Deja Vu Hangs on RIM

The stock falls on news of another patent lawsuit.
Publish date:

Updated from 2:48 p.m. EDT

Shares of

Research In Motion


slumped Monday following word that the company is facing a new patent lawsuit.


, a privately held rival provider of wireless email technology, sued RIM in federal court in Texas on Friday following a legal victory earlier that day against a third player in the industry,

Seven Networks

. Visto alleges that RIM is infringing on its patents covering technology used in wireless email such as synchronization, remote access and security.

Visto is seeking an injunction against RIM that would bar the company from offering its BlackBerry devices and services in the U.S. At least right now, Visto has not asked for any monetary damages or royalties from RIM.

That's not to say Visto is opposed to a monetary settlement to the dispute, Visto CEO Brian Bogosian said on a conference call.

"The reality is we're business people. We'll do what's in the best interests of our employees, our investors and our customers," Bogosian said. "Given RIM's past, we're prepared for a long fight."

Visto may indeed get what Bogosian's expecting. In a statement late Monday, RIM said it wasn't violating Visto's patents and, even if it was, it believes those patents aren't valid anyway. The company also implied that it was considering responding to the suit by countersuing Visto for violating RIM's own patents.

"RIM has been monitoring Visto's litigation against other companies in the industry and ... believes

that ... Visto's patent claims as directed against Seven Networks refer to a different type of system than RIM's technology," the company said in the statement. RIM "will file its legal response in due course," the company added.

But investors reacted negatively to the news. In recent trading, RIM's shares were off $2.33, or about 3%, to $74.30. Earlier in the session, the company's stock was off as much as 5%.

Indeed, the suit likely brought to investors' minds a bad sense of deja vu. Just two months ago, RIM

paid $612.5 million to settle a long-running patent dispute with holding company


. Not only did that suit cost the company capital, but it also hurt the company in the marketplace. In recent quarters, the growth in RIM's BlackBerry subscriber base has fallen far shy of its expectations.

In its statement, RIM said it didn't expect that its customers would be affected by the suit. RIM predicted the case wouldn't go to court until the middle of next year.

But others who have followed the company think the case is more bad news for RIM. The new suit could similarly distract RIM and give valuable time to its competitors to develop and market BlackBerry alternatives, says David Schamens, a fund manager with Invictus Funds, who covered a short position in RIM on Monday following the lawsuit announcement.

"This is absolutely stunning," says Schamens. "Talk about kicking a dog when it's down."

At least as Bogosian portrayed things, RIM had the kick coming. The company has been aware of Visto patents for years but has never attempted to license them, he said.

"As of this morning, we've not received any phone calls from RIM," he said. "The fact is, they know how to find us."

A federal jury on Friday found Seven willfully infringed Visto's wireless email patents and awarded Visto $3.6 million in damages, the equivalent of a 19.8% royalty rate. Bogosian declined to estimate the amount of damages RIM's infringement had caused Visto or to say whether a similar royalty rate might apply in their dispute.

"The royalty rate is a reflection of what

the jury thinks is the value of Visto's portfolio," he said. But Bogosian emphasized, "We're not seeking a royalty from RIM."

The lawsuit against RIM is only

the latest brought by Visto against its rivals in the industry. In addition to the Seven case, the company has also sued


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alleging patent infringement.

Meanwhile, the case against RIM makes for an interesting epilogue to the NTP case. One of the criticisms directed against NTP in that dispute was that the company's case was somehow illegitimate because NTP wasn't using the patents itself as an operating company. Partly to deflect those charges, NTP bought an equity stake in and licensed its patents to Visto.

On the call Bogosian said that NTP has only a small, minority position in Visto and exercises no control over the company. Visto is not using NTP's legal team in its own case against RIM, he said.