The Ingram Christmas Letter for 2004

Another Christmas arrives to find Toronto largely snowless – although we got just enough to make the lights look pretty, after what was one of the warmest Novembers since the Pleistocene Era (not to be confused with the more malleable Plasticine Era). Many of the T-shirt-clad people lining the street for the annual Santa Claus parade no doubt felt sorry for poor old St. Nick, in his ermine-trimmed coat and boots (synthetic ermine, of course), but I expect that plenty of others were more than a little thankful for some global warming. Everyone into their SUVs – and whatever you do, don’t stop idling!

The various members of the Ingram family (eastern Toronto division) made it through the year with their usual aplomb, thanks to careful planning, a few lucky breaks, and the occasional 20-dollar bill slipped to a teacher along the way. We had quite the generation gap this year, with Zoe in Grade One (she’s six) and Caitlin in Grade 10 (she’s 15) – Zoe was learning that the round part of a “b” goes to the right and the round part of a “d” goes to the left, and Caitlin was learning about polynomials (whatever those are). Meaghan, meanwhile, was playing the flute and learning French and all the other joys of Grade 6.

We spent some time in sunny Florida, courtesy of Becky’s mother and father, where the girls learned to play shuffleboard, Zoe enthralled the gathered throng at the weekly sunset “drum circle” on the beach with her interpretive dance (that’s her on the right) and we saw the famed Lipizzaner stallions. Caitlin experienced the rollercoaster at Busch Gardens while on a school trip to Virginia Beach (that’s her on the right), Zoe learned to ride a two-wheeler (she didn’t hit that car, in case you’re worried) and Meaghan made some new friends at camp. Oh yes, and she also turned eleven. The girls practiced their diving and puttered around in boats, and even chipped in to do some painting at the cottage.

In between there was plenty of jumping in the pool (not our pool, alas), some beautiful sunsets, and a little golf (thanks Bob), not to mention naps for both young and old. In the fall, Meaghan and Zoe got dressed up for Hallowe’en (Caitlin’s too old for that sort of thing, of course) and so did some people who should know better. Later, there was time set aside for squeezing through caves and walking in the woods, or sitting in trees and the wearing of pretty hats. And now we are quite ready for Christmas, with all the various treats prepared, including the ginger cookies and the star-cookie Christmas trees. And the girls have decorated not just their own Christmas tree but their cousin Jessica’s too and have met Santa.

And so it goes, as Kurt Vonnegut Jr. used to say. Another year filled for the most part with fun and frolic (and the occasional splinter, bee sting, hacking cough, vomiting spell, heart surgery, etc. — but let’s not talk about that). If you have a lot of free time on your hands and feel like surfing through some more pictures of the Ingrams, you can find some at If you want to drop us a line using that newfangled e-mail thing all the kids are talking about, Mathew is at [email protected] and you can reach Becky at [email protected]. We here at Ingram and Co. wish you and yours all the best of the season.

RIM must settle

About the only people who might have been happy to see the court ruling against Research In Motion Wednesday — apart from pharmacists selling motion-sickness pills — were options traders, who love a volatile stock the way a mouse loves cheese. RIM shares leaped by almost 15 per cent on huge volume after the news was released, then fell back, were halted for an hour or two, and then plummeted.

While the complicated decision by the U.S. federal court took some time to figure out, since it did three different (and even somewhat contradictory) things at once, the underlying message is a fairly obvious one: Research In Motion is guilty of patent infringement, period. The company should settle with its accuser, NTP, and the sooner the better.

The U.S. Circuit Court ruled on an appeal launched by RIM of an earlier, lower-court decision in favour of NTP, a company that holds a number of patents, including some filed by Thomas Campana in the early 1990s. These patents refer to the wireless transmission of e-mail to a mobile device, which is the foundation of RIM’s BlackBerry handheld business — one that is growing so quickly RIM has a market value of $15-billion (U.S.), despite the fact that it has sales of less than $1-billion.

The initial judgment by the lower court found that RIM’s products infringed on the Campana patents in a number of different ways, and ordered the Waterloo, Ont.-based company to pay NTP $53-million in damages. The court also awarded NTP an injunction preventing RIM from selling BlackBerrys in the United States. When the Canadian company appealed, the decision of the lower court was suspended until the appeal was over. Now the appeal is over, but the case hasn’t quite come to an end yet.

The reason the stock market got so confused about the appeals court ruling — and the reason why some analysts have described the decision (wrongly) as a “partial win” for RIM — is that the court upheld the lower court’s ruling in part, vacated it in part and sent another part back to the original court to re-hear the case, because of a misinterpretation. The part the appeals court upheld, however, amounted to the bulk of NTP’s case: 11 out of 16 claims.

The appeals court ruled that five of the claims involved a misinterpretation by the court of the phrase “originating processor.” Because of this, the lower court will have to reconsider those claims, and hear arguments as to whether the misinterpretation was so unreasonable that it prejudiced the jury. If it did, the court might decide to reduce the award.

James Hurst, a patent lawyer at Winston & Strawn in Chicago who has been following the case, said the ruling was “a big victory for NTP.” He said the lower court re-hearing of the five claims is “insignificant” and “almost an afterthought,” because even winning on one claim (let alone 11 of 16) would be enough to justify the injunction and some damages. Even if the damages were lowered, NTP would have enough ammunition to force the Canadian company to pay a licensing fee.

Since the judgment in 2002, RIM has been putting money into a reserve in order to pay for such an eventuality, at a rate of 8.6 per cent of its revenues. As more than one analyst has pointed out, however, there is nothing that says NTP has to agree to license its patents to RIM for 8.5 per cent of its sales. The decision by the appeals court theoretically gives the patent holder enough leverage to force RIM to agree to a fee much higher than that — and even the 8.6-per-cent rate would cut RIM’s earnings by about 20 per cent, analysts estimate.

Banc of America Securities cut its target price on the stock to $86 from $99 and reiterated a “neutral” rating after the court ruling, saying the five claims being sent back would likely not alter the ultimate outcome, and that “our discussions lead us to believe that NTP can now ask for a higher royalty and/or threaten to shut Research In Motion down in the U.S.” The brokerage firm said the 8.6-per-cent royalty rate “could be a floor, not a ceiling.”

Several analysts noted that RIM still has another avenue of appeal outside of the current case: At the company’s request, the U.S. Patent and Trademark Office is reviewing the five patents held by NTP to see whether they were awarded properly. If they are changed or thrown out, then RIM might not have to pay NTP anything at all. Stanford Group noted, however, that the district court found RIM’s evidence on “prior art” — one of the criteria the U.S. PTO would use for a review — unconvincing, and the appeals court upheld this finding.

Research In Motion has been trying for some time to give the impression that its fight with NTP is just a nuisance, and that it shouldn’t really affect its successful handheld business. The company has done its best to portray NTP as an interloper without a legal leg to stand on, and yet — according to Mr. Campana (who is now deceased) — RIM ignored letters warning the company of the patents he held before the legal action was started by NTP.

RIM’s BlackBerry is a great product with a lot of popular appeal and a growing market. The company should swallow its pride and settle with NTP as soon as possible, in order to put the issue behind it once and for all.