The US Patent and Trademark Office (PTO) has rejected seven out of eight claims made by NTP against Research in Motion's (RIM) BlackBerry service, throwing a legal settlement between the two companies into further turmoil.

The patent office issued what it calls "non-final office actions" rejecting all the claims in two of NTP's patents, on the heels of a preliminary rejection notice for the claims in five of the patents earlier this year. Only one of the key patents at issue in the dispute over the BlackBerry service now contains valid claims in the eyes of the patent office, but that patent is under review as well.

The PTO's decision gives 60 days to respond, at which point the re-examiner will issue a final ruling. That final ruling could still be appealed to the PTO's appellate board, and then to the US Court of Appeals for the Federal Circuit if necessary - a process that could take several years.

Nevertheless, the announcement severely weakens NTP's case against RIM and put the settlement the two reached earlier this year in doubt.

RIM operates the popular BlackBerry service, which allows handheld users to access their corporate e-mail behind firewalls. NTP claims it infringes its patents. Court rulings in favour of NTP that included an injunction against the sales of RIM's BlackBerry devices drove RIM to the settlement table in March, and the companies agreed to a $450 million licensing deal.

However, that deal has unravelled recently as RIM and NTP have disagreed over the scope and terms of a term sheet that was signed in March. RIM believes that it and NTP made a definitive agreement that RIM's $450 million payment would allow it a perpetual license to NTP's technology, while NTP does not believe the companies ever reached a final agreement on the matter. RIM has filed a motion asking an appeals court to send the case back to a lower court to enforce the terms of the settlement agreement. RIM then announced this week that it had developed a work-around for the Blackberry service so it would not infringe NTP patents.

"I would say it's a substantial, very material, and highly indicative development," said RIM chairman Jim Balsillie on the USPTO news. RIM believes that the PTO will be inclined to uphold the preliminary ruling given the two years of work put into the re-examination. But the company is now in the strange position of asking an appeals court to uphold a licensing agreement to patents that might not be valid, Balsillie said.

"It is a rather unusual situation that they are refusing to accept a check for $450 million when the validity of their IPR [intellectual property rights] is at issue," he sumised.

It would be premature for either company to view the PTO's decision as a tipping point, said John Rabena, a partner with Washington law firm Sughrue Mion who litigates software and electronics patent disputes. "Neither company can really bank too much on the patent office going one way or another for them," Rabena said. "RIM isn't banking on the re-examination process to get them off the hook; on the other hand, a significant percentage of re-examinations wind up with the patent owner making an amendment to the claims."

One way of satisfying the objections of the PTO would be to modify the claims to make them narrower, Rabena said. If NTP chose that route, they would lose the right to seek past damages, but could still sign future licenses and file new lawsuits based on the narrowed claims, he said.

NTP has filed responses to two of the seven office actions, Wallace said. The 60-day period has not yet expired on the remaining office actions, and NTP plans to respond to all of them, he said.