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Freedom Wireless collects prepaid patent

A second patent is issued, potentially giving the company additional ammunition as it attempts to collect royalties from competitors that offer prepaid wireless services.

Freedom Wireless, which holds a patent for prepaid wireless services and is attempting to collect royalties from other carriers, has received a second patent.

Freedom Wireless said Wednesday that the U.S. Patent & Trademark Office granted the company a patent for its technology that allows prepaid wireless phone users to add money to their wireless phone accounts. Without this ability, customers would have to open a new account and potentially be forced to reactivate their handset with a new phone number.

In December, Freedom Wireless was awarded a patent for technology it developed to eliminate the cumbersome method that prepaid mobile phone callers go through to make calls. After receiving that patent, the company sued Boston Communications Group, Verizon Wireless, Cingular, AT&T Wireless, CellularOne in San Francisco and Western Wireless, alleging those companies used the patented technology and owe royalties to Freedom Wireless.

Prepaid wireless calling plans, which allow a user to credit their account with an up-front payment rather than paying based on usage at the end of each month, have become popular with lower-income customers and families with children. But the patents, lawsuits and efforts by the carriers to debunk Freedom Wireless' claims to the technology have lingered for months, casting a legal shadow over these prepaid calling plans.

Although this week's second patent potentially bolsters their claims in the lawsuits, Freedom Wireless executives said this week they haven't decided yet if they will sue these same companies again, or try to introduce this second patent into the ongoing litigation.

But Freedom Wireless has fired off about 400 letters of warning to companies that have allegedly been using the newly patented technology, according to company executives. The recipients include all of the defendants in the lawsuit.

"We believe that certain prepaid wireless service providers, in addition to those identified in the (law)suit, should have an interest in a license, and (we) are prepared to offer licenses on reasonable terms and conditions to any interested party," states the letter.

A fiery history
The new patent is the latest chapter in a long-running battle between Freedom Wireless and several major carriers involved in the prepaid cellular phone business. The clash could help shape how carriers sell prepaid phones and cards, the same products that many in the cellular phone industry are hoping will attract interest from those who can't afford regular cell phones.

Many in that segment are between the ages of 10 and 24. According to Cahners In-Stat Group, a market research firm, there will be about 43 million youthful wireless subscribers by 2004, up from about 11 million today.

Also, the number of the U.S. wireless customers using some form of prepaid service is expected to double in size by 2005, according to The Yankee Group, another market watcher.

Freedom Wireless filed its lawsuit against the carriers soon after receiving the first patent in December. The suit, claiming that Freedom Wireless is owed royalties because its technology is at use, is set for trial in October.

The lead defendant in the case is Boston Communications Group. The company declined to comment Wednesday.

But in an earlier statement, the company said: "We do not infringe the Freedom Wireless patent. Moreover, we believe that the patent is invalid and unenforceable. We have identified hundreds of pieces of prior (designs), including our own technology, which predates the Freedom Wireless patent application by more than one year."

Boston Communications Group also recently disclosed that it had posted a $60,000 reward for any information debunking the patents given to Freedom Wireless, according to a Securities and Exchange Commission filing.