bold 9790 1 Research in Motion: One Step Closer to the Grave

Research in Motion cannot seem to catch a break. A San Francisco jury determined that RIM infringed one of Mformation Technologies’ patents, and awarded damages in the amount of $147.2 million. This was calculated based upon a figure of $8 per device connected to the BlackBerry Enterprise Server. Even if this is overturned on appeal, it creates one more obstacle for RIM, and the entire smartphone market, to overcome.

Research in Motion cannot seem to catch a break. A San Francisco jury determined that RIM infringed one of Mformation Technologies’ patents, and awarded damages in the amount of $147.2 million. This was calculated based upon a figure of $8 per device connected to the BlackBerry Enterprise Server. Even if this is overturned on appeal, it creates one more obstacle for RIM, and the entire smartphone market, to overcome.

This verdict comes just days after Nokia added additional infringement claims against RIM in Germany, and a few weeks after RIM posted its first operating loss in 8 years. RIM has also announced that it will cut 5,000 jobs in the coming months. The one time leading innovator in the smartphone market seems to be one step closer to its inevitable demise.

Unfortunately for consumers, this verdict is terrible news. If the verdict is somehow affirmed by the appellate court, it will give companies that do not produce smartphones immense power over those that do. For example, if Mformation claimed that a smartphone manufacturer had infringed upon a patent, the company could do one of two things. First, it could demand that the manufacturer pay huge royalties for the use of its technology. Alternatively, if the manufacturer did not want to cooperate, then Mformation could point to the verdict against RIM to coerce the manufacturer into payment. Either way, Mformation would be able to collect massive royalty payments, and drive up the price of smartphones.

It is not just Mformation that would be able to do this, either.  If this verdict is upheld, it will send a message to every other company that holds a patent needed for the manufacture of smartphones that they too can charge huge royalty fees. If Mformation received $147.2 million for the infringement of one patent, then why wouldn’t every other company increase its royalty fees? Moreover, it will act as an incentive to pursue any claim that might be infringement. The manufacturer will then be forced to just pay the increased royalty, rather than taking the risk that a jury may return an unreasonable verdict, such as this one.

For RIM, this is a verdict that must be overturned. If it is not, then the company faces the very possibility that it will cease to exist in its current form. More importantly, however, this is a verdict that must be overturned for the entire smartphone market. If upheld, this will allow companies that do not even produce smartphones to dominate the market, and stifle innovation. In addition, it will allow those companies to charge massive royalties for the use of their technology, and it will make smartphones unaffordable for the average consumer.