Clear Winners Unlikely In Motorola -- RIM Patent Fight

In a conflict stemming from the failure to renegotiate a cross-licensing agreement that expired in 2003, the two companies traded lawsuits in U.S. district court last weekend.

Richard Martin, Contributor

February 21, 2008

4 Min Read

As with most information-technology patent disputes, there are few clear winners and some obvious losers in the current spat between BlackBerry-maker Research in Motion and Motorola.

In a conflict stemming from the failure to renegotiate a cross-licensing agreement that expired in 2003, the two companies traded lawsuits in U.S. district court last weekend. RIM filed a suit claiming that Motorola infringed on RIM's patents and tried to charge excessive royalties for its own patents. Motorola, in turn, filed two lawsuits against RIM alleging patent infringement.

For RIM, the legal dispute with Motorola takes the Canadian company back to the bad old days of 2002-2006, when it endured a protracted battle with NTP over the intellectual property covering its mobile e-mail system. Faced with a possible shutdown of its service, RIM was finally forced to sign a $612.5 million settlement in 2006.

While RIM continues to hold a dominant position in the smartphone market in North America, it faces stiff challenges from big handset makers, including Nokia, and from Microsoft, which now offers free mobile e-mail service along with its Windows Mobile operating system.

A Wall Street darling for years, RIM has seen its stock slide along with the broader tech industry since late fall. Prominent London-based analyst Richard Windsor of Nomura Securities now has a "sell" rating on RIM's shares.

For users, the dueling lawsuits simply mean that the companies are likely to be distracted from innovation and improving service to devote energy and resources to their courtroom wrangling. Especially troublesome are the Wi-Fi-related aspects of the case: the RIM suit covers, among other things, technology that allows mobile devices to switch to Wi-Fi, according to the company's filing.

As business users increasingly seek "dual-mode" devices that work over cellular and Wi-Fi networks, the patents for Wi-Fi remain in dispute, creating a huge looming risk for not only vendors but also users of such services.

Last June a federal district judge in Texas ruled against wireless-LAN equipment vendor Buffalo Technology in its patent fight with the Australian science agency CSIRO, which holds a 1996 patent underlying 802.11a/g technology -- the core of all corporate wireless LANs and public Wi-Fi networks.

CSIRO also holds a patent for 802.11n, the emerging next-generation standard for higher-speed Wi-Fi that is being finalized by the IEEE. So far CSIRO has refused to provide assurances that it won't sue vendors of .11n-based gear for patent infringements. A RIM-Motorola battle over Wi-Fi related patents only further muddies those waters. The most potential damage, though, will likely be suffered by Motorola, which can ill-afford a patent dispute as it looks at possibly spinning off its languishing handset division and concentrating on enterprise wireless networks.

"Motorola is by far the biggest loser in all of this," says Carmi Levy, senior VP for strategic consulting at AR Communications, "because at a time when its leaders need to be focused on turning the company around, they instead choose to divert their attention to a lawsuit that promises to sap precious resources away from more important activities."

Motorola's new top management hasn't been shy about litigating to protect its wireless technologies. The company filed suit last August in U.S. District Court in Delaware alleging that Aruba has violated four patents held by its subsidiaries Symbol Technologies and Wireless Valley Communications. Two of the patents, held by Wireless Valley, use 3-D representations for wireless LAN design and management; the other two relate to WLAN switching architecture technology originally developed by Symbol.

RIM alleges that Motorola "is demanding exorbitant royalties ... for patents that Motorola claims are essential to various standards for mobile wireless telecommunications and wireless computing that RIM practices."

Those royalties may have been a way of trying to offset losses in Motorola's cell phone business, which saw its sales drop 38% and profits tumble 84% in its most recent quarter, compared with the same period a year ago. An ongoing legal dispute would make the sale of the already beleaguered unit even more difficult. That means Motorola's lawyers almost certainly will seek a quick settlement with the still-powerful BlackBerry maker.

"A drawn-out intellectual property-based lawsuit will take years to resolve if Motorola doesn't politely resolve its differences with RIM," adds Levy, "by which point the mobile landscape will look very different than it does today."

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