Judge refuses to enforce disputed patent deal, may ban BlackBerry sales; RIM shares tumble.

November 30, 2005: 3:44 PM EST

WASHINGTON (Reuters) - BlackBerry maker Research In Motion Ltd. was dealt another legal setback in a key patent infringement case on Wednesday, raising pressure to settle or face a possible shutdown of its U.S. mobile e-mail service.

U.S. District Judge James Spencer denied a request by Research In Motion to enforce the terms of a disputed $450 million settlement reached earlier this year with patent holding company NTP Inc.

Now the judge will set up a hearing on whether RIM can keep selling or importing its BlackBerry hardware and software in the United States.

RIM (down $3.98 to $60.94, Research) stock, halted for the news, tumbled after reopening, sliding about 7 percent on Nasdaq and in Toronto.

RIM said in a statement that it would continue efforts to get the U.S. Supreme Court to review the case. The company also reiterated that it has prepared a software upgrade that can be used to work around the disputed patents.

The dispute between RIM and NTP goes back four years.

In 2001, NTP filed a suit against RIM claiming that the BlackBerry infringed on its patents. In 2002, a jury found in favor of NTP and awarded the company $23.1 million in damages.

In 2003, a district judge increased the damages to $210 million and issued an injunction against RIM. That injunction was set aside, however, pending appeal.

Last December, an appeals court sided with the district court and, in March, RIM settled with NTP for $450 million.

But during the summer, RIM walked away from that deal for reasons that have yet to be disclosed. In this go-round, RIM wanted those terms enforced, so Wednesday`s ruling was a setback.

RIM reports more than 4 million BlackBerry subscribers worldwide, with the vast majority in the United States. So will you lose your BlackBerry service?

The judge could issue an injunction, but several analysts doubt that RIM will have to stop selling BlackBerries.

NTP has asked the court to make sure that any shutdown of the BlackBerry does not affect government customers or emergency response personnel. And RIM has said that it would be difficult to shut down the service selectively, making it less likely that an injunction could be enforced in a timely fashion.

In addition, RIM would likely be interested in settling, even if it means a bigger payout.

``I don`t think RIM wants to take it all the way to an injunction, so the likelihood is that they are going to settle before that happens, said Kona Shio, an analyst with research firm Conscius Capital Partners in Montreal. It is estimated a new settlement could cost as much as $1 billion.

NTP, a holding company and not a rival making its own products, would also benefit more from a settlement than from a BlackBerry shutdown. After Wednesday`s ruling, NTP`s lawyer, James Wallace, said, ``We would hope today`s developments would bring the parties back to the table.``