Cisco the target of wireless lawsuit

Wi-LAN, based in Calgary, Alberta, filed a lawsuit Wednesday in Canada's federal court that claims the networking giant produced and marketed Wi-LAN's technology without a license. Cisco uses the technology in both its Linksys home-networking products and its Aironet wireless bridges and access points.

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Wi-LAN was awarded several patents in the United States and Canada in 1994 for orthogonal frequency division multiplexing , or OFDM, technology. The company claims that this technology forms the basis of the 802.11a and 802.11g standards for wireless LAN (local area network) or Wi-Fi products. The company also believes that the Wi-LAN OFDM patents apply to emerging 802.16a and 802.16e standards used in broadband wireless or WiMax products.

In 2002, Wi-LAN sued Redline Communications in a similar patent dispute. The two companies settled the case earlier this month out of court. Details of the settlement weren't disclosed, but Redline agreed to pay royalties both retroactively and in the future to Wi-LAN for the use of the technology, according to Wi-LAN.

Ken Wetherell, vice president of corporate communications for Wi-LAN, said the company plans to enforce its patents across the industry.

"Without our OFDM patents, there would be no 802.11a/g," he said. "We didn't enforce these patents sooner, because we didn't want to slow down development in the market. But now that the technologies are firmly established, we feel we must protect our intellectual property."

Unlike Qualcomm, which forces equipment makers to pay a fee for using its CDMA (Code Division Multiple Access) technology on wireless phones, Wi-LAN said it plans to collect licensing fees and royalties from chipmakers.

"We're a Qualcomm with a heart," Wetherell said. "We don't want to chase down every equipment maker in the market. If we get the chipmakers to pay the licensing fees, it won't likely slow down innovation in the market."

So why is Wi-LAN targeting Cisco, which makes networking equipment and not chips? In 2000, Wi-LAN filed a lawsuit against a small wireless chipmaker called Radiata in Canada. Cisco bought Radiata soon after the filing, inheriting the lawsuit. The case was soon dismissed when it was discovered that Radiata didn't have an actual product to sell. Cisco stated then that it had no intention of selling or marketing the product in Canada, according to Wetherell.

Cisco has since shut down the Radiata operation. But the company has used the 802.11a/g standards in its Aironet wireless-LAN products. Since 2003, through the acquisition of Linksys, Cisco also has been selling other Wi-Fi products that use these standards.

Wetherel said Cisco is an easy target because of this history.

"It will be much harder for them (Cisco) to say that they didn't know about us, since the issue came up back in 2000, when Cisco bought Radiata," he said. "We've really got nothing to lose. Even if this lasts two years, we probably will only spend about $2 million, but the upside potential is much higher."

Cisco said it is still looking into the matter.

"Wi-LAN claims that its patents are related to industry standards and appears to be applying the patents to the Wi-Fi industry as a whole," a Cisco representative wrote in an e-mail. "We will respond as appropriate, after reviewing the claims."

Wi-LAN is a small, 140-person company with about $19 million a year in revenue. It is publicly traded on the Toronto Stock Exchange under the symbol "WIN." Wetherel said the company doesn't plan on surviving on the licensing revenue alone. It is building a broadband wireless product using the WiMax standard, which it plans to release sometime in 2005.

The company has already struck a licensing agreement with Philips Semiconductors for its 802.11a/g chipsets. It also has entered an agreement with Fujitsu Microelectronics America for new chips it is developing for WiMax applications. The company hopes that it can use outcomes from the Cisco and Redline lawsuits to persuade other companies to negotiate outside the courtroom.