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Will RIM survive the patent minefield?

The last thing the BlackBerry maker needs is a battle over patents with Mformation

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BlackBerry maker Research in Motion – once the biggest force in enterprise mobility – is hanging on by the skin of its teeth. Not only are profits down and the BlackBerry 10 OS been delayed, but the company has been found guilty of patent infringement and ordered to pay $147.2 million in damages.

This may seem minor in the context of wider software patent wars underway in the United States, but the ruling is an expensive distraction at a time when RIM needs to put all its energy into perfecting the BlackBerry 10 operating system.

It is also unfortunate that the patent in question relates to RIM's BlackBerry Enterprise Server (BES) – the crown jewel in its enterprise mobility portfolio.

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BES has long set the standard for secure messaging globally, and is widely used by financial firms and Fortune 500 companies seeking remote device management, encryption and other advanced security capabilities.

The patent in question is owned by Mformation Technologies and underpins a range of over-the-air mobile device management (MDM) activities, including “managing, controlling, and reconfiguring wireless devices remotely over a wireless network with acceptable reliability and security”.

The amount awarded to Mformation by the US Federal District Court of Northern California is based on past sales of BES-connected BlackBerry smartphones in the US from late 2008 through to the trial date. It does not include future royalties, past and future US government sales, or past and future non-US sales.

This amounts to 18.4 million devices, at a cost of $8 per device over 24 months – meaning that the court values use of Mformation's patented technology at around $0.33 per month per device.

Whether this value will be translated into future royalties is unknown. RIM has refused to divulge figures on the number of devices connected to its BES servers, but with more than 250,000 active servers deployed around the world, each supporting up to 2,000 users, settlement would come at no small expense.

Sources familiar with the matter told Techworld that Mformation is open to striking a global licensing agreement with RIM. However, RIM has made it clear that it plans to fight the ruling.

“RIM has worked hard for many years to independently develop its leading-edge BlackBerry technology and industry-leading intellectual property portfolio, and RIM does not believe that the Mformation patent in question is valid,” the company said in a statement.

RIM is now waiting for the trial judge to settle certain legal issues that might impact the verdict before deciding whether to pursue an appeal. If the ruling is upheld and RIM rejects Mformation's terms for a licensing agreement, this could result in further legal action.

“RIM can't afford legal losses like this right now as it fights for its life,” said Constellation Research analyst Ray Wang. “Licensing costs will ultimately be passed on to the consumers. It may mean greater costs passed on to the carriers or passed on to the device. In any case, the buyer pays more.”

The number of features that Mformation is holding RIM accountable for is not yet clear. IDC analyst Nick McQuire said that the overlap between Mformation's patent and the BES is likely to be relatively small, but still highly relevant.

“If you look at some of the elements they're talking about – such as device configuration, lock/wipe and application management – those types of features are now highly commoditised,” he said. “We've seen announcements from competitors of Mformation that some of this stuff is going down to less than a dollar a device.”

The ruling could also impact on the development of RIM's BlackBerry Mobile Fusion platform – the company's unified interface for IT departments to manage devices that use Apple iOS and Google Android operating systems, as well as BlackBerry smartphones and PlayBook tablets.

“The BES environment is the epicentre of that strategy,” said McQuire, adding that it is essential for RIM to offer multi-platform MDM support, in order to avoid being left behind in the bring-your-own-device (BYOD) revolution.

“You have to think about where we're going in terms of organisations mobilising applications and needing a secure channel back to the enterprise environment,” he added.

Although RIM's customer base has swung dramatically away from the enterprise in recent years, with consumers now representing up to 70% of BlackBerry owners, analysts agree that the company cannot afford to let its enterprise business dwindle.

“The BES environment is a highly important aspect of RIM's business, and it's also the most stable at the moment, so RIM desperately needs to protect that aspect,” said McQuire.

However, the company is in no position to be getting involved in ongoing patent litigation, nor to be paying vast licensing costs for technology that is has become highly commoditised.

The only solution is innovation – and that is why the success of BlackBerry 10 is so important. New features such as video chat sound promising, but McQuire warns that expectations have been raised so high that BlackBerry 10 will inevitably disappoint.

For RIM, the on-going damage of the Mformation case is not just the potential drain on its balance sheet or the waste of senior management time if it contests the court ruling. The case has cast further doubt on RIM’s capacity to innovate.

RIM (like Nokia) lost the handset wars to Apple and Samsung. If the company's core enterprise technology is not sufficiently original to avoid litigation, how much hope does Blackberry 10 have of competing against what will be extremely enterprise-friendly Windows 8 platform?


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Comments

Min Zhu said: RIM has somepatent useful but most of them are not

Katie Bertram said: This article provides a lot of good information about RIMs current state -- and reiterates the point that the company is in no position to be getting involved in ongoing patent litigationI actually just read an article by an agency that measures corporate brands CoreBrand and itdiscusseswhat RIM could have done differently and where the brand might be headed It provides a different angle than this post by focusing on RIMs overall brand strategy or lack thereof but I find it beneficial to see all aspectshttpcorebrandcomviews608



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