Court Ruling Imperils Prepaid

By Matt Hines  |  Posted 2005-10-20 Print this article Print

Wireless Company"> BCGIs stock has plummeted as the ruling has moved forward, trading at just over $1 on Thursday, compared to a yearly high more than $10 in December, 2004.

Freedoms patent, granted in 1999, covers technology related to managing prepaid wireless services that makes it possible to measure usage without forcing subscribers to enter access codes into their handsets. Part of the patent relates to software needed to shut off service when a customer has run out of minutes.

The company was founded in 1999 by businessmen who had first applied for the patent as independent owners of prepaid their own companies. The company has since sold licenses to the technology to several companies, including Convergys Corp. and Telcordia Technologies Inc. Freedom maintains that BCGI generated $1.5 billion in revenue using its patented tools.

Freedom previously lost a similar patent suit against GTE Wireless Corp., which successfully argued that other vendors had offered nearly the same type of technology before it had launched its own prepaid services.

Some industry watchers have observed that BCGI was found guilty of patent infringement even though no Freedom Wireless designs were employed or referred to in the development of BCGIs systems.

According to Keith Mallinson, analyst with Boston-based researchers Yankee Group, the ruling awarded to Freedom, which he identified as "a four-employee company with no business operations, services, software or products for sale," affects one-fourth of BCGIs prepaid business and poses a severe threat of bankruptcy for the firm.

Click here to read more about how wireless helps hospitals. Mallinson also said that the case could deter growth of the larger prepaid market, as the BCGI case is "merely the beginning for Freedom Wireless and its lawsuits." The company has already filed suit against Nextel and Alltel, and the May 2005 decision could lead to action against other vendors and service providers, including Ericsson, Telcordia, Lucent, VeriSign, Alcatel and Intervoice.

"The US prepaid wireless market landscape has been severely altered from this recent decision," Mallinson wrote in a recent report. "The example set by this broad interpretation on Freedom Wireless patents will not only harm prepaid billing vendors and wireless providers, but it will also languish consumer adoption."

Check out eWEEK.coms for the latest news, reviews and analysis on mobile and wireless computing.


Submit a Comment

Loading Comments...
Manage your Newsletters: Login   Register My Newsletters

Rocket Fuel