NTP Turns Its Attention to Palm

Just months after a settlement with Research In Motion, the patent outfit is starting another fight—this time against the maker of the Treo

by Arik Hesseldahl

Here we go again. Just when you thought you had heard the last of NTP—infamous for the lawsuit that nearly squashed the BlackBerry and the company behind it, Canada's Research In Motion (RIMM)—the Virginia-based patent holding company has filed suit against another handheld maker, Palm (PALM), the company behind the Treo smartphone—and the BlackBerry's main rival.

When last heard from, NTP had just secured a $612.5 million settlement from RIM for a permanent license to the patent portfolio of Thomas Campana Jr., an inventor who died in 2004, but whose company, launched in 1992, sought to commercialize a set of patents surrounding wireless e-mail (see BusinessWeek.com, 12/8/05, "The BlackBerry Widow's Tale"). NTP's critics gave it the pejorative label "patent troll," and RIM CEO Jim Balsillie said his company's multiyear legal odyssey showed that the U.S. patent system was in need of reform.

Patent History

The two entities settled their differences in March, even as the U.S. Patent & Trademark Office found after a review that several of the disputed patents should never have been issued in the first place (see BusinessWeek.com, 3/3/06, "BlackBerry Won't Get Squashed").

In a suit filed in a federal court in Virginia against Palm, NTP claims that Palm's Treo devices as well as older gadgets in the Palm product portfolio, including the Palm Tungsten, and the long-retired Palm VII and Palm i700 series of wireless handhelds, infringe on seven patents. Five of those patents are the very same that NTP argued RIMM had violated.

Calls to the law firms representing NTP and to Palm were not returned. In a statement, Don Stout, NTP's co-founder said the firm had sought to settle the matter with Palm without resorting to litigation, but wasn't successful.

Palm didn’t respond to a request for comment.

Sowing Doubt

Palm's financial ability to withstand a lawsuit and pay a sizable settlement isn't what RIM's was. Palm's cash position is about $128 million. For the year ended May 31, it took in $1.5 billion in revenue and reported a profit of $336 million. At the time of its settlement, RIM was financially much healthier with $2 billion in sales and $460 million in cash. Much of what it paid in the settlement, $450 million, came from an escrow account that had been created by court order.

For RIM, settling was a calculated move designed to erase the pall of doubt that had surrounded sales of BlackBerry devices in the U.S. Fear that its wireless e-mail network would be shut down by court order in the U.S. had begun to eat into sales growth.

Now Palm will face the same kind of doubt as the case winds its way through the U.S. court system.

Interesting Wrinkles

It's a bad time for this to happen to Palm. The company just released a new generation of wireless handhelds, the Treo 680, that had rejuvenated interest in its products. And in the last year, Palm also partnered with Microsoft (MSFT) by selling a line of its Treo products that run on the software giant's Windows Mobile operating system.

One interesting wrinkle that didn't happen to RIM: Palm's Treo runs software from RIM that is fully covered by RIM's license with NTP. The Treo also uses software from Good Technology, a privately held wireless messaging concern that has also cut a licensing deal with NTP.

Investors pounded Palm's stock sending it down $1.17 or more than 7% to $14.24 in regular trading, and then an additional 2 cents in after-hours trading. Stock in RIM, no surprise, surged on the news, adding $4.07 or 3.5%, closing at $120.36 a share during the regular session, and adding another 14 cents in after-hours trading.

Hesseldahl is a reporter for BusinessWeek.com.