Patent Wars Go Wireless

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?

Its 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 drama—a classic David and Goliath battle, as a small, Canadian firm takes on the heavyweight champion of the networking world.

But a key interest here isnt the players or the fight itself; its 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, its fair to question the impact of the suit on the industry. But dont look for it to cripple development efforts. OFDM is already out there. No ones going to call it back. Certainly not Wi-LAN. Its using the courts to help it enlist partners who havent exactly rushed to its doors to license the companys technology.

Its not surprising the company would. Wi-LAN was founded in 1992 on the strength of patents developed by Calgary researchers: Dr. Hatim Zaghloul, who worked for a Canadian telco at the time, and Michel Fattouche, a professor at the University of Calgary. Those patents, now at the heart of the Cisco suit, were granted in 1994. Since then, Wi-LAN has added to its roster of wireless patents. In a largely symbolic gesture, the company even purchased the original patents on spread-spectrum technology, developed by Hedy Lamarr. Since those patents expired in 1959, the transaction was largely a gesture to honor the unsung Hollywood screen actress who opened the door to modern wireless communications.

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 its made it clear that, if they dont come to Wi-LAN, Wi-LANs going after them.

/zimages/6/28571.gifClick here to read more about Wi-LANs suit against Cisco.

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-dont-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-LANs patents but decided to settle because the legal battle would have been "too much of a distraction" from the companys 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-LANs third licensee behind Philips Semiconductor and Fujitsu Microelectronics of America.

Zaghloul, Wi-LANs 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: Its the Super Lotto jackpot in licensing, the ship everyone hopes will someday come in.

(Funny I should say that. For Wi-LAN, Ciscos ship was on the horizon back in 1999. That year, Cisco eyed the company for possible acquisition. "There were preliminary discussions," Ken Wetherell, Wi-LANs 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-LANs 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, Ciscos subsequent purchase of Linksys changed all that.

/zimages/6/28571.gifClick here to see what the lawyers have to say about Wi-LANs suit against Cisco.

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-LANs 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 its 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-LANs 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? Thats the question that makes this a case to watch.

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