Blackberry 2003 Annual Report Download - page 20

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Research฀In฀Motion฀Limited฀฀|฀฀Incorporated฀Under฀the฀Laws฀of฀Ontario฀(United฀States฀dollars,฀in฀thousands฀except฀per฀share฀data฀or฀as฀otherwise฀indicated)
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For฀the฀years฀ended฀March฀1,฀2003,฀March฀2,฀2002฀and฀February฀28,฀2001
Fiscal฀2003฀Third฀Quarter
The฀NTP฀matter฀went฀to฀trial฀during฀the฀third฀quarter฀of฀2003฀in฀the฀United฀States฀District฀Court฀for฀the฀
Eastern฀District฀of฀Virginia฀(the฀“Court”).฀The฀jury฀issued฀a฀verdict฀in฀favour฀of฀NTP฀on฀November฀21,฀2002.฀
Specically,฀the฀jury฀found฀that฀certain฀of฀the฀Company’s฀products฀and฀services฀made฀available฀in฀the฀
United฀States฀over฀certain฀periods฀infringed฀on฀NTP฀patents฀(the฀“infringing฀revenues”)฀and฀as฀a฀result฀
the฀jury฀awarded฀damages฀based฀upon฀its฀assessment฀of฀the฀estimated฀income฀derived฀from฀these฀
infringing฀revenues.฀The฀jury฀also฀found฀that฀the฀infringement฀was฀willful.฀Based฀upon฀its฀nding฀of฀
infringement,฀the฀jury฀awarded฀compensatory฀damages฀of฀$23.1฀million฀(the฀“jury฀verdict”)฀based฀upon฀
its฀assessment฀of฀the฀infringing฀revenues฀multiplied฀by฀its฀determination฀of฀an฀appropriate฀royalty฀rate฀
(the฀“royalty฀rate”).฀
Accordingly,฀during฀the฀third฀quarter฀of฀scal฀2003,฀the฀Company฀recorded฀an฀expense฀of฀$23.1฀million฀
pursuant฀to฀the฀jury฀verdict;฀and฀recorded฀an฀expense฀of฀$4.7฀million฀for฀its฀current฀and฀estimated฀
future฀costs฀with฀respect฀to฀ongoing฀legal฀fees฀for฀the฀NTP฀matter฀for฀a฀total฀charge฀of฀$27.8฀million.฀
Fiscal฀2003฀Fourth฀Quarter฀
During฀the฀fourth฀quarter฀of฀2003,฀both฀NTP฀and฀the฀Company฀led฀post-trial฀motions฀and฀supporting฀
memoranda฀with฀the฀Court฀in฀advance฀of฀a฀February฀28,฀2003฀hearing.฀NTP฀led฀motions฀for฀entry฀of฀
nal฀judgment;฀prejudgment฀and฀postjudgment฀interest;฀enhanced฀damages;฀attorney฀fees;฀and฀an฀
application฀for฀a฀permanent฀injunction.฀The฀injunction฀application฀seeks฀to฀prohibit฀the฀Company฀from฀
providing฀BlackBerry฀service฀in฀the฀United฀States฀and฀from฀selling฀and/or฀distributing฀certain฀handhelds฀
and฀software.฀The฀Company’s฀counsel฀led,฀amongst฀other฀motions,฀a฀motion฀asking฀the฀Court฀to฀enter฀
a฀judgment฀in฀favour฀of฀the฀Company฀as฀a฀matter฀of฀law,฀notwithstanding฀the฀jury’s฀verdict.฀Additonally,฀
RIM฀led฀a฀motion฀for฀a฀new฀trial.฀
During฀the฀hearing฀on฀February฀28,฀2003,฀the฀Court฀heard฀arguments฀in฀relation฀to฀these฀post-trial฀
motions,฀but฀did฀not฀rule฀on฀any฀of฀the฀motions฀except฀two:฀i)฀the฀Court฀ruled฀that฀NTP฀was฀entitled฀to,฀
for฀the฀purposes฀of฀determining฀additional฀compensatory฀damages,฀an฀accounting฀of฀the฀Company’s฀
infringing฀revenues฀for฀the฀period฀November฀1,฀2002฀to฀February฀28,฀2003฀(the฀“Accounting”);฀and฀ii)฀the฀
Court฀ruled฀that฀if฀the฀jury’s฀verdict฀were฀entered,฀the฀prejudgment฀interest฀rate฀would฀be฀set฀at฀the฀
prime฀rate.฀
The฀Court฀next฀ruled฀on฀March฀11,฀2003฀as฀follows:฀i)฀the฀jury’s฀compensatory฀damages฀award฀was฀
increased฀by฀the฀amount฀equal฀to฀the฀infringing฀revenues฀for฀the฀period฀November฀1,฀2002฀to฀
November฀30,฀2002฀multiplied฀by฀the฀royalty฀rate;฀ii)฀supplemental฀judgment฀was฀entered฀for฀NTP฀
for฀compensatory฀damages฀equal฀to฀the฀infringing฀revenues฀for฀the฀period฀December฀1,฀2002฀to฀
February฀28,฀2003฀multiplied฀by฀the฀royalty฀rate;฀iii)฀on฀or฀before฀March฀30,฀2003,฀the฀Company฀was฀
required฀to฀provide฀the฀Accounting,฀duly฀veried฀and฀sworn,฀to฀NTP฀and฀the฀Court;฀iv)฀commencing฀
with฀the฀rst฀quarter฀of฀scal฀2004,฀the฀Company฀was฀required฀to฀provide฀an฀Ongoing฀Quarterly฀
Accounting฀to฀NTP฀and฀the฀Court฀of฀all฀infringing฀revenues;฀v)฀to฀account฀for฀any฀ongoing฀postjudg-
ment฀infringement฀activity,฀the฀Company฀was฀required฀to฀establish฀an฀interest-bearing฀account฀with฀
an฀FDIC-insured฀bank฀located฀in฀the฀Eastern฀District฀of฀Virginia฀and฀make฀deposits฀therein฀on฀a฀
quarterly฀basis฀(“Quarterly฀Deposits”),฀in฀amounts฀equal฀to฀the฀quarterly฀infringing฀revenues฀multiplied฀
by฀the฀royalty฀rate;฀vi)฀the฀Quarterly฀Deposits฀are฀to฀be฀continued฀until฀such฀time฀as฀the฀judgment฀of฀
the฀Court฀is฀afrmed,฀reversed,฀or฀remanded,฀at฀which฀time฀the฀parties฀will฀be฀required฀to฀move฀the฀
Court฀for฀a฀hearing฀on฀the฀disposition฀of฀the฀Quarterly฀Deposits;฀vii)฀the฀Company฀is฀required฀to฀pay฀
prejudgment฀interest฀on฀the฀compensatory฀(non-enhanced)฀portion฀of฀damages฀awarded฀by฀the฀jury.฀
Such฀interest฀will฀accrue฀from฀the฀date฀of฀the฀Company’s฀rst฀infringing฀activity฀and฀be฀compounded฀
quarterly.฀The฀parties฀jointly฀submitted฀a฀calculation฀of฀the฀interest฀due฀on฀March฀28,฀2003;฀and฀viii)฀the฀
Company฀will฀be฀required฀to฀pay฀postjudgment฀interest฀on฀the฀full฀amount฀of฀the฀monetary฀award฀
entered฀by฀the฀Court,฀as฀specied฀in฀the฀Court’s฀entry฀of฀nal฀judgment.฀