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Patent Injunction Could Roil Wi-Fi Industry

An Australian federal agency won a patent for Wi-Fi technology in September, 1996, and now a federal judge has ordered a vendor to stop selling wireless LAN products until it obtains a license.
A little-noticed federal court decision on June 15, issuing an injunction against wireless-LAN equipment vendor Buffalo Technology in its patent fight with the Australian science agency CSIRO, could have broad implications for the entire Wi-Fi industry.

Judge Leonard Davis of the Eastern District Court of Texas found that Buffalo was violating CSIRO's 1996 patent underlying 802.11a/g technology -- the core of all corporate wireless LANs and public Wi-Fi networks -- and that the Japanese manufacturer, which has a U.S. subsidiary based in Austin, Texas, must cease selling WLAN products until it reaches a license agreement with CSIRO.

Recognizing that the CSIRO patent poses a universal threat to makers of Wi-Fi gear, a group of major tech companies that includes Intel, Dell and Hewlett-Packard filed countersuits in May 2005, seeking to have the CSIRO patent invalidated.

Judge Davis' decision could lead to hefty licensing fees to CSIRO from makers of Wi-Fi-based products from laptops to smartphones to semiconductors to gaming consoles.

"The ruling that the Buffalo products infringe will apply across-the-board," said Dan Furniss, in an interview. Furniss is a partner at Bay Area law firm Townsend and Townsend and Crew, which represents CSIRO.

An Australian federal agency akin to the National Science Foundation in the U.S., the Commonwealth Scientific and Industrial Research Organization (CSIRO) conducts scientific research for the public good. After carrying out research seeking to solve a set of problems around connecting computers wirelessly in the mid-'90s, the agency in 1996 was awarded U.S. patent No. 5,487,069 (known as the "'069 patent") in September, 1996.

In 1999, the Institute of Electrical and Electronics Engineers (IEEE) finalized the 802.11a standard, and four years later 802.11g was issued. Collectively known as Wi-Fi, the 802.11 family of standard led to an explosion of in-office wireless networks and of public hotspots, rapidly creating a multi-billion dollar industry in which close to a quarter-of-a-billion devices have been sold in the last three years. CSIRO is not a patent troll, asserted Furniss in an interview, but a government agency seeking reasonable license agreements with the companies profiting from the patented technology.

"CSIRO invented the .11a and g technology, and they want people to license it," said Furniss. "They tried for two years to get people to license it, but everybody had lawyers who said 'It's not valid,' or 'We don't infringe because we do something different,' which is ridiculous."

Judge Davis' decision is noteworthy because it seemingly contradicts the Supreme Court's May 2006 ruling in another patent case, eBay v. MercExchange, in which the Court found that an injunction could be issued in an infringement case only if the plaintiff is actually 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.

"The Supreme Court has been engaged in its own campgn in the area of 'patent reform,'" said Bruce Sunstein, in an interview. Sunstein an attorney at the Boston law firm of Bromberg & Sunstein, which specializes in intellectual property cases, said the high court "has issued a series of decisions in the past year or so that have uniformly come down against patent enforcement."

In this case, Judge Davis noted that a research institution like CSIRO could suffer irreparable harm in terms of "lost opportunities" for future research and development programs.

"This is the first decision since eBay in which a non-comptitor has gotten an injunction," pointed out Furniss.

There are currently three other cases in the Texas court involving CSIRO and big tech companies, and Davis has ordered mediation in those suits to be completed by November. Noting that the court has now bolstered the validity of the Australian agency's claims, Furniss said that talks with other alleged infringers are ongoing and that CSIRO is open to a settlement. CSIRO originally offered license rates starting at $4 per unit and going down to $1.80 per unit depending on volume, the lawyer said, and is open to negotiation.

"They're not looking for a dime a unit, that's for sure," Furniss added.

Buffalo will likely appeal the decision and seek a stay of injunction pending the appeal so that it can continue to sell wireless LAN equipment in the United States.