Wi-fi patent threat looms after US ruling

Companies working with popular standards for wireless technology may have a patent infringement problem.

A federal judge in Tyler, Texas, ruled last week that an Australian government agency holds the rights to patents on the underlying technology used in two wi-fi standards and a third proposed standard.

The decision - if it survives what many assume will be a lengthy appeals process - could have a wide-ranging impact on wireless equipment makers and consumer electronics manufacturers.

Judge Leonard Davis ruled that a patent granted in 1996 to the Commonwealth Scientific and Industrial Research Organisation (Csiro), Australia's national science agency, is valid.

The patent describes the implementation of several aspects of the 802.11a and 802.11g wireless standards developed by the Institute of Electrical and Electronics Engineers (IEEE). The court also ruled that Buffalo Technology, a small maker of wi-fi routing gear, had violated this patent.

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The judge in the case issued a summary judgment, which indicates the court is wholly convinced by the evidence, to the point where there are no questions of fact. In general, a summary judgment is rare in patent disputes.

The ruling is certainly a blow for Buffalo Technology, which - unless it wins an appeal - could be forced to pay between $1.5m and $2m in damages to Csiro. But the decision, which essentially upholds the notion that Csiro owns the rights to widely used standards-based technology, could have a huge impact on the entire wi-fi industry, particularly as companies start embedding wi-fi chipsets into consumer electronics devices such as music players and mobile handsets.

Stan Schatt, a vice president at ABI Research, said: "One reason that wi-fi has proliferated as it has is because it's reached a point where it's incredibly cheap, so it's easy to just stick a wi-fi chip in a consumer electronics device. But if the cost of the technology goes up to pay for the licence, even a little bit, it could throw off the economics."

More than 100 companies could end up paying royalties to Csiro for use of the technology, claimed Daniel J Furniss, a partner at Townsend and Townsend and Crew, the law firm representing Csiro.

Furniss said Csiro sued Buffalo first because the company wouldn't meet with them to discuss their claims. He also wouldn't specify how much money his client could expect to generate from any future licence agreements. A Buffalo Technology representative could not be reached for comment.

Csiro claims its patent covers a core method for transmitting wireless signals that use orthogonal frequency division multiplexing (OFDM) modulation, which breaks signals into different parts to transmit data simultaneously over different frequencies to maximise performance. IEEE standards including 802.11a, 802.11g and the proposed standard called 802.11n - which is expected to be ratified in 2007 - all use OFDM to transmit data wirelessly.

Buffalo Technology is not the only company fighting Csiro's patent claims. In 2005, Dell, HP, Intel, Microsoft and Netgear sued Csiro in federal court in San Francisco to invalidate the patent. The case is currently on hold because Csiro requested that it be transferred to Texas, where Judge Davis has already done extensive research on the case.

A judge in San Francisco is expected to rule either this week or next on whether to move the case to Texas, said Townsend and Townsend and Crew's Furniss. The companies involved in suing Csiro in San Francisco declined to comment for this story.

While Csiro has won a significant battle in Texas, analysts say it still has a long road ahead before it will be able to get any of the equipment makers to pay a penny. Buffalo can appeal the court's decision, and the cases in which Csiro is being sued in San Francisco to invalidate the patents must also be decided.

Marguerite Reardon writes for CNET News.com