30-day transition period, but RIM has argued that the transition period should be longer if the court were to grant and implement an injunction.
The Patent Office has already soundly rejected each of NTP’s patents on two occasions. These rulings from the Patent Office were based on multiple grounds, required the unanimous agreement of three senior patent examiners, and are expected to withstand all future appeals by NTP. NTP, however, is attempting to exploit and widen a gap in timing between separate proceedings underway in the court system and the Patent Office. RIM developed its software workaround designs as a contingency for the possibility that an injunction is implemented prior to the cancellation of NTP’s patent claims.
RIM Opposes Any Injunction:
NTP made clear that it is seeking monetary compensation from RIM and it is therefore evident that NTP can be fully compensated through ongoing royalty payments. There is also clear evidence that an injunction has become increasingly impractical and inappropriate given the specific facts of this case, including NTP’s failure to present a plan that is acceptable to the United States government. There are over 3 million BlackBerry users in the United States today and the United States government estimates that nearly 1 million of those users would need to be exempt from any injunction. In addition, final rejections of NTP’s patents are expected from the Patent Office in the coming weeks. There are also significant public interest concerns relating to any potential suspension or interruption of BlackBerry service in the United States, including a potentially significant impact on national security and the US economy.
RIM will make the software update available at a later date on a special web site: www.blackberry.com/workaround. Additional information on the BlackBerry Multi-Mode Edition software update is already posted on this site and periodic updates will be posted prior to the effective date of any potential injunction order. The software workaround designs remain a contingency plan because the court has not yet ruled on RIM’s argument that the aggregate effort to deploy this software update for millions of users is not warranted under the circumstances. There is no need for any customer action at this point in time.
About Research In Motion
Research In Motion is a leading designer, manufacturer and marketer of innovative wireless solutions for the worldwide mobile communications market. Through the development of integrated hardware, software and services that support multiple wireless network standards, RIM provides platforms and solutions for seamless access to time-sensitive information including e-mail, phone, SMS messaging, Internet and intranet-based applications. RIM technology also enables a broad array of third party developers and manufacturers to enhance their products and services with wireless connectivity. RIM’s portfolio of award-winning products, services and embedded technologies are used by thousands of organizations around the world and include the BlackBerry wireless platform, the RIM Wireless Handheld product line, software development tools and software/hardware licensing agreements. Founded in 1984 and based in Waterloo, Ontario, RIM operates offices in North America, Europe and Asia Pacific. RIM is listed on the Nasdaq Stock Market (Nasdaq: RIMM) and the Toronto Stock Exchange (TSX: RIM).