paidContent - RealNetworks Loses Arbitration Against VeriSign; May Have To Pay 'Material' Damages

This story was written by Rafat Ali.
RealNetworks (NSDQ: RNWK) has lost an arbitration hearing against VeriSign (NSDQ: VRSN) related to a mobile partnership that the companies were involved with, according to an SEC filing that just came out from Real. The judgment came down in May and there was a further ruling on it under which VeriSign could claim monetary compensation, and “the Company could ultimately be required to pay damages to VeriSign in an amount that may be material to its financial condition and results of operations,” RealNetworks said in the filing. The amount hasn’t been decided by the arbitration panel but a hearing to that effect is scheduled on July 13 in Seattle, the company said. Real intends to pursue other options on this dispute as well. But it continues Real’s myriad legals fights, somewhat dispropotional to its current size and sphere of influence in the industry, as detailed well by this NYT story from two weeks ago.

Real and VeriSign had an agreement going back to 2001, where Real’s mobile messaging service, branded Metcalf, routes and delivers SMS (and e-mail and MMS) messages between wireless carriers within the U.S. and internationally; this was done in partnership with VeriSign. But VeriSign has been trying to sell off its messaging business, as it decided to focus on its core of internet infrastructure services.

The dispute started when Real first filed in June last year, to “seek resolution of disputes regarding the proper interpretation of an Alliance Agreement entered into between the parties dating back to 2001,” the filing said. VeriSign filed various counterclaims against Real including claims that “we breached the Alliance Agreement and tortuously interfered with VeriSigns proposed sale of certain business units.” Which is a big deal, and would be interesting to find who the exact mechanics of that sale process and Real’s interference in it. In May this year, the panel rejected Real’s claims for relief over the JV, and granted VeriSign’s claims including that of interference in the sale process.

And then “Subsequent to that ruling, the Arbitrator has further ruled that the limitation of liability clause contained in the Alliance Agreement does not apply to the potential damages VeriSign incurred. In response, VeriSign has filed an amended statement of damages seeking a material amount in damages. A hearing to address VeriSigns claimed damages is currently scheduled to begin July 13, 2009.” All this means that RealNetworks may have a big payment coming…


By Rafat Ali