Are Patents Bad for Business? -- WiFi...

Canadian networking equipment manufacturer Wi-Lan has decided to sue major Wi-Fi manufacturers for patent infringement, reports Jennifer Hagendorg in this story picked up by Advanced IP Pipeline. "This legal action against Cisco puts the industry on notice that Wi-Lan will aggressively protect its patent rights," said Sayed-Amr "Sisso" El Hamamsy, president and CEO of Wi-Lan, Calgary, Alberta, in the statement.

Tony Smith, writing for The Register details the patents at issue in his story. "...three Wi-LAN patents - one Canadian (2,064,975), the others registered in the US (5,282,222 and 5,555,268) - which cover the use of orthogonal frequency division multiplexing (OFDM), a technique incorporated into the 802.11g and 802.11a Wi-Fi standards." He notes that there are a total of 17 patents in question, some granted and some pending, that Wi-Lan claims "are necessary for the implementation... of WiMAX."

Dana Blankenhorn sees Wi-Lan's enforcement of its patents as an abuse writing initially here:

Smart people get together and create a standard. It's a universal standard, a free standard, non-proprietary.

Then, years later, after everyone has committed to this free standard, some hoser comes up with a patent claim and decides to shake everyone down.

and then in response to Steve Stroh, here:

My take. The use of patents as a business weapon by a company failing of its own weight is what I'm on about...

Patents are a limited right to profit from an invention for a limited time. They are a license to produce. They should not be a license to prevent. The test of a patent's worthiness should include a measure of the holder's own efforts to exploit the patent. And the transferability of patents should be limited. It's a production license, not a legal hunting license.

For his part. Steve Stroh defends Wi-Lan, commenting to Network World:

"This isn't a 'let's try to get away with extorting money' Wi-LAN really does believe that it's only fair for the wireless industry to pay them for their OFDM patent just like Qualcomm has done with CDMA."

Patrick Mannion, for this story picked up by CommsDesign interviewed Mo Shakouri, vice president of the WiMax Forum on the topic.

"We've examined their claims and found nothing,"" said Mo Shakouri, vice president of the WiMax Forum and assistant vice president of business development at Alvarion.

"They may have been able to bully smaller companies without the financial resources to fight them," said Shakouri, referring to Redline Communications. "But when they go up with the big guys [such as Intel] they're going to get killed. They're only damaging themselves; they should focus on building equipment and working better within the WiMax group."

On the one side, the argument seems to be that companies should compete on their ability to execute, building great products and running a good business. On the other hand, examples like Qualcomm abound in which enormous businesses have been created based upon revenues from inventions licensed to others. So are patents good for business or bad for business?

The problem with the "execute and run a good business" argument is that without patent protection, innovative startups would never get funding, much less have an opportunity to compete against powerhouse corporate titans like Cisco. Without patent protection to nurture small companies, an enormous engine for innovation in our economy would dissapear. Rather than be surprised or upset that a small company has the gumption to stand up for themselves and ask to be paid for their innovation, we should be applauding the "little guy" in asking to be fairly compensated. The proper time and place to address IP issues is during the standards process, not after products are shipping.