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BlackBerry expert: shutdown only "10% likely"

 In my previous post entitled Will there be a BlackBerry shutdown? Eight experts tell me, I mentioned that I would be expanding on the comments made by two of the experts I interviewed about the likelihood (or lack thereof) that BlackBerry service will be suspended in the U.

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In my previous post entitled Will there be a BlackBerry shutdown? Eight experts tell me, I mentioned that I would be expanding on the comments made by two of the experts I interviewed about the likelihood (or lack thereof) that BlackBerry service will be suspended in the U.S. as a result of the patent infringement dispute between BlackBerry-maker Research In Motion and patent-holder NTP.

Todd Kort, a senior analyst at Gartner, doesn't think this is likely to happen. Here's what this knowledgeable, veteran BlackBerry-watcher   told me yesterday:

Obviously, things remain uncertain on the ultimate result of the court case.  More certain is the direction the US Patent and Trademark Office (PTO) is taking.
 
On February 24, Judge Spencer has scheduled a hearing that will move this long-running patent dispute closer to a conclusion.  The judge will likely threaten RIM with an injunction, which is unlikely to take effect immediately, but perhaps as soon as 30 days following the judge’s decision.  At that point RIM will need to either settle with NTP before the injunction goes into effect, or RIM must implement their workaround solution, which they expect will circumvent the imposition of major penalties such as a shut-down.
 
The judge has been consistent in his rulings, tending to favor NTP’s side in virtually all circumstances.  He indicated on November 30 that he is unwilling to wait for the PTO to finish their re-examination of NTP’s patents. 
 
The PTO has been consistent in the last eight months in ruling that 8 NTP’s patents are invalid and should never have been granted.  This follows the discovery last May of some technical manuals published by TeleNor of Norway, which pre-date anything NTP patented.  Had the TeleNor evidence been uncovered and known earlier, this case would not have gone to trial and NTP almost certainly would not have been granted their patents.  NTP has begun an appeals process within the PTO that could take at least another six months and quite possibly another year.  We expect that at the end of the appeals process the NTP patents will be rendered worthless.  It is in NTP’s interest to try to obtain a large up-front lump sum payment from RIM, because royalties are unlikely to be a source of income for NTP much longer. 
 
RIM has been trying to delay the court decision as long as possible, with the hope that the PTO would have time to rescue RIM.  At this point it seems likely that the judge would be moving toward re-instituting the injunction he has stayed since 2002 pending RIM’s appeals process.  The RIM appeals have been exhausted, but now RIM has developed a “workaround” solution that may avoid NTP’s patents.  It is unclear what the judge will do with respect to the workaround.  He may need more time to evaluate the workaround to determine whether it infringes on NTP’s patents.  This may buy RIM more time - perhaps enough time for the PTO to finish its work invalidating NTP’s patents.  If this were to occur before the Judge issues a decision, then RIM could escape with only minor financial damage.
 
It seems likely that the judge will award NTP the cash RIM has been putting into an escrow account since the jury trial ended with a guilty verdict for RIM in November 2002.  Since that time RIM has been required to put 8.55 percent of its US revenue into the escrow account each quarter.  This account is now approaching $300 million.
 
RIM says they will implement their workaround solution rather than allow the Judge to implement the injunction, which threatens to shut-down the BlackBerry email service within the US.  This would not excuse RIM from financial penalties associated with its patent infringement, only that RIM may not have to pay royalties to NTP going forward from the date of the implementation of the workaround.  So it seems very likely that RIM will have to pay NTP at least the amount within the escrow account.
 
There are dozens of possible scenarios that could develop over the next month, but Gartner has created 4 general categories of results that we believe events will fall into.  We have assigned probabilities to each of these, with the total being 1.0.

  • RIM and NTP will settle (0.35 probability)
  • Resolution of this matter will be delayed for at least 12 months  (0.35 probability).
  • RIM will enact work-around plans it claims does not run afoul of NTP (0.2 probability).
  • The federal court will issue an injunction against RIM that shuts down BlackBerry service (0.1 probability).

If the workaround “works” and is deemed by RIM users to be not too difficult to implement & use, then it is likely that RIM will implement the workaround, rather than just use it simply as a bargaining chip in negotiations with NTP.   I’m assuming that the workaround is real, it works OK, and that RIM will implement it.

If RIM implements the workaround, then the court must determine whether the workaround still infringes on NTP’s patents.  I have no idea how (or when) the court will rule on this.

Only after these two conditions have been satisfied would we recommend that Gartner clients implement the workaround.

It is unfortunate, but many clients may have to operate in legal limbo while all of this gets sorted out.