Patent Trolls on the Loose

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.

Fool contributor Anders Bylund is not a lawyer, and any legal opinions expressed above are based on nothing but years of watching that system undermining the technology sector. He holds no position in any of the companies discussed here. The Fool owns shares of IBM, Marvell, and Qualcomm. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. You can check out Anders' holdings and a concise bio if you like, and The Motley Fool is investors writing for investors.


Read/Post Comments (7) | Recommend This Article (3)

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Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On March 18, 2011, at 5:50 PM, webserver227 wrote:

    Why don't you tell IBM not to collect royalties for their patents or inventions from all of the industries???? Maybe give away every invention for free to all including the Chinese companies. Why not if Mosaid or Rambus cannot collect their inventions or patents they acquire?

    You are one of the stupid human beings on this planet. Why not you invent something important and then give it away for free? Why not ask all the universities to give away everything invention for free? We do live in a capitalistic society.

    Why not tell Apple to give away every invention they have invented for FREE so everyone could use that technology for free so consumers win by getting cheaper products?

    Why not? You are just too stupid of a human being. That is your problem. Hey, by the way Rambus have spent over $350 million defending their patents already and the cartel spent over $1.2 billion and counting to not to pay Rambus a dime but now only two dram companies left that still having signed yet. Pretty soon they will because they have stolen invention for free as well as try to kill a smaller company Rambus by filing lawsuits coast to coast to destroy rambus. The price fixing trial is coming up in June 2011 that will let everybody know what really happened to rambus from the industry that wanted free inventions and also try to make them public domain.

    You stupid human being who wrote this article.

  • Report this Comment On March 18, 2011, at 7:58 PM, patentssss wrote:

    Has anyone looked into Wordlogic?

    Similar situation in Vancouver against google, apple, bing, droid and others.

    Why are all the patents in Vancouver

  • Report this Comment On March 18, 2011, at 9:06 PM, keahou wrote:

    Have you written about Micron Tech instigating the largest Sherman Antitrust Cartel that the NY Attorney General said that he had ever seen? Of course that Cartel paid shills like Sherry Garber, Bert McComas, Jack Robertson, and others to slander Rambus. What is your interest in this, one of the finest companies to come out of Stamford U? Intel was pleading in 1989 to members of this Cartel, before it was formed, to break the memory bottleneck that was preventing faster computers. Professors Farmwall and Horowitz broke the code. Sort of like QCOM and their CDMA technology for CELL only RMBS technology allowed INTC and many others to benefit by solving Intel's problem.

    Perhaps you can do a bit of research and write a true story about this Rambus saga. Businessweek touched on it years ago, but since then no one has bothered to do the research to write this up. Try rambus.org for starters.

  • Report this Comment On March 18, 2011, at 11:06 PM, webserver227 wrote:

    Anders is one of the dumbest human being on this planet. How did he erver finished Middle school? How? This guy need to think a thousand times before he spills out his dumb articles. Who he works for? That must be one dumb boss who hire him.

  • Report this Comment On March 18, 2011, at 11:49 PM, techgall wrote:

    I Read in Vancouver Sun that wordlogic predictive search was presented to and stolen by google perhaps

  • Report this Comment On March 22, 2011, at 12:25 PM, kewlness wrote:

    Bedrock Computer Technologies LLC is another one of these patent headhunters. They have a case going against a bunch of big names (Red Hat, Google, Amazon, and others who use the Linux kernel) for a PROCESS of storing a retrieving information in a computer system. There is even a question whether the actually own the patents at all...

    For just one case, see:

    http://docs.justia.com/cases/federal/district-courts/texas/t...

    The patent process needs a severe overhaul. People should be able to protect their ideas, but those ideas must also become available to the public domain eventually and not be perpetually held...

  • Report this Comment On March 22, 2011, at 8:25 PM, DDHv wrote:

    I wonder what would happen if ownership of a patent allowed collection of a percentage, instead of a monoply? That is, when anyone paid above a stated percentage of say, FOB factory to the patent owner, the patent owner would not be allowed to sue for more, but anyone who did not pay that percentage would not only be liable for suit, but also have large fines to pay.

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