Nearly every gadget of note comes with Wi-Fi connectivity these days. And gosh darn it, Canadian patent hoarders MOSAID Technologies wants to get paid for every last one of 'em.
The firm, which trades on the Toronto exchange and our Pink Sheets, has unleashed a lawsuit against 17 technology companies, large and small. The targets range from chip designers Marvell Technology Group (Nasdaq: MRVL ) and soon-to-be Qualcomm (Nasdaq: QCOM ) subsidiary Atheros Communications (Nasdaq: ATHR ) , to system builder AsusTek and smartphone specialist Research In Motion (Nasdaq: RIMM ) . The alleged patent infringers are a mix of American, Canadian, and Far Eastern companies and have very little in common except they all touch the Wi-Fi supply chain at some point. MOSAID is an equal-opportunity headhunter.
MOSAID CEO John Lindgren isn't pulling any punches: "We believe that all companies offering products that implement the Wi-Fi standard require a license to our wireless patents." That is, after all, why MOSAID paid a pretty penny for the right to manage these patents. These companies have apparently chosen not to sign any contracts with MOSAID and need a friendly reminder from the courts.
What's the problem?
Apparent nuisance suits are all over the technology sector, including seemingly baseless accusations thrown back and forth between true giants of the industry. MOSAID counterpart Rambus (Nasdaq: RMBS ) has made a business model out of patent suits, supported by a healthy investment in researching more technologies to fuel those license and royalty payments -- and the occasional court-ordered fine for infringement damages.
By contrast, MOSAID nurses a minuscule research and development budget but has nonetheless amassed an impressive patent portfolio in networking and memory chip technology. And the license-less Wi-Fi bunch had better sit up and take notice, because MOSAID has quite the track record in successful suits.
Some cases run quickly through the system, as when IBM (NYSE: IBM ) recently settled a case involving six memory-related patents just 17 months after the original complaint. But it's not always such a painless experience: A Samsung case dragged on from 2001 to 2005, and Infineon put up its dukes from 2002 to 2006 before reaching a settlement. That one not only gave MOSAID six years of license payments, but also fattened its patent portfolio with 50 memory patents from Infineon and Qimonda.
Here be dragons
Complex technologies like wireless networking and computer memory attract patent hoarders like moths to a nightlight. In my view, this dance does more good for the legal profession than it does for technologists of any stripe, and the whole patent system is way overdue for an overhaul. This week's patent reform hand-waving is a welcome baby step but won't do much to really change anything.
The technologies at issue were invented by NCR, Lucent, and Agere Systems in association with AT&T way back when, all of whom still exist and are doing business in some form today. MOSAID is paying $70 million upfront to Agere (now an LSI (NYSE: LSI ) operation) over five years along with a 20% share of royalties collected.
In a sense, MOSAID is a specialized debt collector, focused on monetizing LSI's patent portfolio without getting LSI's hands too dirty. And in some cases, MOSAID is acting on borrowed time: At least one of the six patents at hand seems to have expired already, and another is due for the scrapheap later this year. Better act fast!
The damage done
So Rambus, MOSAID, and their ilk get to keep enjoying their twisted business models. IBM, Intel, and friends do a bit of legal wrangling themselves but often did all the hard work behind the patents to begin with.
And in the meantime, they get to spend time, money, and management efforts on waving away this type of annoyances, sometimes handled by single-purpose hitmen. Are you surprised to learn that CEO Lindgren used to be MOSAID's general counsel?
Whether you agree with my mordant point of view, I'm sure you have some strong feelings on the patent licensing issue. Let it all out in the comments below, and don't forget to add Rambus to your watchlist so you won't miss the next round of arguably misdirected legal activity.