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Saturday, December 03, 2005

[print version] Bye Bye BlackBerry? | CNET

[print version] Bye Bye BlackBerry? | CNET News.comBye Bye BlackBerry?

By Ian Austen

Story last modified Sat Dec 03 08:27:00 PST 2005

OTTAWA--What if your BlackBerry screen went dark?

To executives like Douglas Steenland of Northwest Airlines, the idea of doing business without a BlackBerry is about as appealing as reverting to rotary dial phones and Telex machines.

"It's the proverbial blessing and curse," Steenland said of his BlackBerry, which sends e-mail messages wirelessly. "It's a blessing because it liberates you from the office. It's a curse because there's no escape."

That is why there was so much anxiety throughout corporate America over this week's news that a long-running patent infringement battle between the maker of BlackBerry, Research in Motion, and NTP, a tiny patent holding company, might cause a service shutdown, perhaps within a month.

Indeed, the prospect of life without BlackBerries is so frightening to Northwest--a heavy user if ever there was one--that the airline immediately demanded a conference call with RIM executives and one is scheduled for Tuesday.

"Everybody here hopes that somebody else will fix the problem," said Andrea Newman, Northwest's senior vice president for government relations. "But no one really knows what the problem is or what it will take to fix it."

RIM, which is based in Waterloo, Ontario, promises it has a solution that will keep its beloved BlackBerries humming even in the face of an injunction. While most analysts view the prospects of a shutdown as unlikely, they have little faith in the proposed solution, which has potential legal pitfalls of its own. What's more, the history of the struggle between the companies means that no outcome is certain. (RIM declined to comment.)

In an interview early this year and more recently at an investors' conference in New York, James Balsillie, the chairman and co-chief executive, said that the company had developed a new software technology that did not infringe on NTP's patents and would provide a way to escape any injunction.

RIM has offered little additional information about its new system other than to say that switching over to it would not require subscribers to acquire new devices or to alter their current units.

"On this subject they seem to have an attitude that they wish that people would stop talking about it," said Kenneth Hyers, a wireless research analyst with ABI Research who is based in Raleigh, N.C. The company briefed Hyers this week, he said, and indicated only in broad terms that the software modifications would be made at a network level.

"That begs the question, 'If they've been sitting on this all this time, why haven't they implemented it?'" he said. "Their answer is that this is a major network upgrade and nobody wants to mess with the network if they don't have to."

That, Hyers added, suggests that installing the software will not be as easy as RIM suggested.

While the change, if it is made, will not require any action by subscribers, it's not clear if it will alter how the BlackBerry e-mail service operates.

Balsillie has said that the new system has been tested with focus groups but he offered no details.

Any changes to the experience of users, said Avi Greengart, the principal mobile devices analyst at Current Analysis in Sterling, Va., could undermine a chief reason for BlackBerry's success. There are 3.65 million BlackBerry users worldwide.

"You now have a very nice, seamless e-mail experience with BlackBerry," Greengart said. "If you want to do just voice and e-mail, it's hard to beat a BlackBerry."

There is one party who says he knows the details of the change but who also has a vested interest in the case. Donald Stout, the patent lawyer who is a co-founder of NTP of Arlington, Va., said RIM showed him its alternative system.

While he formally agreed not to disclose its details, Stout said that RIM's alterative is not invisible to users. "It would differentiate their e-mail in a manner that there is a risk from the end-user standpoint that it takes away some of the things I like about the BlackBerry service," Stout said on Friday.

He acknowledged that RIM might have since altered its software in a way that avoids those problems.

Stout said that he doubted very much that RIM had found a way around his company's patents. "That's balderdash," he said. "They're just trying to keep the ball up in the air."

If NTP wins an injunction to end BlackBerry service and RIM keeps BlackBerry service operating through the new software, Stout said his company would ask for an immediate judicial review of the changes.

If that hearing finds RIM is still infringing on NTP's patents, Stout said NTP would ask that RIM and every wireless carrier in the United States offering BlackBerry service be cited for contempt.

The dispute dates to the beginning of the decade when RIM was still a relatively small company. Stout said NTP believed that RIM's system infringed on broad patents given to NTP's co-founder, Thomas Campana Jr., an engineer who is deceased, for a primitive wireless e-mail system he devised as a subcontractor during the 1980's at a company called Telefind.

In the lawsuit that followed RIM's initial rebuff of NTP, a jury in Richmond, Va., found in NTP's favor. That decision, largely upheld on appeal, required RIM to pay a royalty that would have generated about $240 million to date.

In March, the two companies announced that RIM would pay NTP $450 million to license its patents. But that deal collapsed over final terms.

Although NTP is now asking a federal court in Virginia to block BlackBerry service to everyone in the United States except government and aid agency account holders, most analysts say that the Canadian company can, and should, still settle out of court. The estimated price tag for that, however, is now pegged at $700 million to $1.5 billion. While such a settlement is large for a patent case, RIM is estimated to have at least $1.8 billion in cash.

When an injunction would arrive is not clear. But Stout, in a view shared by others, expects that a ruling could come as soon as the end of this month or by mid-January at the latest. It is possible that RIM may then be given a period, perhaps of several weeks, to shut down.

RIM still has other legal options. The United States Patent and Trademark Office is reviewing eight of NTP's patents and has issued preliminary rulings against the company in several cases. But final rulings are unlikely to come for months and a two-part appeal process could extend the review for years. In any case, NTP needs only a single patent upheld to gain an injunction.

In addition, RIM is preparing an appeal to the Supreme Court, although even it acknowledges that the court rarely hears patent appeals.

Even if the court accepts RIM's appeal, which hinges on the fact that its software resides on servers based in Canada where NTP does not hold patents, any Supreme Court decision is unlikely to come swiftly.

So far there has been little apparent impact on BlackBerry sales. Greengart at Current Analysis said that most BlackBerry purchases in the United States are made by corporate information technology departments that would be reluctant to change to alternative hand-held units from Palm, Nokia and Samsung, or move to wireless e-mail software from Good Technology and SEVEN because of the cost and the bother.

As well, he added, many corporations prefer BlackBerry because its software offers a high level of security and its devices cannot be used by employees for non-work-related tasks like listening to downloaded music.

As for Stout, he has no apologies for BlackBerry owners who may be cut off by his company's request for a shutdown or RIM investors who will probably see their shares sink if the company loses a market that provides about 70 percent of its revenue.

Shares of RIM closed at $64.50, down 52 cents.

"If this goes as far as an injunction, I won't feel sorry for them," Stout said. "No BlackBerry customer can say that NTP didn't offer a license. If RIM turns that down, they have no one to blame but themselves for the consequences. BlackBerry users should tell RIM to stop fooling around with their service and take the license."