With the end of the year upon us, Research in Motion's (RIM) CDN$66 million hostile takeover bid for encryption specialist Certicom has hit a snag.

It appears the maker of BlackBerry smartphones will begin the New Year locked in a court battle to salvage its attempts to acquire Certicom after learning that Certicom intends to file submissions before the Ontario Supreme Court of Justice and the Ontario Security Commission for and injunction and a cease trade order respectively preventing RIM from acquiring Certicom shares.

Certicom is best known for its Elliptic Curve Cryptography (ECC), which is used by Motorola, IBM and other customers including military and government departments to protect information. Certicom says the technology meets U.S. National Security Agency standards. Acquiring Certicom will bolster the BlackBerry's security posture and make the handset more attractive to government buyers.

On Dec. 10, RIM made an offer of CDN$1.50 per Certicom share. Last Thursday, Certicom called RIM's takeover bid "highly opportunistic." The security company's special committee of independent directors urged shareholders not to take any action regarding the offer.

Certicom alleged that RIM used confidential information contrary to the terms if agreements entered between RIM and Certicom. Certicom also said RIM failed to make proper disclosure in its offer to purchase sent to Certicom shareholders.

"RIM intends to vigorously oppose Certicom's allegations," according to a statement issued by the mobile handset maker yesterday.

"While this course of conduct is consistent with Certicom's past conduct in rebuffing RIM's overtures to conclude a negotiated transaction...RIM is disappointed that Certicom directors are again attempting to keep the decision as to whether to accept RIM's offer out of Certicom shareholder's hands," the statement said.

Jim Balsillie, co-CEO of RIM, reported that his company had been talking to Certicom's management about a potential transaction since February 2007. Despite nearly two years of discussions, RIM has been "unable to engage the Certicom management in a meaningful dialogue to advance the terms of a potential transaction."

Certicom responded to the offer by setting up a special committee and saying that its board of directors "will evaluate and consider the adequacy of RIM's proposal, solicit other proposals, consider the full range of alternatives to maximize shareholder value and make the recommendations to the full Board of Certicom."

RIM's formal offer to Certicom shareholders on or before Dec. 12 was CDN$1.50 per share for a total of CDN$66 million. Shares in Certicom, which were trading for CDN$1.70 on the Toronto Stock Exchange early this month, fell to CDN$1 after RIM announced its offer.

Certicom would be a highly valuable piece of intellectual property for RIM, according to Ronald Gruia, analyst with Frost & Sullivan in Toronto. He said there's a constant demand within RIM to seek alternative routes and build the company's encryption technology team.

"Certicom has integration with a whole bunch of different handset vendors. I think this will ultimately strengthen the BlackBerry portfolio," he said.

A tie-up with Certicom will also put RIM in a better position to meeting more vigorous security requirements especially in the government sector, says Ryan Reith, analyst with IDC. For example, he said, U.S. government agencies require technology vendors to address five different levels of encryption and so far RIM has accomplished three of them.

For BlackBerry users, data is usually encrypted before it leaves the network operations centre, then is re-encrypted when it flows through the BlackBerry Enterprise Server and encrypted a third time when the data reaches the receiving BlackBerry device, Reith said.