Banks to lose IM security tools due to Reuters/FaceTime license fracas

Because Thomson Reuters made a licensing payment to FaceTime two weeks late, a US judge has ordered the removal of security and regulatory compliance tools from an instant messaging product used by more than 100 stock brokerages and banks.

Reuters had integrated the tools from FaceTime into Reuters Messaging, an IM service sold to dozens of customers in the financial services industry. One of the tools is designed to assure compliance with an SEC mandate to record and archive the electronic communications of securities traders and brokers.

In a statement on July 1, Eran Barak, Thomson Reuters' head of strategy and collaborative services, predicted that losing FaceTime's technology could cost the company -- which was acquired by Thomson Financial earlier this year -- millions of dollars if customers decided to move to a competing IM service instead.

Barak also cautioned that some IM customers would be "crippled in their day-to-day operations" without access to FaceTime's technology.

US District Court Judge Colleen McMahon issued the order to remove FaceTime's code because Thomson Reuters had been two weeks late with its final licensing payment to the company.

Under a $1.3 million licensing contract reached with FaceTime in 2006, Reuters was entitled to exercise an option to purchase a perpetual license by paying an additional $150,000 by January 31, 2008. Reuters, however, did not make payment of the $150,000 until February 15.

"This appears to be an open-and-shut case," McMahon said, in issuing the ruling. "The option was not exercised in accordance with its terms."

Brokerages and banks that license technology directly from FaceTime won't be impacted by the order.