Wi-Fi ruling may lead to patent lawsuits

Companies using wireless technology may be in for legal problems after a court ruling that an Australian government agency holds the rights to patents on the underlying technology used in popular Wi-Fi standards.

Companies using wireless technology may be in for legal problems after a court ruling that an Australian government agency holds the rights to patents on the underlying technology used in popular Wi-Fi standards.

Last week, a federal judge in Texas upheld a patent granted in 1996 to Australia's national science agency, the Commonwealth Scientific and Industrial Research Organisation.

Judge Leonard Davis also ruled that Buffalo Technology, a small maker of Wi-Fi routing gear, had violated the patent.

Davis issued a rare summary judgment, which means the court is wholly convinced by the evidence and that there are no questions of fact.

Unless it wins an appeal, Austin, Texas-based Buffalo Technology could be forced to pay between $1.5 million and $2 million US in damages to CSIRO.

But the judge's ruling could also have wide-ranging implications for the wireless technology industry, such as the makers of music players and mobile handsets.

"One reason that Wi-Fi has proliferated as it has is because it's reached a point where it's incredibly cheap, so it's easy to just stick a Wi-Fi chip in a consumer electronics device," Stan Schatt, a vice-president at ABI Research, told CNET News. "But if the cost of the technology goes up to pay for the licence, even a little bit, it could throw off the economics."

Currently, Wi-Fi chips cost only a couple dollars, which means companies are using it in all kinds of consumer electronic devices. Microsoft's new Zune music player uses Wi-Fi, allowing people to share music.

The lawyer representing CSIRO says more than 100 companies could end up paying royalties to the agency for use of the technology.

Citing ABI Research and InStat market research firms, CNET News says that in 2005, an estimated 140 million to 155 million Wi-Fi-enabled devices were shipped. The firms predict that number will jump to 450 million devices by 2009, representing significant potential licensing fees.

While the Texas ruling is an important victory for CSIRO, experts say it may be some time yet before equipment makers are forced to pay up because Buffalo Technology can appeal the court's decision.