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RIM Settles Patent Suit For $612.5 Million

Research In Motion Ltd said Friday it has reached a $612.5 million settlement with NTP Inc., whose patent-infringement suit had threatened to halt the use of RIM's popular BlackBerry email device.

As a result of the licensing and settlement agreement, U.S. District Judge James R. Spencer in Virginia dismissed the case, RIM said.

"As we put this lengthy and complicated litigation behind us, we extend our sincere gratitude to all of our customers and supporters for their patience and loyalty," Jim Balsillie, chairman and co-chief executive at RIM, said in a statement.

The Canadian company said it paid NTP $612.5 million in full to settle all claims against it, as well as for a perpetual, fully paid up license going forward. The license covers all of RIM's products, services and technologies; and permits the company and it partners to sell products and services free of any claims by NTP, a patent-holding company based in Arlington, Va.

As a result of the payment, RIM, which had set aside $450 million for a settlement, would record an additional $162.5 million in its fourth quarter earnings, which it expects to report April 6. As of Nov. 26, 2005, RIM's total of cash, cash equivalents, short-term, long-term investments and escrow funds was about $1.8 billion.

For businesses, the bulk of RIM's more than 4 million wireless email customers, the uncertainty loomed over what has become an increasingly vital tool. Phil Go, CIO of the construction firm Barton Malow, breathed a sigh of relief after the ruling, since he'd testing Treo and Samsung mobile devices with Good Technology's wireless E-mail as a safety net, since so many of its employees now rely on the connection. Now he won't have to change them over. Said Go, "The consequences of a shutdown would've been significantly severe."

In its preliminary results for the fourth quarter, released with the settlement announcement, RIM said revenues were expected to range between $550 million and $560 million, lower than previous estimates of $590 million to $620 million. Revenues in the same quarter a year ago were $404.8 million.

Earnings, excluding the NTP settlement, were expected to be in the range of 64 cents and 66 cents a share, below previous estimates of 76 cents to 81 cents a share.

A federal jury decided in 2002 that RIM had infringed on five NTP patents. The ruling was appealed and eventually sent back to Judge Spencer. Without a settlement, RIM faced a court order banning it from selling the BlackBerry and its network services in the United States.

Although analysts said a shutdown was unlikely, the possibility concerned many businesses that had adopted the BlackBerry as a mobile communication device. Called the "CrackBerry" by addicted users, the device is bought primarily by businesses.

Before the settlement, the U.S. Patent Office had rejected several NTP patents. However, it wasn't clear what impact, if any, the decisions would have on the court proceedings. In addition, RIM claimed to have developed a workaround for the BlackBerry, if Spencer ordered a shutdown.

RIM and NTP had reached a $450 million deal last year, but the agreement fell apart, causing public exchanges between the two companies to become increasingly nasty.

As of Nov. 26, 2005, RIM's total of cash, cash equivalents, short-term, long-term investments and escrow funds was about $1.8 billion.

InformationWeek's Chris Murphy and Elena Malykhina contributed to this article.

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