BlackBerry vs. Redberry in China

Hot on the heels of the settlement of a rancorous patent dispute, Research In Motion may have a new fight on its hands. Canada's RIM this year plans to launch its iconic BlackBerry wireless e-mail device in China, where it will go toe-to-toe with China Unicom, the state-run telecommunications company.

RIM (RIMM), which in February agreed to pay a $612.5 million settlement with U.S. holding company NTP, has confirmed it's on track to introduce the BlackBerry in China by the middle of the year. Not to be outdone, China Unicom (CHU) has launched its own BlackBerry-like wireless e-mail service.

And here's where it gets weird. China Unicom's service is not only patterned after the BlackBerry, but its name is inspired by the BlackBerry as well. "China Unicom's Redberry brand not only continues the already familiar 'BlackBerry' image and name, it also fully reflects the symbolic meaning of China Unicom's new red corporate logo," the Chinese company says in a statement.


  Having competitors with seemingly similar offerings is nothing new to RIM. With some four million BlackBerry devices in use around the world, RIM competes with Palm (PALM), Hewlett-Packard (HPQ), Nokia (NOK) and Motorola (MOT) on the device front. Meanwhile its software rivals include privately held Good Technologies, and Microsoft (MSFT), among others.

RIM has been negotiating for the right to do business in China for several years and according to published reports is poised to announce a deal with China Mobile (CHL), a Hong-Kong based carrier with 284 million subscribers, compared with China Unicom's 121 million.

The technology behind the Redberry service comes from a Beijing-based outfit called Facio Software, which sells a software product it calls Uni Pushmail. The company didn't immediately respond to requests for comment, but its chief executive is Tony Chan, a Microsoft alum whose career includes stints at Rhapsody Software, which was acquired by Brocade (BRCD) in 2003 and Vitalsigns, which was later acquired by Lucent Technologies (LU).

So could RIM pick a trademark fight with China Unicom? RIM isn't commenting on the matter, but a source familiar with the company's thinking says RIM doesn't consider the Redberry service much of a threat.


  Still, should RIM opt to battle in court, it could, says Jim Fang, a lawyer with the Seattle-based firm of Davis Wright Tremaine who specializes in helping western firms navigate China's legal system. "The key to asserting a trademark in China is whether or not the trademark you're asserting is famous," he says. "If your trademark is famous you're on stronger ground, even if your trademark isn't registered."

But litigating in China is not for the timid, says Stephen Baker, a trademark lawyer with New York-based Baker and Rannels. Baker's firm is working on a case involving the golden fleece logo popularized by apparel maker Brooks Brothers. A Chinese company began using the logo even though Brooks Brothers was established with retail stores in the country.

"It's a clear case where the logo came from, and we'll probably win, but just presenting our evidence has taken reams and reams of paper," says Baker. In another case, it's taken a year for the Chinese trademark office to even respond to legal filings, he says.


  Meanwhile, analysts aren't paying much attention to the prospect of a RIM rival in the vast Chinese wireless market. "The reality is that there are already a lot of competitors out there, and they're trying to set up their own solution," says James Faucette, who covers RIM for Pacific Crest Securities in Portland, Ore.

"RIM makes a healthy monthly profit per subscriber, and anyone who thinks they can provide 80% of the solution and capture some portion of the market that RIM is going after will give it a try," Faucette says. "But I don't think there's anything more ominous here than what's already available from Good or Microsoft."

RIM could use a successful Chinese launch. The company, which generated $2 billion in fiscal 2006 sales, finished its fourth quarter with an $18 million profit on revenue of $405 million. The period was marred by the payout to NTP to end long-fought patent litigation (see BW Online, 3/03/06, "BlackBerry Won't Get Squashed"). The dispute had threatened to shut the service down in the U.S., causing uncertainty that slowed sales. A beachhead in China -- Redberry or no -– could go a long way to helping RIM bounce back.

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