Wi-Fi world under threat from Symbol patent

Wireless vendor Symbol Technologies Inc. has told us it will be seeking a big license fee from all Wi-Fi equipment vendors for an infringed patent. And according to one manufacturer, Proxim Corp., it stands a good chance of getting it.

Last week, Proxim gritted its teeth and paid $23 million damages awarded by a jury to Symbol in 2003. Patents owned by Symbol could affect any 802.11 access point, said both companies.

"The patent that was found to be infringed, is a standard feature on every 802.11 access point," said Ben Gibson, vice president of marketing at Proxim. The feature -- power save -- is built into standard Wi-Fi chip sets but, according to the jury's decision, does not infringe the Symbol patent until the chip set is built into a system. This means that every other Wi-Fi system vendor could be in line for a letter from Symbol's legal team, asking for six-percent royalties.

This could amount to tens of millions a year for Symbol. The Wi-Fi market -- the greatest part of which is access points -- was $658 million in the last quarter, according to analysts Synergy Research Group Inc.

Symbol, for its part, is talking about a licensing program rather than a lawsuit-fest. "Proxim made an enormous effort to stop our licensing effort. They failed, and our entitlement to a six-percent royalty has now been tested and validated by jury and judge," Symbol's general counsel, Peter Lieb, told Techworld. "There are a lot of companies who need our technology, and it is only right that we get fair royalties."

Lieb said that some companies are already paying licensing to Symbol, but would not say who they are, or which companies Symbol was approaching next. Licensing would be a minor part of its business compared with shipping products, he said: "If the amount of licensing revenue become significant, we will disclose it," said Lieb. "The lion's share of our revenue is always going to be in sales of products and services."

Ironically, the legal battle was started by Proxim, which sued Symbol in 2001 over its own impressive stack of patents, and was counter-sued by Symbol. Both suits were settled -- in Symbol's favor -- in 2003, and Proxim has now decided not to go fighting. "We had a choice whether to continue to fight the litigation," said Gibson. "Given the size of the jury verdict, it was important for us to decide to move. We didn't want a one-time financial event of $26 million hanging over our head. To appeal, we would have had to post a bond for a large part of that."

To add to the irony, Symbol's victory could extend its control over Wi-Fi intellectual property. To reduce its future payments to a more manageable two percent, Proxim has agreed to hand over some of its own patents to Symbol. These are related but (by definition, and by legal decision) different to the Symbol patents, but Lieb believes they will produce another royalty stream. Crucially, the patents handed over by Proxim last until 2014, while the Symbol patents referred to in the suit, run out in 2009.

In a fast growing market, a patent-based revenue stream could be very important for Symbol (Lieb told us he was not aware of any comparable licensing scheme in the Wi-Fi world), and could alter the shape of the Wi-Fi industry significantly.

However, it is worth remembering that both Symbol and Proxim have a vested interest in making this agreement seem as important as possible. Proxim has paid up and would like its competitors to suffer too, and Symbol would like other vendors to come quietly.

The big test will be when Symbol writes to Cisco Systems Inc. and stacks its patents -- and its lawyers -- up against those of the networking colossus.