Patent Wars Go WirelessBy Carol Ellison | Posted 2004-06-27 Email Print
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A Canadian company with patents on core wireless technologies is engaged in a litigious crusade to sign up licensees. Is that any way to court partners?It's tempting to look at the patent infringement suit that Wi-LAN slapped against Cisco Systems last week, wring our hands and lament, "Here we go again." On the face of it, this one has the makings of high dramaa classic David and Goliath battle, as a small, Canadian firm takes on the heavyweight champion of the networking world.
But a key interest here isn't the players or the fight itself; it's what inspired the battle in the first place. At the heart of the issue is OFDM (orthogonal frequency division multiplexing), the modulation technique behind the high-speed data transfers enabled by the 802.11g and 802.11a Wi-Fi standards, as well as the 802.16 WiMax standard and short-distance ultrawideband technologies.
Given the wide reach of OFDM, it's fair to question the impact of the suit on the industry. But don't look for it to cripple development efforts. OFDM is already out there. No one's going to call it back. Certainly not Wi-LAN. It's using the courts to help it enlist partners who haven't exactly rushed to its doors to license the company's technology.
For Wi-LAN, patents are the product, and the litigation all comes down to a bread-and-butter issue. The company wants others to license its patents and it's made it clear that, if they don't come to Wi-LAN, Wi-LAN's going after them.
Wi-LAN comes at Cisco hot off a win in a similar patent dispute with Toronto-based Redline Communications. Last month in an if-you-don't-want-to-fight-'em-join-'em move, Redline signed a royalty agreement with Wi-LAN, settling the 2-year-old case.
At the time of the settlement, Redline President and CEO Majed Sifri insisted the company did not infringe on Wi-LAN's patents but decided to settle because the legal battle would have been "too much of a distraction" from the company's core business. And besides, he added, royalties to Wi-LAN would represent only "a minor portion of the overall Redline product cost." Redline then became Wi-LAN's third licensee behind Philips Semiconductor and Fujitsu Microelectronics of America.
Zaghloul, Wi-LAN's co-founder and executive chairman, said, "Our intention is to now move ahead with negotiating further licensing agreements for our intellectual property."
Now Wi-LAN wants Cisco in its collective of licensees, and those negotiations ended up in court last week. But who can blame Wi-LAN? With its Aironet line in the enterprise and LinkSys dominating the home and small-business market, Cisco represents the proverbial 900-pound gorilla in the wireless space: It's the Super Lotto jackpot in licensing, the ship everyone hopes will someday come in.
(Funny I should say that. For Wi-LAN, Cisco's ship was on the horizon back in 1999. That year, Cisco eyed the company for possible acquisition. "There were preliminary discussions," Ken Wetherell, Wi-LAN's vice president of investor and media relations, told me. "Share prices went from about $5 to $9 to $30. It was such a moving target the talks never progressed past the preliminary stage.")
By 2000, Wi-LAN was at odds with Cisco after the networking giant acquired an Australian company that had been found by Canadian courts to have violated Wi-LAN's patents. Cisco won a dismissal of that case when it told the court it had no interest in marketing products based on the patents in Canada. According to Wi-LAN, Cisco's subsequent purchase of Linksys changed all that.
If Cisco chooses not to settle, as Redline did, this could prove to be a long and protracted battle. Accordng to Wetherell, "There have been about 70 U.S. patents that refer to Wi-LAN's original patents, 700 additional patents that refer to the 70 and another 6,000 that refer to the 700."
The prospect of jurists poking through that cascade of patents to scratch out the truth is so comic it's terrifying. The best engineers in the business would find it daunting.
But if Cisco decides to avoid the specter and settle, as Redline did, Wi-LAN's partner program gets one big shot in the arm. Suddenly, litigation becomes a big factor in building a successful partner program. But is it one we want? That's the question that makes this a case to watch.