PCTEL, Intel Sign Modem Licensing Deal

By Susan Kuchinskas

December 23, 2003

Chip-making giant buys rights for $14.5M and grants cross-licensing rights to Chicago-based soft modem maker.

Communications technology provider PCTEL said on Tuesday that Intel has licensed its modem technology. Under terms of the agreement, Santa Clara, Calif.-based Intel will receive a license to all of PCTEL's patents, while PCTEL gets a cross-license to Intel-owned patents relating to its own business and a one-time $14.5 million payment.

The Chicago-based PCTEL has a fat IP portfolio with 71 patents and 49 more applications on file, and has a history of aggressively defending them. Earlier this month PCTEL settled a patent infringement lawsuit over its soft modem technology, used to build internal computer modems, with chipmaker Broadcom .

Other parties named in the suite, 3Com , U.S. Robotics, Agere, and Lucent Technologies are still in litigation.

"The reason Intel took a license is that we asserted our modem technology," PCTEL CEO Marty Singer told internetNews.com. "They ship soft modems, a product area we've been in for years and in which we've created quite a bit of intellectual property."

Singer said the license was the result of 18 months of discussion. An Intel spokesperson would not provide details about what IP Intel licensed to PCTEL or what products would use PCTEL's tech.

Under the Broadcom settlement, the company will license all of PCTEL's modem patents, while PCTEL will assign it two key patents relating to Ethernet technology. Broadcom will pay PCTEL a total of $3.5 million for past damages, the two assigned patents and patent royalties for sales after 2004. It will become an official PCTEL customer and also license to PCTEL its own voice band modem patents.

While PCTEL has always defended its IP, going so far as to buy products on eBay and testing them for possible infringements, according to Singer, the latest suit reflects a change in the company's business model. While it continues to produce Wi-Fi and cellular mobility software, software-defined radio products and access technology, it got out of the modem business.

PCTEL has shipped some 75 million soft modems, Singer said, but that had become a low-margin, commodity business.

"What makes more sense? To plug away in the product business and suffer on the profit side, or exit and simply license our technology?" he said.

In May, PCTEL unloaded its legacy HSP modem product line to Conexant as part of a strategic plan to make a transition to wireless products.

Singer said that the majority of its patents are essential to the implementation of the V90 (56 KBPS) and V34 (lower speed) standards. A third set of 47 patents, covering soft modems, was acquired as part of the Conexant deal. While not essential, they are important for technical aspects such as saving power, ensuring compatibility with different dialing codes and waking up the modem when it rings. It's these "soft modem" patents that are the subject of the latest suit and the focus of a general licensing push.

"Because we're in litigation, people know we're serious about asserting our intellectual property rights," Singer said. "A lot of people only settle after they see litigation."

Last June, PCTEL sued 3Com , alleging that it had manipulated the International Telecommunications Union (ITU), which sets standards for communications protocols. PCTEL said 3Com had agreed to license the technology essential to the V.90 (56 KBPS) modem on a non-discriminatory basis and on reasonable terms and conditions, but hadn't fulfilled the commitment, harming smaller competitors and consumers.

The licensing deal with Intel reflects that company's own repositioning in the wireless chip market. On Dec. 11, the chipmaker rolled what was formerly its Wireless Communications and Computing Group (WCCG) into the Intel Communications Group (ICG). The move followed disclosure in a financial update that Intel would spend about $600 million to back out of the WCCG, due to drastically lowered expectations for long-term growth for the division.

ICG encompasses network processors, wireless LAN chipsets, gigabit networking hardware and software, network cards and network infrastructure technologies.

In a statement, Intel CEO Craig Barrett said the move reflected Intel's vision of wireless LANs and wide area cellular technologies coming together.



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