Research In Motion WiFi Ruling Jeopardizes Company's Ability To Sell BlackBerrys

Posted: Updated:
From left, Thorsten Heins President and CEO of Research in Motion (RIM), Brian Bidulka and Grant Gardiner, attend the company's Annual General Meeting, Tuesday, July 10, 2012. RIM has lost a patent ruling that could force it to halt BlackBerry sales. (AP Photo/The Canadian Press, Dave Chidley) | AP

Research In Motion may have to halt sales of the BlackBerry after a Swedish arbitrator sided with Nokia and against the Canadian tech company in a WiFi patent dispute, Reuters reports.

According to Nokia, a Swedish arbitrator ruled this week that RIM is "in breach of contract and is not entitled to manufacture or sell WLAN products without first agreeing royalties with Nokia."

IDC analyst Francisco Jeronimo told Reuters the ruling "could have a significant financial impact to RIM, as all BlackBerry devices support WLAN."

The Canadian Press reports:

TORONTO — Research In Motion was buffeted Wednesday by news that Nokia Corp. has asked courts in several countries to uphold a Swedish arbitrator's ruling that could prevent RIM from using certain patented wireless technology.

The arbitrator ruled recently that RIM is in breach of the companies' agreement and should be blocked from making or selling products with WiFi communciations unless it pays royalties to Nokia for certain technology rights.

"In order to enforce the tribunal's ruling, we have now filed actions in the U.S., U.K. and Canada with the aim of ending RIM's breach of contract,'' Nokia spokesman Mark Durrant said in statement.

He said Nokia licensed some of its technology to the BlackBerry maker in 2003 and they revised their arrangement in 2008. He said RIM asked a Swedish arbitrator to rule on terms of the deal but Nokia fought back and prevailed.

A Research In Motion representative in Waterloo. Ont., said the company doesn't comment on litigation before the courts but noted the company's has an ``industry leading'' portfolio of intellectual property of its own.

"RIM will respond to Nokia's petitions in due course,'' Nick Manning said in an email message.

Disputes over patents and intellectual property are common in the technology industry and Research In Motion has been an active participant _ sometimes prevailing in courts and sometimes paying heavily for technology rights.

The legal battles frequently take months, if not years, to run their full course but usual result in a negotiated settlement.

RIM has been under the spotlight as the media, analysts, investors and consumers watch to see if the pioneering smartphone company can beat back competition with its new generation of BlackBerry technology.

RIM's shares (TSX:RIM) dropped to as low as $10.15 in early trading Wednesday on the Toronto Stock Exchange but gained strength as the day progressed.

The shares were at $11.07 in Toronto with about an hour left in trading, up 37 cents from the Tuesday close.

RIM's stock has languished throughout most of 2012 due to lost market share and the slow introduction of the BlackBerry 10 operating system but recently traded as high as C$12.09 following relatively positive analyst estimates.

The dispute with Nokia, if unresolved, could affect how RIM's products work if Research In Motion attempts a technical workaround, or whether products using the Nokia technology can be marketed if the arbitrator's ruling is upheld.

If the two companies negotiate a deal, as many observers expect, the main impact would be on BlackBerry profit margins or prices.

The Associated Press reports that Peter Misek, an analyst at Jefferies in New York, says Nokia's filings suggest RIM will likely end up paying royalties of US$2 to US$5 per phone.

Nokia has filed a petition with a U.S. federal court for the Northern District of California, where the Finnish company has a U.S. headquarters, saying that Research In Motion continues to violate the arbitration award and breach the underlying agreement through sales of certain RIM products.

It noted that a Swedish arbitration tribunal, which held hearings in September on the matter, determined that RIM isn't entitled to "manufacture or sell'' products with the wireless local area network standards known as WLAN, 802.11, or Wi-Fi without agreeing with Nokia on a royalty.

Wi-Fi is designed for relatively short-range wireless communications, such as within a home, office or restaurant. It is only one of the features in BlackBerry products, which also provide other types of longer-range wireless communications through telecom networks around the world.

Research In Motion has been attempting to battle back from a dramatic loss of market share to rival products such as Apple's iPhones and devices using Google's Android operation system.

Stock analysts have been reviewing their estimates for RIM's stock price ahead of the launch of a new generation of BlackBerrys, scheduled for January. The company also releases its next financial report on Dec. 20, for the fiscal third quarter ending on Dec. 1.

RIM stock got a boost recently when two Canadian analysts increased their price targets for the shares to $15 and $17, respectively, based on their view that the market had undervalued the company.

The stock has given back much of the gain it has made since Nov. 20, when the shares closed in Toronto at $9.70. Their highest recent close came after nearly 12.6 million shares were traded on Nov. 22 and the stock ended the day at $12.

Also on The Huffington Post

First Look At The Features Of BlackBerry 10
Share this
Current Slide

Suggest a correction

Around the Web

Nokia-RIM patent royalty talks fall through

Research In Motion shares fall, then recover, on news of dispute with Nokia

Why Research In Motion Shares Got Crushed

BlackBerry ban looms following loss in Nokia suit

BlackBerry maker RIM loses patent dispute with Nokia

RIM shares fall as Morgan Stanley says BB10 'too late'

On RIM, Canadians are the bulls