My take on today’s court ruling against Reuters… in favor of FaceTime

After a six-month contract dispute and a resulting court ruling in favor of FaceTime, Thomson Reuters as of this Friday, Aug. 1, 2008 will no longer be able to provide its customers in the financial services sector with FaceTime technology that has provided important compliance capability in the Reuters Messaging Network since 2006.

 

While FaceTime is understandably pleased that our intellectual property is protected, we are very concerned about what this outcome means to customers’ compliance status.

 

My take? Reuters is choosing to potentially put its customers in jeopardy of not having adequate compliance capabilities for Reuters Messaging, a communications tool hundreds of financial institutions in the world rely on.

 

How did this happen?

 

Two and a half years ago we reached an agreement with Reuters whereby they licensed our source code to provide compliance for the Reuter Messaging Network. The Reuters Messaging Network is used extensively by market professionals in the financial services industry.

 

The deal made sense. For Reuters, for FaceTime and, most importantly, for our customers.

 

FaceTime’s customers include 9 of the top 10 banks in North America and most of the largest investment banks in the world. Most of them have employees that use Reuters Messaging – typically traders whose communications are subject to strict compliance regulations. As a result of this agreement, they were able to log their Reuters messages within IMAuditor, along with messages from AOL, MSN, Yahoo, Microsoft OCS, Sametime and other popular public and enterprise networks – or they could log them directly with Reuters “in the cloud” using the Reuters Messaging Compliance Manager (RMCM).

 

Many customers use FaceTime’s IMAuditor to log all conversations on all IM networks – including Reuters – using our solution as a unified repository. For some, it made more sense to log Reuters Messaging with Reuters’ archiving solution. The customer had a choice.

 

Our agreement with Reuters expired on January 31, 2008.  Shortly thereafter, we approached them to negotiate a new agreement. One of our key requirements was a technology partnership whereby Reuters would continue to allow FaceTime access to the Reuters Messaging Network to provide customers with this continued choice as they have done for years.

 

Reuters contested the language of the expired agreement. To protect our intellectual property, FaceTime filed suit in the Southern District Court of New York, and as Eric Goldman (Assistant Professor at Santa Clara University School of Law) mentions in his blog, won an “open and shut” ruling.

 

However, the story doesn’t end there.

 

With this week’s deadline looming, Reuters now plans to move ahead with a platform switch replacing the FaceTime technology in RMCM with another solution. Yet, in a court filing earlier this month, Reuters’ claimed

 

“There is no practical immediate substitute for the Reuters messaging compliance product …”

 

“Any development of a suitable replacement (and complete transition of existing customers to the new product) would take several months…” and

 

“If Thomson Reuters were suddenly unable to make use of the Reuters Messaging compliance product, Thomson Reuters’ customers would be crippled in their day-to-day business operations…”

 

As if the financial sector doesn’t already have enough to worry about.