Patent award against RIM could make all smartphones unaffordable

As if it wasn’t having a bad enough time already, RIM’s been ordered to pay out $147.2 million in damages to Mformation Technologies over patents related to the remote management of wireless devices.

It’s a decision which, if upheld, could have a major effect on the price of all smartphones in the future.

Mformation sued RIM in 2008, claiming that its BlackBerry Enterprise Server (BES), used by corporate enterprise customers to manage and secure their BlackBerry devices, infringed its patents.

And a federal jury in San Francisco has agreed, ordering RIM to pay $8 for each of the 18.4 million BlackBerrys involved.

“Mformation created the mobile device management category in the late 1990s and was innovating in this area well before most of the market understood the fundamental importance of wireless mobility management,” says patent inventor and Mformation founder/CTO Rakesh Kushwaha.

“Our patents are a core part of our innovative products, and are fundamental to the methods used for device management in the market today. We ensured that our early innovations in device management were put through rigorous legal assessment by applying for patents on these innovations in the United States and abroad.”

The ruling is a major blow for RIM, which is already pretty strapped for cash. It reported a first quarter loss last month of $518 million, on revenue down a third at $2.8 billion.

Worse still, perhaps, it’s been forced to delay the launch of its BlackBerry 10 until next year, citing problems with the device’s new operating system.

With the court having dismissed some of Mformation’s patent claims, RIM is hoping to get the decision reversed on the basis that the patent is obvious.

And we should all hope that this is what happens, says patent expert Florian Mueller.

“The per-unit royalties that are rumored to be paid by Apple to Nokia and by certain Android device makers to Microsoft are comparable to what this California jury, possibly misguided by Mformation’s shrewd lawyers and suboptimally-instructed by the court, awarded to Mformation,” he says.

“But a license deal with a company like Microsoft or Nokia involves large numbers of relevant patents. Those kinds of companies have tens of thousands of patents worldwide, and a licensee’s products potentially implemented many hundreds (if not more) of them in a device.”

Applying the Mformation award to all the other patents used widely across the industry, he says, could add as much as $2,000 – yes, $2,000 – to the cost of an average phone.

“Jury verdicts don’t set a precedent in the narrow sense of the word – only judges can do that. But if this jury verdict was affirmed by a judge as well as by the appeals court, that would be a terrible precedent,” he says.

“With all of the other smartphone-related cases pending, the consequences of this position on a ‘reasonable royalty’ would be catastrophic.”