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October 5, 2004

Hotspot Operators Face New Patent Fee Demand

A patent-buying firm has told hotspot operators that royalties are due for gateway page redirection: Last week, hotspot operators told Wi-Fi Networking News, they began receiving hefty packets from Acacia Technologies describing the company's patent rights that it contends cover gateway page redirection used by many hotspot operators. (T-Mobile's new 802.1X system will not use redirection at all.) Acacia will require royalties to continue using the technology.

Redirection involves the access point or back-end system capturing any Web page request from an unauthenticated user on the network and redirecting them to a page that contains login or usage information. After successfully logging in, the user is then passed on to their original page or a hotspot information page.

Acacia Technologies, a company that is in the business of purchasing and enforcing patents, bought patent number 6,226,677 from LodgeNet. The patent covers redirection. Hotspot operators that received letters have been asked to pay $1,000 per year (editor's note: an earlier version incorrectly stated that $1,000 would be due per quarter) for up to 3,500 redirected connections. Companies that rack up more than 3,500 redirections per year pay between 5 cents and 15 cents per redirect additionally.

Acacia wouldn't say how many letters it had sent out so far "but anybody who operates a hotspot with redirection can assume they'll hear from us," said Rob Berman, executive vice president of business development and general counsel for Acacia Technologies. Matrix Networks is among three hotspot operators that have contacted Wi-Fi Networking News regarding the letters; the others wished to remain anonymous. Wayport has not received a letter and T-Mobile has not yet responded to our query.

In January, Nomadix received a patent that includes some redirect techniques. "It is our belief that our patent predates" the Nomadix patent, Berman said. The Nomadix patent was filed December 8, 1999 and the Acacia patent was filed January 15, 1999.

Nomadix was not available for comment.

Acacia examined a variety of factors including the strength of the patent and profit margins of hotspot operators to set the licensing fee. "We think we set the royalties at a low enough level where it shouldn't have any affect on the market," said Berman. "These royalties should not affect anybody's business in a negative way."

Letter recipients will have 30 days to study the documents and ask questions. After that, Acacia will contact them again. "Ultimately if people opt not to license the patent, if they can't show us that they're not infringing, then that could result in patent infringement litigation. It's not our first choice but sometimes that becomes necessary. We have $30 million in the bank and we have the resources to enforce the patent as necessary," Berman said.

Those who choose to license earlier get a better deal, he said. Acacia is waiving past infringement initially but over time will stop doing that and will also raise royalties. "Those who license earlier on get the best deals," Berman said.

Not everyone believes the patent is valid. Jim Thompson, formerly the CTO of Wayport and currently with NetGate, weighed in on the topic on the Bay Area Wireless Users Group community site. Thompson says that Wayport was doing redirect before either the Nomadix or Acacia patents were filed. That could be grounds for reversing the patent, he said.

Acacia chose to approach operators that use products that do redirect rather than offering licenses to manufacturers because it can potentially earn more money from operators. "The user has recurring revenue, the manufacturer is a one-time sale," said Berman.

Nigel Ballard, director of wireless for Matrix Networks, has contacted Nomadix for advice on how to proceed since he received a package from Acacia. Matrix recently bought 37 Nomadix boxes and has others installed at hotels. Matrix sells systems to hotels so Matrix wouldn't be required to pay royalties to Acacia but its customers would. "If it comes down to it, do we have to go to Hilton and say, 'that box we sold you in good faith, apparently there's a patent infringement'? I don't want to have to do that," Ballard said.

Ballard is also involved with Portland's Personal Telco project and wonders if the group, which uses the open source NoCatAuth that has redirect built in, will also receive a letter. Berman said Acacia is looking into the community groups but hasn't made a determination about approaching them.

Update: Michael Oh of NewburyOpen.Net wrote in to note that he had also received a packet from Acacia relating to his free, business-supported Wi-Fi networking effort in Boston on Newbury Street. "Ironically, we don't use home page redirection on our public network, so they're obviously not doing their research," Oh said via email.

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