Sell-Side Update on Research In Motion's Court Case (RIMM)

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Bear Stears analysts Andrew J. Neff, Bill Hand and Ted Chung sent a note to clients as an update on the Research in Motion (RIMM) / NTP patent dispute, in the wake of yesterday's non-final ruling against NTP (all five of NTP's patents at stake vs. RIMM have now received non-final rejections). Key excerpts:

While today’s (2/1) rejection of NTP’s patent (usually referred to as the "592" patent) by the US Patent Office (USPTO) is positive for RIMM, it is not clear if it will have any impact on the litigation before the US District Court.

On the positive side, today’s ruling provides better leverage for RIMM and could lead to the eventual invalidation of the NTP patents.

On the negative side, NTP still has two distinct appeal processes remaining (first, to the Patent Appeal Board and, then, to a US District Court/Federal Circuit Court), which could take up to a year or two to resolve. Importantly, NTP’s patents remain valid until NTP exhausts its appeal process. In addition, Judge Spenser presiding over NTP/RIMM litigation has indicated several times during prior proceedings that he will not wait until the patent review process is completed (since the patents are valid today and the appeals process could take months/years) to rule on NTP's request for an injunction.

As to the timing and next steps:

* Patent review: USPTO is expected to issue a Right of Appeal Notice following a 30-day response period at which point NTP is likely to appeal USPTO’s rejection of the patents to the Patent Appeal Board.

* NTP/RIMM litigation: Both RIMM and NTP are expected to file their response briefs today at the US District Court with oral arguments scheduled for February 24, after which Judge Spenser is expected to rule on the issues at hand including NTP’s motion to reinstate the injunction against RIMM.

Stock impact: Positive for RIMM but NTP patents are still valid.

RIMM 1-yr chart: