Boston Communications Group Inc. settled its long-running dispute with Freedom Wireless Inc., agreeing to pay $55.3 million to the patent-holding firm.
BCGI suffered a potentially fatal blow last year when a Massachusetts U.S. District Court ruled the company had infringed on two patents for wireless billing technology held by Freedom Wireless L.L.C. Freedom was awarded $128 million in damages, and BCGI had been ordered to pay tens of millions more to cover additional revenues—sums that threatened to push the company into bankruptcy.
The settlement includes a $12.6 million prepayment for licensing fees under a new agreement. That amount is expected to cover BCGI’s royalties to Freedom through February 2007.
Freedom also agreed to drop litigation against BCGI carrier customers including Cingular Wireless L.L.C., Sprint Nextel Corp. and Alltel Corp. The operators had been named as co-defendants in the lawsuit, but agreed to release BCGI from its indemnification obligations under terms of the settlement.
The agreement ends the latest saga pitting technology companies against patent-holding firms—outfits often derided as “patent trolls.” Freedom’s founders in 1994 won a patent for technology that can automatically shut down mobile phones that have exceeded usage limits, and for the last seven years have focused solely on patent litigation.
Patent-holding companies have won vast sums in recent years taking on the likes of Microsoft Corp., Research In Motion Ltd. and BCGI.
BCGI Chief Executive Officer E.Y. Snowden compared his company’s struggle with that of RIM, which earlier this year ended an epic patent-infringement case by shelling out $450 million to patent holding firm NTP Inc. RIM was facing an injunction that would have shut off service to U.S. subscribers; BCGI narrowly staved off a similar fate late last year.
“They ultimately made their decision (to settle); I’m afraid we’ve had to make the same,” said Snowden. “As successful as you think you may be in business or in court, if you lose your customers, what’s left?”
Shares of BCGI shot up on the news, more than doubling from $1.70 to $4.14 before settling in after-hours trading.
