Thomson Reuters Corp. must remove a crucial layer of software from its instant messaging service beginning Friday under a federal court order that threatens to disrupt communications within dozens of stock brokerages and banks.
The decision issued Tuesday by U.S. District Judge Colleen McMahon penalized Thomson Reuters for being two weeks late with its final licensing payment to Silicon Valley software maker FaceTime Communications Inc.
Reuters, the news and information service bought by Thomson Financial earlier this year, stitched FaceTime's computer coding into an instant messaging service that has been sold to about 100 customers in the financial services industry.
FaceTime's technology provides Reuters' instant messaging customers with two vital features ??” security against computer hackers and tools to comply with a variety of government regulations that include a mandate to store the electronic conversations of securities traders and brokers.
The decision won't affect banks and brokers that independently license FaceTime's tools for their internal instant messaging systems.
The FaceTime elements are so important to Thomson Reuters that a company executive, Eran Barak, warned in a July 1 declaration that losing the technology would have a "devastating impact on customer satisfaction and customer goodwill."
Barak, Thomson Reuters' head of strategy and collaboration services, estimated the New York-based company's 2009 revenue could decline by millions of dollars if disillusioned customers seek other instant messaging alternatives. He also indicated switching might not be easy, warning some instant messaging users "would be crippled in their day-to-day operations" without access to FaceTime's protections.
Messages left late Tuesday with a Thomson Reuters spokesman and attorney weren't immediately returned. FaceTime remains willing to negotiate a new licensing agreement with Thomson Reuters, said Jim Obrien, the Belmont-based company's general counsel.
Although Reuters' instant messaging would still be able to relay electronic conversations without FaceTime's technology, the service probably couldn't be used by many brokers and banks without the security and compliance tools.
McMahon, a New York federal judge, showed little sympathy for Reuters in what she called an "open-and-shut case."
After paying $1.3 million to FaceTime as part of a two-year contract, Reuters could have nailed down the permanent right to use the software by making a $150,000 payment by Jan. 31 this year, according to McMahon's decision.
But Reuters didn't wire the funds until Feb. 15 ??” two days after FaceTime's Obrien sent a letter notifying the company that the previous deal had expired.