2nd UPDATE: Research In Motion, Motorola Settle Patent Dispute

11th Jun 2010 16:56

(Updates with analyst commentary.) By Roger Cheng Of DOW JONES NEWSWIRES NEW YORK (Dow Jones)--BlackBerry maker Research in Motion Ltd. (RIMM) and Motorola Inc. (MOT) settled their patent dispute over key technology found in their smartphones, with RIM agreeing to make a one-time payment and ongoing royalties in exchange for a halt to the litigation. As the battle for smartphone customers intensifies, the major players have taken to courtrooms as a second front. RIM and Motorola's settlement marks the resolution of only one of several ongoing clashes either in a district court or the U.S. International Trade Commission. Beyond control over patents, the disputes are often seen as a strong-arm or intimidation tactic. RIM holds the largest share of the U.S. smartphone market with its line of BlackBerrys, which are popular with the corporate crowd. But many are concerned RIM's position is at risk as flashier smartphones, including Apple Inc.'s (AAPL) iPhone and a wave of Android devices, dominate consumer interest. Motorola, meanwhile, is attempting to break into the smartphone business itself with a burgeoning line of devices running on Google Inc.'s (GOOG) operating system. Its Droid was heavily promoted by Verizon Wireless, and Motorola co-Chief Executive Sanjay Jha called for higher sequential sales of smartphones in the second quarter. Neither company would provide more specific financial information on their long-term cross-licensing deal, which covers standards such as second generation, or 2G, technology, 3G, 4G, wi-fi, wireless email and other industry standards. The deal also includes a transfer of various patents. Analysts don't believe the deal provides a significant financial windfall to Motorola, but RIM's willingness to pay illustrates the strength of Motorola's patent portfolio. Motorola could use its portfolio to negotiate better royalty terms to other patent-holders such as Qualcomm Inc. (QCOM) or Microsoft Corp. (MSFT), according to Goldman Sachs analyst Simona Jankowski. Conversely, the deal is a slight negative to RIM, with the royalties potentially hurting margins, she said, and highlights the vulnerability of the company's patent portfolio. Kaufman Bros. analyst Shaw Wu, however, said he believes the cross-licensing deal should bolster RIM's position as it launches a new version of its proprietary operating system, which utilizes more touchscreen functions. Technology companies have fired off lawsuits with increasing frequency over the past few months. A few months after Motorola filed its suit against RIM in January, Apple sued HTC Corp. (2498.TW, HTCXF) over technology including the implementation of touchscreen features. The lawsuit was widely seen as an indirect attack on Google, creating an implied threat to any handset maker using Android. HTC later countersued. Eastman Kodak Co. (EK) sued Apple and RIM over claims their smartphones illegally use Kodak's digital imaging technology, while Apple and Nokia Corp. (NOK) still face an ongoing legal dispute. The companies are also more likely to opt for a review by the ITC, which generally moves quicker than the traditional court. An ITC trial can come 14 to 16 months after a complaint, or sooner, while a district court can wait years before a judge hears the case. While the ITC can't decide on monetary damages, it can impose a ban on products that infringe on patents, essentially cutting off a company's business. -By Roger Cheng, Dow Jones Newswires; 212-416-2153; [email protected] (END) Dow Jones Newswires June 11, 2010 11:56 ET (15:56 GMT)