Wi-Fi's Future: Patent-Pending?

By Ed Sutherland

March 11, 2004

A number of 802.11-related vendors recently received patents that could cost other companies a lot in licensing fees. How will intellectual property rights impact the marketplace?

A flurry of patent claims causing concern in the high-flying Wi-Fi industry are grounded in old-fashion economics, says a Silicon Valley expert.

"Merely selling products" is not enough to stave off stiff competition, says Dennis Fernandez, a partner in a law firm dealing with high-tech patent issues. He points to pressure by venture capital firms funding many Wi-Fi companies.

"In Silicon Valley, many venture capital firms sitting on startup boards of directors require" that startups "devote serious attention to building -up their intellectual property (IP) position," says Fernandez.

One of the most publicly-visible aspects of Wi-Fi is the hotspot -- public locations where wireless users can connect to the Internet or office network while sipping coffee or waiting in an airport. Users often grouse about the difficulties in logging into different hostpot provider networks which many times require changes in settings.

Concern over Wi-Fi patents was ignited in January when Nomadix said gained patent on technology making it easier to redirect a wireless laptop or other portable computer to hotspots.

Covering "redirection to a portal for any user regardless of their settings," the Nomadix patent touched off questions about the company's intentions. While Nomadix co-founder Dr. Joel Short was quick to assure ISPs and others that the patent would not be used as a club, "we encourage people to license and not infringe."

Robert Leon, co-founder and CTO Calypso Wireless Using a carrot-and-stick approach, Calypso is asking major cell phone carriers to license its roaming technology both in order to stay out of court and to increase their profits by offering cell phone subscribers voice, video and broadband over Internet services available via Wi-Fi connections.

Boston-based Newbury Networks holds the patent to technology for managing and securing wireless networks. Used in its Wi-Fi Watchdog product, Newbury's patent says this technology "detects the real-time position and tracks the location of any 802.11 device over a wireless LAN."

The patents aren't preventing competitors from speaking out. Birdstep says its roaming technology uses the standards-based Mobile IP for 'seamless roaming.' In 2003, PCTEL agreed to add Birstep's technology to its Segue Roaming Roaming Client for Windows. Broadbeam is another vendor offering the ability to roam between cell and Wi-Fi networks.

Does this mean more courtroom battles? Fernandez doesn't think so, saying "Patent lawsuits are notoriously expensive to fight."

At up to $2 million per case, "it's unlikely that there will be many parties eager to test these litigation waters. The vast majority of cases will get settled early."

Via Licensing must have overheard Fernandez because it is hoping to do for Wi-Fi what it has done for consumer electronics. The company, a subsidiary of Dolby Laboratories, believes an "patent pool" would provide one-stop shopping for Wi-Fi license holders and licensees.

"There are a number of patent pools that are based around CD, DVD, and audio and video technologies," says Via's Ron Moore. Via has created such pools for the MPEG standard.

This "is much better than just building products based on a standard then one day having someone come to you with patents in hand asking you to write a big check," says Moore.

But can companies profit from patents? Calypso thinks so. It is hoping to increase revenue by following the Qualcomm model. The cell phone technology designer turns a profit partially from the royalties garnered by its CDMA patents.

It's not always so easy.

"The pure IP business model of collecting royalties based on technology development without actually building and shipping a product is more difficult than people commonly think," says Fernandez.



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