Patents and commodities

Today's paper has the (not widely published) report that Netgear is being sued for patent infringement over its Wi-Fi gear. Netgear (along with Cisco-owned Linksys) is one of the decade-old commodity producers of network equipment, but is more recently facing competition from Chinese brands.

The lawsuit was filed Wednesday, according to Bloomberg:

Dec. 19 (Bloomberg) -- Netgear Inc., the maker of networking equipment for homes and small businesses, was sued by Fujitsu Ltd., LG Electronics Inc. and Royal Philips Electronics NV over patents covering wireless computer networks.

Fujitsu, LG and Philips are part of a patent-licensing pool created in 2004. Participants share inventions covering the so- called 802.11 standard, a protocol for wireless local area networks that lets computers talk to each other at high speeds.

While Netgear refuses to pay royalties to patent holders in the pool, it claims in advertisements that its products comply with the standard, Fujitsu, LG and Philips said Dec. 17 in a complaint in federal court in Madison, Wisconsin. Netgear products targeted in the suit include wireless routers, personal- computer cards and adapters.

This is really interesting for several reasons:

• With the notable exception of MPEG4, patent pools have been rarely successful for coordinating patent holder interests.
• Thus far, IEEE standards such as Wi-Fi seem to have had fewer patent suits than most other standard (although Buffalo Technology lost a case last year).
• Fujitsu, LG and Philips are not major producers of this gear except in their respective home markets.

Wi-Fi and its parent Ethernet have been one of the most successful (and most commoditized) multivendor standards of all time. Does this presage a new flurry of patent filing (or litigation) for Wi-Fi users? (Of course, the patent thickets around WiMax and 802.16 constitute an IP Lawyer Full Employment Act). Will it push up the price of gear? Will it form an entry barrier in this commodity business, with big electronics companies pushing out smaller companies the way that Telcos have taken on Vonage?