Report: Patent Case Threatens to Cripple U.S. Prepaid Wireless Market

The outcome in a patent-infringement case in May is hindering the development of the prepaid wireless business in the U.S. at a time when the market is already behind overseas markets in usage, a report released by a major research firm says. According to the report from the Yankee Group, “Emerging U.S. Prepaid Market Takes Major Blow from Patent Infringement Lawsuit Damages Award,” the decision in the case threatens to harm prepaid billing vendors and wireless carriers while slowing consumer adoption. A court in May awarded $128 million to a company called Freedom Wireless, which had sued Boston Communications Group Inc., Cingular Wireless, and Western Wireless over patents it holds for certain prepaid billing processes. Freedom, which according to the Yankee Group employs four people and has no business operation, has also sued Nextel and Alltel. The May decision affects one quarter of BCGI's prepaid business and could land the company in bankruptcy, the report says. Meanwhile, the research firm predicts the decision could lead Freedom to sue more vendors, including Ericsson, Telcordia, Lucent, VeriSign, Alcatel, and Intervoice. “The U.S. prepaid wireless market landscape has been severely altered from this recent decision,” said Kenneth Mallinson, executive vice president at the Boston-based Yankee Group, in a statement. The research firm recommends that carriers and billing vendors drop or reduce royalty charges on “infringing” billing processes if Freedom Wireless's patents cannot be invalidated.