Will Aussie patents turn Wi-Fi into a house of cards?

Get ready for the WiFi tax. There's no way vendors can back away from the Wi-Fi "standard"  (in other words, this is a house of cards that probably won't come down) even though it appears as if the 54 mbps Wi-Fi standards 802.11a and 802.11g as well as the forthcoming 802.11n (200 mbps, practically speaking) are "reading" on an Australian patent for orthogonal frequency division multiplexing (OFDM) modulation. News.com's Marguerite Reardon reports:

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....

.....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 that 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 license agreements...

...In 2005, an estimated 140 million to 155 million Wi-Fi-enabled devices shipped, according to ABI Research and InStat, market research firms. That number in 2009 is expected to balloon to 450 million devices shipped....

....CSIRO claims that 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 maximize 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, Intel, Hewlett-Packard, 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.

You're probably asking "why Tyler, Texas?" Actually, the question should be why "eastern Texas?" Like Marshall, TX where other patent cases are often heard, Tyler is a small town in eastern Texas that's just West of Shreveport, LA (Tyler and Marshall are 60 miles apart). Patent holders routinely file their infringement cases in this neck of Texas because of how the courts routinely take the patent holder's side. The New York Times has an interesting story about this phenomenon (see So Small a Town, So Many Patent Suits, registration may be required). Dan Bricklin links to that Times' piece from his own blog about how he was called in as an expert witness in the case of Hyperion v. Outlooksoft. Bricklin's testimony played a key role in Outlooksoft's successful defense against the infringement suit brought by Hyperion: an extremely rare occurance for eastern Texas patent litigation (and one that puts Bricklin on the map as a the expert witness to have on your side if you find yourself on the receiving end of a patent infringement suit). 

The net result, if the patent holds up, is that CISRO will probably be able to extract a royalty from every single Wi-Fi device that's manufactured. It will also be able to seek back pay. The list of impacted companies that may have to pay up will read like a who's who of the IT business. Wi-Fi radio makers such as Atheros, Broadcom, and Intel could be at the front of the line. Reardon points out that Microsoft's new Zune player comes with a Wi-Fi radio. But, in my opinion, it's doubtful that CISRO would go after Microsoft. Instead, it would probably go after whatever company Microsoft buys its Wi-Fi radios from. That said, whoever makes the Wi-Fi radios in Microsoft's Zune would probably pass the additional cost onto Microsoft who in turn would either have to eat that additional cost or pass it along to Zune buyers in the device's retail price. 

There are, of course, other wireless technologies -- some longer range than Wi-Fi, others shorter-range -- such as WiMax, Zigbee, Bluetooth, and Nokia's new Wibree (just to name a few).  I have no idea if any of them also use OFDM (perhaps someone who reads this can comment). But, given Wi-Fi's penetration into the market, it's doubtful that there will be a move to a substitute wireless technology that doesn't infringe.