Wi-Fi Takes Shape As The Next Patent Battleground

Alittle-noticed Federal court decision issuing an injunction against wireless LAN equipment vendor Buffalo Technology in its patent fight with an Australian science agency could have broad implications for the Wi-Fi industry.

Judge Leonard Davis of the U.S. Eastern District Court of Texas found on June 15 that Buffalo violates the Commonwealth Scientific and Industrial Research Organization's 1996 patent underlying 802.11a/g technology--the core of all corporate wireless LANs and public Wi-Fi networks. Davis issued an injunction blocking Buffalo, a Japanese manufacturer with a subsidiary in Austin, Texas, from selling WLAN products until it has a license agreement with CSIRO.

Buffalo is likely to appeal the ruling and ask the court for a stay of the injunction. But if the ruling stands, Davis' decision could force makers of Wi-Fi-based products--from laptops to smartphones to semiconductors to game consoles--to pay hefty licensing fees to CSIRO, an Australian federal agency akin to the U.S. National Science Foundation.

Recognizing the CSIRO patent as a threat, a group of major tech companies that includes Dell, Hewlett-Packard, and Intel filed lawsuits in May 2005 to have the CSIRO patent invalidated. CSIRO countersued. In all, CSIRO has three other cases challenging Wi-Fi use by Belkin, Dell, D-Link, Fujitsu, HP, Intel, Microsoft, Netgear, 3Com, Toshiba, and others. Notably absent is Cisco Systems, which pays royalties to CSIRO from its acquisition in 2001 of Radiata, a company formed by CSIRO.

THE HEART OF WI-FI

The technology in question forms the guts of Wi-Fi, or the 802.11 standards. In 1999, the Institute of Electrical and Electronics Engineers finalized the 802.11a standard, and four years later 802.11g. Those standards sparked a multibillion-dollar industry for office and home wireless networks and public hotspots. Almost 300 million devices have been sold the last four years.

Judge Davis' decision also is noteworthy because it seems to contradict the Supreme Court's May 2006 ruling in another patent case, eBay v. MercExchange. In that case, the court found that an injunction could be issued in an infringement case only if the plaintiff is in competition with the defendant--in other words, companies or individuals who seek to make money from patent holdings, rather than actual products and services, were unlikely to get injunctive relief. It was a landmark case because injunctions used to be routinely given, and they give huge bargaining power to the patent holder by cutting off an infringer's revenue source.

Davis wrote that a research institution like CSIRO could suffer irreparable harm in terms of "lost opportunities" for future research and development programs.

The CSIRO-Buffalo case comes as lower courts are having to react to several recent Supreme Court decisions that amount to "its own campaign in the area of patent reform," says Bruce Sunstein, an attorney for Bromberg & Sunstein, which specializes in intellectual property cases. The court has raised the standards to get, defend, and enforce patents, issuing "a series of decisions in the past year or so that have uniformly come down against patent enforcement," Sunstein says.

Davis has ordered mediation, to be completed by November, in the three other pending suits. CSIRO originally offered license rates starting at $4 per unit and going down to $1.80 per unit depending on volume, says Dan Furniss, of Townsend and Townsend and Crew, which represents CSIRO. "They're not looking for a dime a unit, that's for sure," says Furniss.

Furniss says CSIRO is open to a settlement--while also noting that the court has now bolstered the validity of the Australian agency's claims. Looks like the battle over who owns Wi-Fi is just beginning.