Wireless patent suit takes aim at WLAN, WiMAX vendors

A patent protection suit filed against Cisco Systems Inc. this week could have big implications for vendors of WLAN gear and of the expected flurry of WiMAX fixed-wireless products.

Wi-LAN Inc., of Calgary, Alberta, holds U.S. and Canadian patents on a radio modulation technique called orthogonal frequency division multiplexing. This week the company filed suit in Canadian federal court, charging Cisco with infringing OFDM patents in the Aironet and Linksys brand 802.11a and 11g products Cisco sells in Canada. OFDM is the modulation technique used in all such products from any vendor.

The new suit comes just weeks after Wi-LAN settled a somewhat similar court case it had earlier brought against Redline, a maker of broadband wireless gear. Redline has agreed to pay a royalty on every OFDM-based product it sells, including future products based on the IEEE 802.16 standards, for fixed wireless nets. The royalty fees were not disclosed.

"The suit is important symbolically," says Steve Stroh, editor of the Focus on Broadband Wireless Internet Access newsletter, in Redmond, Wash. "Cisco's the biggest name in networking, and if Wi-LAN can, by some miracle, add Cisco's scalp to their belt, then lots of other people fall into line." Stroh notes that for now, this is a Canadian suit dealing with products sold Canada.

Through a spokeswoman, Cisco had a short statement: "Wi-LAN claims that its patents are related to industry standards and appears to be applying the patents to the Wi-Fi industry as a whole. We will respond as appropriate after reviewing the claims."

"This isn't a 'let's try to get away with extorting money' (strategy)," Stroh says. "Wi-LAN really does believe that it's only fair for the wireless industry to pay them for their OFDM patent (and the 'licensed' patents now) just like Qualcomm has done with CDMA (cellular technology)."

The Cisco suit is the opening gun of a more aggressive plan for patent protection, and license fee collection, by Wi-LAN because the company no longer has to shield and nurture the burgeoning WLAN industry, according to Wi-LAN executives.

In a statement on Wi-LAN's Web site, Syaed-Amr El-Hammamsy, Wi-LAN president and CEO, says that Redline was a "timely target" when the suit was filed in 2002 because it was using OFDM for wireless products that fell outside the IEEE 802.11 standards. "We did not want to impede the development of the 802.11a/g markets because they were in embryonic phase," he says. "Now that the market for Wi-Fi (the popular term for 802.11 WLANs) is growing... it no longer needs to be shielded or nurtured by Wi-LAN."

"Our Canada and U.S. OFDM patents are the seminal patents that gave birth, in 1994, to roughly 7,200 OFDM U.S. patents that have been filed since that time and refer back, either directly or through other patents, to our original 1994 patents," says Ken Wetherell, Wi-LAN vice president of corporate communications and investor relations.

In addition to the deal with Redline, Wi-LAN also has licensing arrangements with Philips Semiconductor, which recently bought Systemonics and began marketing 11a/g chipsets, and Fujitsu Microelectronics America.

They won't be the last, if Wi-LAN's legal gamble pays off.

In the Web statement, El-Hamamsy promises to "continue to execute our long-term plan for licensing to Wi-Fi semiconductor companies, implementing the 802.11a and 802.11g standards" and, in future, the WiMAX standards. Wi-LAN just a few weeks ago bought from Ensemble Communications 17 additional patents related to the 802.16 Media Access Control (MAC).

"Wi-LAN hasn't demonstrated that they have the resources, at the moment, to file suit in the U.S., let alone tackle all the potential infringers - everyone who builds or equipment using (OFDM)," says newsletter editor Stroh.

The lack of resources is due partly to the company's consistent financial losses on its broadband wireless sales. Revenues for the past three fiscal years have ranged from about US$18 million U.S. at current exchange rates to just over $20 million. The company reported losses in all three years: $73 million in 2001, $4.3 million in 2002, $3.4 million in 2003.

But Wi-LAN is very determined, according to Stroh. "They've been nursing this grudge for a long time. Their first battle was to get OFDM accepted, and now that battle is over and it's time for Wi-LAN to get what they're due," he says.

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