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On December 14, 2004, the CAFC issued a decision that would affirm-in-part and vacate-in-part the decision of the District Court relating to the litigation between the parties and remand the case to the District Court for further proceedings. On January 11, 2005, RIM filed a petition with the CAFC for a rehearing on several significant issues within the CAFC's decision. On March 16, 2005, while RIM's petition for a rehearing was still pending before the CAFC, RIM and NTP jointly announced that they had signed a binding Term Sheet resolving the litigation between them.

As part of the settlement, RIM agreed to pay US$450 million in exchange for NTP granting RIM and its customers an unfettered right to continue its BlackBerry-related wireless business without further interference from NTP or its patents. The parties agreed to negotiate in good faith to finalize the terms of a definitive license and settlement agreement.

Since signing and jointly announcing the binding Term Sheet with NTP, RIM has been negotiating in good faith to complete that process. However, NTP refuses to honor its obligations under the Term Sheet and finalize the definitive documents. As a result, an impasse has been reached with respect to the settlement.

In order to enforce the Term Sheet, RIM has filed a Motion to Stay Appeal and Remand for Enforcement of Settlement Agreement, which requests that the CAFC stay the appeal and remand to the District Court to enforce the Term Sheet. The CAFC may grant RIM's motion, stop its review of the patent dispute and send the enforcement of the Term Sheet to the District Court to resolve. The CAFC may also deny RIM's motion, continue its review of the case, and ultimately send both the enforcement of the Term Sheet and the patent dispute to the district court. RIM expects that NTP will oppose RIM's motion; and, if the CAFC sends the patent dispute back to the District Court, RIM also expects that NTP will ask the District Court to reinstitute the injunction that had previously been granted (which was subsequently stayed pending RIM's appeal and then vacated by the CAFC in December 2004 in connection with the CAFC's decision to remand the case to the District Court for further proceedings) to prohibit RIM from providing BlackBerry service and from using, selling, manufacturing or importing its handhelds and software in the United States. While RIM maintains that an injunction is inappropriate given the facts of the case and recent doubts raised as to the validity of the patents in question, it will ultimately be up to the court to decide these matters and there can be no assurance of a favorable outcome of any litigation.

RIM is reviewing any potential accounting implications of this new development and will provide a further update when RIM reports first quarter fiscal 2006 results on June 29, 2005. RIM has already set aside the necessary funds to make the required payment stipulated in the settlement and continues to hold this cash in anticipation of resolution of this matter.