WASHINGTON -(Dow Jones)- Research In Motion Ltd. (RIMM) Wednesday failed to get an emergency stay request at the U.S. Supreme Court to freeze lower court proceedings in a patent dispute between it and NTP, a Virginia patent holding company, over BlackBerry wireless email devices.
Investor reaction to the decision - issued by Chief Justice John Roberts Jr. without comment - was swift, with RIM shares falling sharply before being halted at 1:19 p.m. EDT. The stock has since resumed trading and recouped most of the losses. RIM shares recently traded up 23 cents, or 0.4%, to $57.59.
The stock has been battered since the U.S. Court of Appeals for the Federal Circuit denied RIM's request for an en banc hearing.
The decline is fueled by concerns that the District Court will re-issue an injunction on U.S. BlackBerry sales, a devastating blow to RIM should it occur, before the Supreme Court acts on a regular appeal RIM plans to file.
NTP, in its own documents filed with the Supreme Court, downplayed the chance that might occur.
"As for the threat of any injunction, as previous settlement discussions show, NTP is a reasonable business entity that is willing to resolve the dispute between the parties and provide for complete 'global peace' going forward," attorneys for NTP said. The company also noted there is "ample time for RIM to file its petition for certiorari before any further action by the lower courts."
In a press release, RIM said Wednesday's decision by the Supreme Court does not mean the court has declined RIM's appeal for further review. "The Supreme Court merely decided that it would follow its normal course of allowing the District Court to decide whether and to what extent to continue the litigation in light of all the relevant circumstances, including the prospect that the Supreme Court may decide to hear the case," RIM said.
The company said that during upcoming proceedings it will ask the District Court to decide whether to enforce the "binding term sheet" signed by the two companies in March. RIM said it will also ask the court to determine the impact of the U.S. Patent and Trademark Office's ongoing review of the five NTP patents at the center of the dispute. The patent office has rejected all claims in all five patents in a preliminary review.
James Wallace, lawyer for NTP, said a status and scheduling conference is set for the morning of Nov. 9 at the District Court. NTP will take the position that there is time for RIM to file its request for review to the Supreme Court before Judge Spencer rules on an injunction.
NTP, for its part, said in a press release it will press ahead in lower court proceedings "for re-confirmation of its previously-entered injunction that prohibits RIM from selling, using, or importing into the U.S. infringing BlackBerry hardware and software."
RIM, Waterloo, Ontario, has been engaged in a bitter fight with NTP for more than four years over the technology in the popular Blackberry wireless email devices.
NTP sued in 2001, saying the company had violated several of its patents with the BlackBerry product. A trial in a Virginia U.S. District Court resulted in a jury verdict against Research In Motion over five patents in 2003.
In its appeals, RIM has argued - so far unsuccessfully - that U.S. patent laws don't apply to it because the company operates in Canada. The pending Supreme Court appeal follows a series of setbacks at the Federal Circuit, which most recently denied an emergency petition from the company last week.
RIM, in the emergency appeal, said its business would be "irreparably harmed" if a lower court is free to issue an injunction before the Supreme Court reviews its appeal. "Research In Motion would suffer substantial revenue and profit losses," lawyers for the company said in the appeal.
Chief Justice Roberts handles emergency requests for cases out of the Washington-based Federal U.S. Circuit Court of Appeals, which reviewed the case on appeal because it dealt with patent law. RIM could refile its request with another justice, but such a move isn't likely to change the outcome of the emergency stay request.
RIM has until Jan. 7, 2006, to file its request for review to the Supreme Court. Some legal experts believe Spencer is unlikely to rule on an injunction before the high court makes its decision on whether to review the case. Experts also say that Spencer's decision may also take into account the fact that NTP doesn't make any products.
That's because Congress is considering legislation on whether an injunction should be granted to patent holders that don't make products, he said. Normally, patent holders are granted injunctions when their patents are infringed. However, the proliferation of patent trolls, companies that own patents and try to assert them even though they don't use the patents to make products, has led Congress to review the use of injunctions.
Still, James Hurt, lawyer at Chicago-based Winston & Strawn LLP, said he believes Spencer could issue the injunction ahead of the Supreme Court's decision. "The District Court has discretion to issue injunctions, despite the fact that one party is seeking review with the Supreme Court," he said.
Hurst said the Supreme Court "almost never" takes patent cases. He said that, if District Courts were required to wait for high court decisions on reviews before issuing injunctions, everyone would try to delay injunctions by seeking Supreme Court reviews.
While uncertainty over the patent dispute has weighed on RIM's stock in recent weeks, Robert McWhirter, a buy-side investor who has owned RIM shares in the past but doesn't presently, said an investment in RIM must factor in two main considerations. First, the outcome of the NTP dispute. Second, RIM's ability to fend off rising competition.
On the latter point, McWhirter, president of Selective Asset Management, a Toronto money-management firm, said it's his understanding that the threat from competitors like Microsoft Corp. (MSFT), Nokia Corp. (NOK) and Motorola Inc. ( MOT) has been overstated. For instance, he said the BlackBerry device is less expensive than most competing devices and it generates higher revenues for RIM's carriers partners than most competing devices.
As for the NTP dispute, if RIM is forced to pay double the $450 million it agreed to pay NTP in March - as some analysts have suggested could happen in light of the renewed threat of an injunction - RIM could do so and still have plenty of cash left over, McWhirter said. The $450 million was part of the term sheet agreement that remains in dispute.
Analysts have said RIM could end up having to pay NTP as much as $3 billion if an injunction appears imminent, or as little as nothing if the PTO rejects NTP's patents in its final ruling.
It's unclear when the PTO's final ruling will come. NTP has said preliminary reviews are often reverse in whole or in part in follow-up reviews. It has also said that the PTO appeals process can take years and won't have any bearing on the District Court's actions.
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