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April 22, 2009

Wi-Fi Patent Cases Settled

Australian tech agency CSIRO cuts deals with all firms it sued, that sued it: An Australian IT publications reports that the long-running patent lawsuits among government tech agency CSIRO, which had a broad patent covering some aspects of the OFDM part of Wi-Fi since 802.11g, have been settled. All the firms involved in litigation have cut licensing deals with CSIRO, the article says, although terms were not revealed.

CSIRO sued and won various judgments against Buffalo Technology, a Japanese-owned firm with worldwide sales, when Buffalo wouldn't agree to pay royalty fees. The case has bounced around a bit, with Buffalo's Wi-Fi products enjoined from the U.S. market for years, then allowed again after Buffalo won part of an appeal. It got rather complicated.

In the end, this apparent settlement with 14 firms, some of which CSIRO had sued and others had preemptively sued CSIRO, doesn't mean too much for anyone. There were certainly issues as to whether CSIRO would be able to survive a full-on patent reexamination, as it was clear that some aspects of its patent could have been open to challenge, but there was no way to know whether any parts of the patent would have been struck down, nor whether those would have affected its overall ability to assert rights.

CSIRO reportedly was never asking for much. As a government agency designed to commercialize and promote national inventions, the scuttlebutt was that they wanted at most a few bucks per qualifying device. The settlement likely involves firms paying something for equipment already sold and agreeing on a fee schedule for future sales.

CSIRO reinvests proceeds of commercialization into research, so in many ways this is a win for everyone (except shareholders of firms in the settlement who will have an extremely diluted "loss") as Australia is on the cutting edge of many interesting technologies funded by this agency. A talk with one researcher about photonic terabit switching blew my mind recently.

With billions of Wi-Fi devices to be sold in the coming few years and likely hundreds of millions, if not over a billion, in the market, CSIRO will see a huge winfall even at extremely modest rates for built-in Wi-Fi adapters, where costs are so low it's likely the agency would get tens of cents instead of dollars.

For consumers, we'll see almost no effect. With products price to end in $9 or $9.95 or $9.99, there's little wiggle room to add a buck or two. More likely, manufacturers will simply absorb the cost and reduce their margin slightly, looking for cost savings elsewhere.


Glenn -- A few bucks per device is actually a lot of money. The margins on these things are pretty thin already.

The buck or two I'm talking about is on the retail end of an integrated product -- $1 or $2 on top of $1999.99 for a laptop or such.

CSIRO's plans were never to ruin the Wi-Fi industry, and I doubt settlements would have been filed that would allow that.

On a $5 Wi-Fi chipset, I would be surprised if the royalty were more than pennies, but on an integrated product like a full gateway sold at retail for $200 a year or two ago, the royalty could be a buck or two.

There's a multiplying effect along the value chain, so 10 cents more cost on a $5 product could be a couple bucks by the time you hit retail, or manufacturers just have to the eat the cost (OEMs in this case), or reduce component costs in other areas.

Doesn't this mean that Wi-Fi is now a patented technology and it wasn't before.

If so, this is a big change. Any new entrant would be required to cut a deal with CSIRO.

If CSIRO's patent claim had come up before standardization they would have been forced to agree to a set of rules that controlled their patent enforcement. As things stand now, they are in a very powerful position.

The article paints CSIRO as benign, but we have no evidence of this. If they wanted to balance their income from this with the interests of Wi-Fi generally then they could make an arrangement with the the IEEE that wouldn't scare people off.

On the other hand, I think that taxpayers want their government agencies to behave more like corporations - eg. extract every cent possible. From this perspective, it is their job to screw Wi-Fi.

Superb questions. I'm checking on that. To my knowledge, 802.11 is full of unencumbered algorithms to which a patent license (either to individual firms/organizations or to a joint patent pool) aren't required.

The IEEE typically requires that those participating in a standards process disclose all patents. Separately, those creating standards may build a RAND (reasonable and non-discriminatory) intellectual property (IP) licensing agreement. Some go further do ZRAND--zero-cost to all participants.

In this case, CSIRO wasn't a member of any groups that developed standards around which its patent is applicable, so far as I know. Even if the agency were part of the groups and didn't disclose, there's no harm/no foul. It would have been unethical, not legal and actionable. (Cf., Qualcomm's problems in 802.20 with disclosure.)

I describe CSIRO as benign because the group has consistently acted in what seems like a reasonable and fair manner for an organization that's pledged to obtain compensation for the innovations that it's licensed. I have never been entirely sure whether I believed it was due the broad coverage ultimately granted in a revised patent. Nonetheless, CSIRO hasn't acted as a predator, unlike several previous attempts by patent trolls to suck substantial and typically unwarranted sums from hotspot operators and others. (Most of those attempts have disappeared without a trace, I should note.)